The guidelines released by ASIC should come as no surprise to anyone who has had dealings with the regulator – they reflect our experience of the approach taken by ASIC in its investigations and enforcement activities. ASIC has recently confirmed that insider trading detection, investigation and prosecution continue to be a priority for ASIC and that it is also actively monitoring potential misconduct involving employees of firms advising on significant corporate transactions. ASIC Chairman Greg Medcraft said yesterday that the expected growth in superannuation (at twice the rate of the economy) and the resulting growth in the financial system will generate more complaints and breaches. In this context, ASIC’s confirmation of its regulatory approach is timely.
The three policy documents ASIC released are:
ASIC’s approach to enforcement (Information Sheet 151) explains the factors ASIC takes into account when selecting which matters it will formally investigate and deciding which of its various enforcement “tools” it will use. This document also sets out its policy for cooperation with ASIC.
Public comment (Information Sheet 152) updates a previous regulatory guide and discusses when ASIC may comment publicly on investigations and enforcement actions.
Enforceable undertakings (Regulatory Guide 100) is an updated version of ASIC’s guide to what an enforceable undertaking is and the factors ASIC will consider when deciding whether to accept an enforceable undertaking. It also describes what terms will not be acceptable to ASIC and provides examples of undertakings ASIC may accept.
ASIC does not have the resources to undertake a formal investigation of every matter that comes to its attention. Factors relevant to ASIC’s decision whether to investigate a particular matter include:
Taking into account the seriousness of the misconduct, ASIC will choose between a wide range of enforcement tools:
As we tell our clients (which is reflected in the policy) a cooperative approach by persons of interest to ASIC may have benefits – including potentially less severe remedies. A cooperative approach, according to ASIC, may include:
ASIC says in its updated public comment guide that:
Again, these principles will come of no surprise to companies involved in investigations or in the negotiation of enforceable undertakings.
ASIC sees enforceable undertakings as potentially achieving a more effective regulatory result, including improved compliance or a quicker outcome for investors.
In broad terms, ASIC says in its updated enforceable undertakings guide that:
The Regulatory Guide confirms ASIC’s policy not to remove an enforceable undertaking from the register (even after all the obligations under it have been fulfilled) and that ASIC will take court action for certain breaches of an enforceable undertaking and will publicise such an application. Again, these principles are not new.
Mallesons has a market leading regulatory practice and acts for companies, their directors and their employees in relation to ASIC investigations and enforcement actions. Please contact us to find out more.
Who does this affect?
Corporations, managed investment schemes, participants in the financial services industry, people engaged in credit activities and professional services firms advising companies on corporate transactions.
What do you need to do?
If you receive a notice or request from ASIC, it is important that you contact your lawyer immediately. There may be serious consequences for companies or individuals failing to provide the information or documents ASIC requests. If ASIC makes an informal request for assistance, it is important that you seek legal advice to understand whether it is more appropriate for assistance to be provided under the protection of a notice.