Must try harder: ASIC's half term report card - Financial Services

Fair, orderly and transparent. These were the key words when ASIC Chairman Greg Medcraft commented on ASIC's enforcement goals amid the Oliver Curtis media blitz. Throw in the regulator's proceedings against a number of major banks around bank bill swap rates and it's clear where ASIC's focus lies with regard to enforcement right now.

This commitment to pursuing misconduct and the importance of deterrence appears loud and clear, courtesy of the ASIC Report on enforcement outcomes. There has been a marked increase in criminal charges and a dramatic rise in infringement notices.

The number of criminal charges laid has gone up by almost 129% compared with the previous six months. The rise is even greater in terms of infringement notices – a 275% jump compared to the second half of 2015. At the same time, the value of compensation or remediation paid has significantly reduced by over 90%.

However, this may potentially be explained by the timing of settlements and other claims resolutions.

ASIC's 'report card' for the first half of this year also outlines its focus for the next six months:

Market Integrity - Concentrating on disclosure obligations and market abuse.
Corporate Governance - Making sure 'gatekeepers' comply with the law. For example, particular focus will be placed on issues such as poor corporate culture, failure to respond appropriately to threats of malicious cyber activity and improper transactions in the face of insolvency.
Financial Services - Ensuring the Future of Financial Advice reforms are complied with and lifting the standards of major financial advice providers in the context of ASIC's Wealth Management Project (action has been taken in relation to six large banks in connection with the Wealth Management Project).

So, no real change in scope and focus, given these three areas are the same as those previously signalled for the first half of the year. It should be noted, however, that the detail of the corporate governance focus area has shifted slightly.

THE KEY STATISTICS

Comparative table of ASIC 'summary of enforcement results'
Type	Number / Value* (1 Jul - 31 Dec 2015)	Number / Value ** (1 Jan - 30 Jun 2016)	Change
Investigations commenced	105	101	-3.81%
Investigations completed	86	93	8.14%
Persons charged in criminal proceedings	6	10	66.67%
Criminal charges laid	42	96	128.57%
Individuals removed from financial services	27	24	-11.11%
Infringement notices issued	20	75	275.00%
Infringement notices paid (value)	$969,200	$1.12 million	15.56%
Compensation/remediation (value)	$149 million	$13.4 million	-91.01%

WHAT TO EXPECT?

Earlier this year, ASIC's chairman stated that additional funding would enable the regulator to carry out further surveillance and enforcement in financial planning, responsible lending, life insurance and misconduct and breach reporting.¹ While it has only been a few months since that increase in funding was announced, the marked increase in criminal charges laid and the rise in infringement notices could be a sign of things to come.

Footnote

¹ Greg Medcraft, 'Building trust and confidence: ASIC priorities' (Speech delivered at the Annual Stockbrokers Conference, Melbourne, Australia, 2 June 2016); Greg Medcraft, Senate Estimates: Opening Statement, 6 May 2016.

* Source: Australian Securities and Investments Commission, Report 476: ASIC enforcement outcomes: July to December 2015, released 30 March 2016.

** Source: Australian Securities and Investments Commission, Report 485: ASIC enforcement outcomes: January to June 2016, released 8 August 2016.

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