Who watches The Watchmen? We do – a review of the ASIC Enforcement Update

From

Simon Carrodus

On 28 March 2022 the Australian Securities and Investments Commission (ASIC) released Report 722 ‘ASIC Enforcement Update July to December 2021’ (Report 722).

In this article, we:

  1. review the key data points in Report 722 and compare them against the previous update – ‘ASIC Enforcement Update January to June 2021’ (Report 699)
  2. provide you with our insights and commentary;
  3. review the relevant data for financial services specifically, and
  4. provide you with our contact details in case you have any questions!

Key data points from Report 722 and Report 699

The second half of 2021 was another busy year for ASIC’s Enforcement Team. Here at The Fold Legal, we pay attention to ASIC’s biannual Enforcement Updates to monitor themes and trends. And of course we like to share our analysis with you.

Below are the figures for the second half of 2021 identified in Report 722 compared against the first half of 2021 as outlined in Report 699:

*Only two (2) people were imprisoned, although ASIC obtained six (6) custodial sentences. For consistency, we have only included the number of people imprisoned, in keeping with Report 699.

What does this tell us?

From the table above, we can see that in the second half of 2021, ASIC increased its activity within the market in the following areas:

  1. individual charges in criminal proceedings
  2. criminal charges laid, and
  3. civil penalty cases commenced.

ASIC also appears to have experienced an increasingly successful end to 2021, by securing an increase in:

  1. non-custodial sentences;
  2. the value of the civil penalties imposed by the courts (an increase of over 180%); and
  3. individuals disqualified or removed from directing companies.

Given this data, we expect the next Enforcement Update to indicate a proportionate increase in these areas for the first half of 2022. This is because ASIC has:

  1. commenced 21 civil penalty proceedings, an increase of 9 since the first half of 2021, and
  2. seen the number of civil penalty proceedings before the courts increase by 12.

We also can expect that ASIC will continue to conduct its investigations at a similar pace – around 50 investigations per half-year.

What does this mean for the financial services industry?

Report 722 showed a small, but important, decline in enforcement activity across the financial services industry more broadly.

When comparing the reported figures in Report 722 to those in Report 699, we see the trends outlined in the table further below.

NOTE:

  1. The figures represented are the differences between the two Reports. For example, the first reported number of -3 for ‘Credit’ means that there were 3 fewer criminal credit case outcomes in Report 722 vs Report 699, and
  2. Insurance was not addressed in Report 699:

From this we can see that:

  1. ‘Financial advice’, ‘Investment management’ and ‘Other financial services’ saw moderate to significant increased enforcement activity during the latter half of 2021, and
  2. ‘Credit’ and ‘Superannuation’ saw significant declines in enforcement activity during the same period.

These trends accord with what we are seeing in the market at the moment. Financial advice continues to be a strong area of interest to ASIC with an uptick in the number of administrative proceedings brought by the regulator.

What next?

We anticipate that the next Enforcement Update from ASIC will show that it has been an equally busy, if not busier, period than the second half of 2021. This is due to:

  1. the increased number of civil penalty proceedings commenced
  2. the increased number of civil penalty proceedings before the courts currently, and
  3. the consistently high number of investigations commenced during the latter half of 2021.

This is in line with what we are seeing, and we encourage our clients to seek professional advice as early as possible when they receive a communication from ASIC.

If you’ve had contact from ASIC and are unsure of what to do, please contact us. We deal with ASIC every day and will be happy to navigate your through the process.

By Simon Carrodus and Glenjon Aligiannis

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