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ASIC wealth investigations increase by 216%

The financial services regulator has reported a 216 per cent increase in wealth management investigations since July 2018, as the fallout from the banking royal commission continues.

According to ASIC’s latest enforcement update, which covers the period 1 January to 30 June 2019, the number of enforceable undertakings brought by the regulator drastically dropped over the period as it has taken more cases to court as per its new ‘Why not litigate?’ approach.

According to the regulator, it entered into one court enforceable undertaking in the six-month period, compared to 12 in the prior comparative period.

The move comes after the regulator was censured by commissioner Kenneth Hayne in his interim and final report for the banking royal commission, when he concluded that “the law was too often not enforced at all, or not enforced effectively”, and that ASIC had “rarely” taken wrongdoers to court. 

One of his final recommendations was for ASIC to ask itself the critical question: “Why not litigate?” when considering actions against any legal violation.

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Writing in its enforcement update, ASIC deputy chair Daniel Crennan QC commented: “Enforcement work has a core focus on deterrence, public denunciation and punishment. We continue to pursue this work via our ‘Why not litigate?’ enforcement approach. 

“This approach does not suggest we take every matter to court but allows us to consider relevant factors to ensure we are doing what we should to punish past misconduct and to deter future misconduct.”

He noted that ASIC had established a new Office of Enforcement, responsible for carrying out ASIC’s key enforcement activities separate from ASIC’s regulatory teams and was “working to strengthen ASIC’s enforcement effectiveness by accelerating court-based enforcement matters”.

According to the report, between July 2018 and June 2019, the financial services regulator had increased the number of ASIC enforcement investigations by 20 per cent, enforcement investigations involving the big six (or their officers or subsidiary companies) by 51 per cent, and wealth management investigations by a whopping 216 per cent.

In the six months between 1 January and 30 June 2019, ASIC recorded 51 financial services-related outcomes. Twelve of these were due to “dishonest conduct or misleading statements”.

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Additionally, as at 1 July 2019, ASIC revealed that it had 17 criminal and 29 civil financial services-related matters underway. Two of the 17 criminal and three of the 29 civil enforcement matters relate to misconduct in the provision of credit (however, no further details were released).

Over the period, a total of $19.2 million had been paid in compensation and remediation for consumers and investors (however, no civil penalties were imposed by the courts and no community benefit payments were made in this reporting period), the report revealed.

The report concluded that, over the six months January to June 2019, ASIC’s enforcement actions resulted in a range of outcomes, including:

  • 70 criminal charges laid 
  • 10 individuals charged in criminal proceedings
  • seven custodial sentences (six people imprisoned) 
  • six non-custodial sentences 
  • 386 criminal charges laid in summary prosecutions for strict liability offences 
  • 191 individuals charged in summary prosecutions for strict liability offences 
  • 103 individuals removed or restricted from providing financial services or credit 
  • 29 individuals disqualified or removed from directing companies 
  • five infringement notices issued
  • 77 investigations commenced
  • 48 investigations completed
  • one court enforceable undertaking

Mr Crennan commented that ASIC is continuing its work on the 13 matters referred to ASIC by the banking royal commission “as well as a significant number of matters that were examined as case studies in the royal commission hearings”.

“While we do not comment on actual or potential investigations, we are prioritising our work on these matters and a significant number of other investigations into Australia’s major financial services institutions. 

“We will continue to provide public updates on our enforcement actions when appropriate,” he said.

[Related: ASIC commissioner clarifies litigation strategy]

ASIC wealth investigations increase by 216%
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Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts. 

Contact Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

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