Did You Know…
ASIC is moving away from the ‘why not litigate?’ mantra, to a focus on economic recovery
On 26 August 2021, the Australian Securities and Investments Commission (ASIC) released its ‘Corporate Plan 2021-25’. In it, ASIC outlined how it would achieve a ‘fair, strong and efficient financial system for all Australians’.[1]
Notably, in its plan for the next five years ASIC appears to be moving away from its “Why Not Litigate” approach to enforcement policy, instead intending to take a more subtle approach consistent with Treasurer Josh Frydenberg’s expectations of a ‘more supportive regulator focused on economic recovery’ as the country and its financial system recovers from the effects of the COVID-19 pandemic.
The “Why Not Litigate” approach means that, once ASIC is satisfied that breaches of the law are more likely to have occurred than not and once it has determined that pursuing the matter is in the public interest, ASIC asks itself that very question – why not litigate this matter? – or to borrow the words of Commissioner Hayne in his Final Report, ASIC “takes, as its stating point, the question of whether a court should determine the consequences of a contravention”. The approach was adopted by ASIC following a finding by Commissioner Hayne that historically: “ASIC’s starting point appears to have been: how can this be resolved by agreement?”
The numbers show that the “Why Not Litigate” approach is not just a Socratic flourish – ASIC pursued 64% civil penalty provision matters and 35% more criminal proceedings between 2018 and 2020.[2]
The Corporate Plan provides that ASIC’s new four external strategic priorities[3] are as follows:
- Promoting economic recovery through better and more efficient regulations, facilitating innovation, and targeting regulatory and enforcement action ‘to areas of greatest harm’;
- Reducing the risk of harm to consumers particularly those exposed to poor product governance and design, and attention on scam prevention;
- Supporting cyber security and enforcement aligning with the Australian government’s commitment to mitigating cyber security risks; and
- Pioneering industry readiness and compliance with law reform initiatives including Financial Accountability Regime, amendments in superannuation and insurance, breach reporting, and design and distribution.
Whilst ASIC will continue to pursue litigation in appropriate cases, it is clear that this new attitude signals that chief amongst ASIC’s enforcement priorities is support for the recovering Australian economy – especially reducing the risk of harm to consumers from scams and poorly designed financial products.
[1] Australian Securities and Investments Commission, 21-225MR ASIC Publishes Corporate Plan 2021-25 (Web Page, 26 August 2021) <https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-225mr-asic-publishes-corporate-plan-2021-25/?utm_source=miragenews&utm_medium=miragenews&utm_campaign=news>.
[2] Louise Massey, ASIC’s ‘why not litigate?’ mantra morphs to a more targeted and proportionate approach (Web Page, 1 September 2021) <https://www.jdsupra.com/legalnews/asic-s-why-not-litigate-mantra-morphs-8561428/>.
[3] Australian Securities and Investments Commission, 21-225MR ASIC Publishes Corporate Plan 2021-25 (Web Page, 26 August 2021) <https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-225mr-asic-publishes-corporate-plan-2021-25/?utm_source=miragenews&utm_medium=miragenews&utm_campaign=news>.
