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ASIC to have larger ‘court-based litigation’ focus

The chairman of the Australian Securities and Investments Commission has said that the corporate regulator will move forward with more “court-based litigation” against financial institutions.

ASIC chairman James Shipton made the comments before the Parliamentary Joint Committee on Corporations and Financial Services on Friday (19 October) after being asked whether ASIC has had “a reticence to take on the major banks”.

The question was raised in reference to statements made by Commissioner Kenneth Hayne in his interim report for the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

In the report, Commissioner Hayne acknowledged ASIC’s use of its banning powers, but he criticised the regulator’s limited use of court action against embroiled entities.

“Rarely has ASIC gone to court to have the defaulting party penalised. The criminal prosecutions that have been brought have all been directed at individuals. Civil penalty proceedings have seldom been brought,” Commissioner Hayne said.


Commissioner Hayne also accused ASIC of too often entering into negotiations with accused parties, which go on to settle an issue through the payment of a financial penalty without having to make an admission of guilt.

As such, in his opening address, Mr Shipton commended the “important work” of the royal commission, the “seriousness of the observations made” and noted that work was underway to provide ASIC with more powers to accelerate its enforcement outcomes and supervisory approaches.

He said: “The royal commission has also made observations and criticisms about ASIC’s approach to enforcement, especially in relation to court-based enforcement.

“While ASIC has always been committed, and dedicated, to preventing misconduct in the industry, we take these comments about our approach very seriously. We fully accept that we need to continue to make changes to our approach to enforcement to deliver more effective deterrence.”

He continued: “If institutions lie, or are otherwise dishonest with us, we will use every power available to us to punish that behaviour. I am a firm believer in the importance and effectiveness of court-based enforcement tools. They are the foundation of any regulator.”

The chair stated that while the considerations of court processes and remediation will be outlined in the regulator’s formal response to the royal commission, he stated that ASIC was clearly expected to “pursue higher and more meaningful penalties in court”.

“With both higher penalties and disgorgement, there will be an even greater deterrence impact from court outcomes,” the chair said.

Later in the committee hearing, Mr Shipton touched on the question about the “reticence to go to enforcement against major banks”, saying that it was working on having a “very credible, robust and responsive answer because we want, and we intend, to have real deterrents when it comes to the big financial institutions”.

Likewise, outgoing deputy chair Peter Kell told the Joint Committee on Corporations and Financial Services that the regulator “accept[s] that we need to have a greater focus in our litigation”.

While Mr Kell highlighted that the regulator had previously sought “very significant remediation” from the larger financial institutions, he “accepted” that it had “not always been accompanied by a court-based litigation and, as you have heard, that is an area where we need to increase our focus”.

Mr Kell continued: “So, it is an interesting challenge. Because, I don’t think anyone would necessarily say that we want to reduce the focus on remediation and compensation of the financial service sector for mum and dad consumers, so how do we make sure that we obtain some of those outcomes while still building on that to increase the deterrent effect through punishment via litigation? And that’s the active issue that is on our plate at the moment.”

He concluded: “Having a greater focus on court-based litigation is the key component of our regulator toolkit and it is something that is needed, in particular, against the larger institutions. And you’ve seen more of that begin to come through the pipeline. And that needs to build on the work we’ve done in terms of remediation and changing practices in the industry. We need that court-based litigation against the big players, so I accept that.”

Meanwhile, deputy chair Daniel Crennan, QC, said of those ignoring cornerstone protections: “We will catch them, we have surveillance, we have new powers, we have receiver of telephone intercepts. If they chose not to comply with their [cornerstone] obligations, people will be going to jail.”

[Related: RC report slams ASIC response to misconduct]

ASIC to have larger ‘court-based litigation’ focus

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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