ASIC's enforcement update

What you need to know

• ASIC has released its bi-annual enforcement update for the period July to December 2020. It provides an interesting insight into ASIC's activities and current and future priorities.
• ASIC emphasises the higher civil penalties obtained in two recent enforcement cases, including a penalty of $75 million.  In light of that and the recent Full Court decision upholding a $125 million civil penalty against Volkswagen, it seems likely that ASIC's expectations in this area may be increasing.
• ASIC also highlights that it has continued to prioritise pursuing court outcomes, including for Financial Services Royal Commission matters, and, comparing the 2018 and 2020 calendar years, recorded a 64% increase in civil penalty proceedings and 36% increase in the number of criminal proceedings commenced.
• Consistent with ASIC's recently adopted 'express investigation' approach, ASIC 'will continue to encourage entities and individuals who are under investigation to cooperate with ASIC as fully and quickly as reasonably as possible'.  This approach seems to be focused not on avoiding litigation but narrowing the issues in dispute and reducing the number of contested proceedings.  It will be interesting to see how ASIC's practices develop in relation to cooperation and whether, over time, it provides any further guidance on the benefits of cooperation for those subject to investigation.

Enforcement in the second half of 2020

In the last six months of 2020, ASIC prioritised enforcement of the following types of matters:

• Financial Services Royal Commission referrals and case studies;
• misconduct related to superannuation and insurance;
• cases that engage ASIC's new powers or provisions that now carry penalties or higher penalties; 
• illegal phoenix activity;
• auditor misconduct; and
• new types of misconduct (such as misconduct carried out online or using emerging technologies).

In response to COVID-19, ASIC has also continued to pursue matters to address conduct that seeks to exploit the pandemic environment (including predatory lending, mis-selling and poor claims handling), opportunistic conduct (including scams), failures to disclose materially negative information, opportunistic and misleading market announcements, and egregious governance failures within corporations, schemes and superannuation funds. 

ASIC highlights that, comparing the 2018 and 2020 calendar years, there has been a 64% increase in the number of civil penalty proceedings commenced and a 36% increase in the number of criminal proceedings commenced.  In the period July to December 2020, there have been a large number of:

• Prosecutions – including 27 individuals charged in criminal proceedings and 194 criminal charges laid (ASIC does not separately break out any criminal proceedings commenced against companies).
• Civil penalties – including $159.8 million in civil penalties imposed by the court, 14 civil penalty cases commenced and 18 civil penalty proceedings currently before courts.
• Investigations – including 107 investigations commenced and 211 investigations ongoing.
• Banning orders – including 22 individuals removed or restricted from providing financial services or credit and 28 individuals disqualified or removed from directing companies.

During the same period, there were only two court enforceable undertakings, reflecting ASIC's continued reticence to accept undertakings following the Royal Commission.  

As at 1 January 2021, ASIC has enforcement litigation in progress in the following areas: