ASIC's Latest Enforcement Update Continues to Reflect an Assertive Enforcement Approach
The report reveals a record number of court filings and monetary penalties and confirms a continued focus on COVID-19-related issues going forward.
On 16 April 2021, the Australian Securities and Investments Commission ("ASIC") released its enforcement update report for July to December 2020. The report demonstrates ASIC's continued focus on litigation as its primary enforcement tool.
The report records that, in the second half of 2020, ASIC's civil penalty proceeding filings increased by 64% compared to 2018. A total of $159.8 million in civil penalties was imposed by courts across the relevant period, including the two largest-ever civil penalty outcomes ($75 million and $57.5 million, respectively) for financial services and market misconduct. There was a 36% increase in criminal proceeding filings compared to 2018, with 194 criminal charges laid and 27 individuals charged. In addition, 107 investigations were commenced, with 211 investigations remaining on foot at the end of the reporting period.
ASIC reported entering into two enforceable undertakings (being court-enforceable undertakings offered to ASIC by defendants as an alternative to litigation) during the period. We are yet to see whether ASIC will increase its use of enforceable undertakings following the marked reduction in their use (in favour of litigation) post the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Consistent with its Corporate Plan for 2020-24, ASIC continues to prioritise referrals and case studies arising from the Royal Commission. As of 31 December 2020, 11 of the 45 investigations resulting from the Royal Commission remain ongoing, with the remainder having resulted in litigation or requiring no further action.
ASIC also continued its pursuit of matters to address issues arising from the COVID-19 pandemic, resulting in five court proceedings and two administrative actions in the period targeting predatory and opportunistic conduct, disclosure failures, and governance failures arising from the pandemic environment.
Looking ahead, ASIC has signalled its intention to continue focusing on conduct that attempts to exploit the pandemic environment or that hinders recovery from it. It is also developing new priorities for its enforcement work in the 2021-2022 financial year, which we expect to be announced in the coming months.
All Australian corporations, directors and officers should continue to be mindful of and seek advice on their obligations given ASIC's assertive approach to enforcement and its preparedness to litigate and pursue large civil penalties and, in some cases, criminal charges which carry custodial sentences.
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