REPORT: ASIC Enforcement Review

Advisers, and Licensees, often long and loudly complain that the Australian Securities and Investments Commission (ASIC) lacks the power, authority and conviction to properly encourage recalcitrant advisers to embrace professionalism.

Advisers and Licensees can now relax. Position Paper 7 "Strengthening Penalties for Corporate and Financial Sector Misconduct" outlines the Regulator's wish-list of powers, penalties and remedies.

Central to an effective enforcement regime is the need to have an appropriate range of penalties available for particular breaches of the law. This will allow the courts scope to impose penalties of greater or lesser severity, or for ASIC to take its own enforcement action, commensurate with the misconduct. Appropriate penalties send a signal to the community that breaches of the law are taken seriously and so promote confidence in the system, as well as providing a deterrent to would be offenders.

While any discussion of powers, penalties and remedies may terrify some advisers, ASIC's proposals are, in our opinion, reasonable and fair. Providing the Regulator with more regulatory options, and removing the threat of imprisonment for strict and absolute liability offences, are sensible outcomes. Extending the infringement notice regime and empowering ASIC to force non-compliant businesses to disgorge profits are, in principle, in the interest of both consumers and the regulated entities.

The FPA's response is unsurprising, 

The FPA in principle supports extending the penalty regime to provide ASIC with a range of regulatory tools to be applied based on the circumstances and severity of the misconduct. However the purpose of the changes must be to address wrongdoing, not to be heavy handed with compliance and penalising those providing quality professional services to consumers. The FPA believes the enforcement options within the law should incentivise individual professionalisation, rather than focus on imposing disproportionate penalties for disclosure matters of mere negligence, which will continue to feed the compliance driven culture of financial services.
— Heather McEvoy, Policy Manager

In ASIC's view the current penalties are "often too weak to act as a real deterrent, or inadequate when compared with the severity of misconduct" and the power to confiscate company profits from non-compliant companies will strengthen Australia's corporate penalty regime.

To read ASIC's Position Paper, click here.

To read the FPA's submission, click here




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