On the 28th of August, the Australian Securities and Investments Commission (ASIC) released its 4-year corporate plan, covering up to 2023. ASIC has taken on the recommendations from the Royal Commission, looking to flex their increased enforcement and supervisory muscle.
ASIC will receive an additional $404 million over the next 4 years to advance recommendations from the Hayne Royal Commission. With the increased ammunition, ASIC has formed the Office of Enforcement and formally set up its Corporate Governance Taskforce.
Corporate Governance Taskforce
The role of the Corporate Governance Taskforce is to review the corporate governance practices of entities in the Close and Continuous Monitoring (CCM) program and other ASX 100 entities.
A key objective is to understand and strengthen director and officer oversight in large, listed companies. This involves examining practices such as the oversight of non-financial risks and decisions about the granting and vesting of variable remuneration for key management personnel. The consistency of company disclosures with actual practices will come under scrutiny.
This will lead to two reports in the second half of 2019 to highlight good practices and those that call for improvement. The first of these reports was released, on the 2nd of October (see HERE) .
Close and Continuous Monitoring Program
The program’s initial focus is on entities’ ability to detect and respond to potentially reportable breaches of financial services laws. This provides comprehensive and timely rectification and remediation of those breaches. It will analyse entities’ internal dispute resolution arrangements to better understand how consumer complaints are managed. They believe the findings will provide good proxy indicators of the broader culture and systems issues in the industry.
Directors and managers of the targeted regulated entities will be provided with feedback on the issues identified. There is a model for public reporting in development with the plan to publish observations of firm practices late this year.
The ultimate goal is to increase the number of large and complex financial services entities monitored through the program and to add areas of focus.
Office of Enforcement
This office will adopt the “Why not litigate?” approach put forward by Kenneth Hayne. The role of the office is to identify, prioritise and be accountable for the most important enforcement activities across ASIC. They will monitor and report on the activities of the law enforcement teams.
The office also oversees the use of emerging technologies to enhance the enforcement capabilities and monitor budgeting and resourcing requirements.
Teams operating under the Office of Enforcement will be separate from non-enforcement related contact with regulated entities as much as possible.
Enhanced enforcement discipline
Over the next four years, cases of high deterrence value and those involving egregious harm or misconduct will be targeted. This will be guided by the ‘Why not litigate?’ operational discipline. This addresses the community expectation that unlawful conduct should be punished and publicly denounced through the courts. This will occur when ASIC are satisfied breaches of the law are more likely than not to have occurred, and if pursuing it would be in public interest.
Expanded enforcement toolkit
The Treasury Laws Amendment Act 2019 will give ASIC the power to carry out its enforcement agenda effectively. The new laws introduced increase maximum prison terms for most serious offences. It provides higher civil penalties for individuals and companies.
The new laws introduce a civil penalty for breaches of s912A of the Corporations Act 2001. This puts a target on the back of companies that do not provide financial services ‘efficiently, honestly and fairly’.
To read the full ASIC plan, click HERE .© Guerdon Associates 2021 Back to all articles