ASIC reports 10% increase in enforcement investigations over the course of one year

Maria Nikolova

As at January 1, 2020, ASIC had 316 investigations on foot covering a range of misconduct across its full scope of jurisdiction.

The Australian Securities and Investments Commission (ASIC) today published an update setting out its work in the period from September 2019 to February 2020, with the data revealing tightening of ASIC’s investigative approach.

Apart from its focus on Royal Commission-related work, since its inception in July 2019 the Office of Enforcement has continued to increase its capacity to investigate and take action in response to market, corporate and financial sector misconduct. It is working to strengthen the governance and effectiveness of ASIC’s enforcement, including by accelerating court-based enforcement.

As at January 1, 2020, ASIC had 316 investigations on foot covering a range of misconduct across its full scope of jurisdiction. These existing investigations relate to, inter alia, directors’ and officers’ breaches, insider trading and market manipulation, auditor and liquidator breaches, and breaches of licensing obligations, including of Australian financial services (AFS) licence obligations.

From January 2019 to January 2020, there has been:

  •  a 10% increase in the number of ASIC enforcement investigations; and
  •  a 52% increase in enforcement investigations involving CBA, NAB, Westpac, ANZ and AMP (or their officers or subsidiary companies).

ASIC says it will keep using the courts to clarify the law where there is uncertainty, and thereby support and guide industry to understand their obligations.

In addition to Royal Commission referrals and case studies, ASIC’s Office of Enforcement is currently prioritising:

  • misconduct related to superannuation and insurance;
  • cases that engage ASIC’s new powers or provisions that now carry penalties or higher penalties;
  • illegal phoenix activity;
  • auditor misconduct; and
  • new or emerging types of misconduct, including misconduct carried out online or with the use of emerging technologies.

The regulator notes that, following extensive consultation, it will shortly release guidance on its approach to the exercise of its product intervention power. The guidance will outline the scope of the power, when and how ASIC expects to use the power, and how a product intervention order is made.

ASIC used this power for the first time in September 2019 to ban a short-term credit model. The regulator is also consulting on further proposed interventions on a number of issues where it has concerns about significant consumer detriment—over-the-counter (OTC) binary options and contracts for difference (CFDs), and the sale of add-on financial products through caryard intermediaries. Let’s recall that, in Consultation Paper 322, ASIC proposes to ban the issue and distribution of OTC binary options to retail clients, and impose conditions on the issue and distribution of OTC CFDs to retail clients.

ASIC’s proposed restrictions on the offer of CFDs to retail clients include:

  • imposing leverage limits;
  • implementing a standardised approach to automatic close-outs of client’s CFD positions in margin call;
  • protecting retail clients against the risk of negative CFD trading account balances;
  • prohibiting certain trading inducements, and
  • enhancing transparency of CFD pricing, execution, costs and risks.

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