The Australian Securities and Investments Commission (ASIC) should be given powers to pursue compensation on behalf of consumers, with the corporate regulator given the first right to sue ahead of investors involved in class actions.
This is the view of UNSW Australia Law Associate Professor Michael Legg, who said ASIC should also become a gatekeeper of information surrounding compensation stemming from regulatory action and class actions.
Legg's comments were part of a submission to Senate Inquiry into the performance of ASIC in which he claimed there was a lack of co-ordination between regulatory actions and class actions, as well as between financial service dispute resolution mechanisms.
Legg stated that in seeking consumer compensation ‘a more robust approach would be to give a preference to either class actions or regulatory proceedings', with ASIC's role prioritised over private litigation.
"ASIC could be given a first right to sue so that if it decided to take action then a class action could not be commenced, would be taken over by ASIC or required to be stayed. Outside of these circumstances, class actions would be permitted," Legg said.
As a result of this prioritisation ASIC could seek compensation for investors ahead of, or in preference to, any action the regulator may take to seek civil penalties.
Legg also suggested that in the event where ASIC did not seek compensation, any civil penalties or fines resulting from action could be used to compensate consumers.
However Legg did not rule out class actions but stated that if one was to be the preferred form of compensation, ASIC "could vacate the field in relation to compensation on the basis that litigation funding is available".
In these cases ASIC would not be involved in a class action except where "it was concerned as to the conduct of litigation or a proposed settlement", Legg said.
