Has ASIC lost its regulatory authority?
Has the Australian Securities and Investments Commission (ASIC) lost its regulatory authority as a result of the manner in which it dealt with the major banks on a range of breaches?
That is the question that has been directly posed by counsel assisting the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services, Michael Hodge QC, who has suggested that loss off authority was due to the regulator’s preference in negotiating enforceable undertakings (EUs) to commencing court proceedings.
Referring directly to ASIC’s handling of the Commonwealth Bank, Westpac and ANZ, Hodge questioned why the regulator had not sought to bring proceedings against the three companies, instead of initiating proceedings against one, Westpac, to test the law while obtaining enforceable undertakings from the other two.
“A significant problem with not commencing court proceedings is that no pecuniary penalty or other relief is obtained which would achieve specific and general deterrence,” Hodge said. “Moreover, it might be thought that the practice of ASIC of accepting enforceable undertakings is more likely to encourage conduct that courts contraventions of statute.”
He argued that this was because the entity giving an enforceable undertaking was “not required to disgorge the profits of its conduct, may not even be required to remediate customers for loss they have suffered as a consequence of the contravening conduct, does not incur a pecuniary penalty that would be calculated to deter any future contraventions and does not attract the condemnation of the Court and the attendant negative publicity”.
“In relation to CBA, it might be thought that if the largest company in Australia, by market capitalisation, is negotiating with ASIC on the premise that it could seek to persuade ASIC to issue a media release rather than insisting upon an enforceable undertaking, after ASIC has provided a document outlining the contraventions that ASIC believed CBA had engaged in, that suggests the collapse of ASIC’s regulatory authority,” Hodge said.
“In relation to ANZ, it might be thought that if ASIC has drafted a document in support an originating process required to commence a Federal Court proceeding, said in unequivocal terms to ANZ that it will commence that proceeding on a particular date and invited admissions, and then refrained from commencing a proceeding after a polite email asking for the opportunity to discuss was received from the general counsel of ANZ, that reinforces an absence of regulatory authority,” he said. “It may also send a message to the regulated population that ASIC lacks authority.”
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