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‘Why not litigate this demonstrable breach’: ASIC’s proactive approach

The Australian Securities and Investments Commission (ASIC) should have acted quickly and more strongly to breaches in the financial industry.

ASIC Chairman James Shipton said that the interim procedures that the corporate regulator has put into place recently, would allow the regulator to do just that.

“We now have issued guidance that would mean that the decision like the one in CCI or the discussion related to NAB yesterday would have a very different starting point. The starting point today would be to answer the question and the turn out minds to why not litigate this demonstrable breach?” Shipton explained.

Shipton said that the corporate regulator was waiting for a review that was being taken into that business which was completed in September. He added that the review will form part of the evidence as part of the investigation.

“If this matter and those facts were to present themselves today, then the processes and the questions we would apply would most likely trigger the commencement of an investigation,” Shipton told the commission last week Friday.

These interim procedures were referred to again this week at the ASIC Market Integrity Meeting by ASIC commissioner Cathie Amour he indicated that the regulator intends to be hard on regulated entities who have not reported things that should be reported.

“We are reviewing our approach to enforcement and particular emphasis is what our approach litigation and while that review is occurring we have put in place some interim initiatives that raise questions about how matters addressed actually come up to the commission,” she explained.

Systemic Issues

At the Royal Commission hearing last week, the ASIC chairman explained that the reason for the ‘inaction’ in 2015 was at the time of the breach notification from Commonwealth Bank of Australia (CBA) is that the issues were thought to systemic throughout the industry.

“As I understand, that at the time there was a focus on an industry-wide reaction, and as I also understand it there was a focus on trying to advance the remediation, advance industry change, get independent reviews on eleven financial institutions involved. But I most certainly agree that the investigation component should have started much earlier.”

He said that the challenge is having just 80 personnel tackling systemic misconduct.

When asked how confident can the community that ASIC will act more quickly in the future, Shipton responded that it is because of the clear guidance that has been set out by the regulator.

Adequate Enforcement Management

Measurement and assessment of the performance, particularly related to an enforcement action, is lacking the and is something ASIC aims to address in the future.

He did say, however, that the evaluation of enforcement is implicitly implied in other aspects of their self-evaluation.

“It would be, I think, unwise to have targets in relation to enforcement outcomes but those but those quantitative assessments are very informative as a guide overtime as to where we are deploying our resources and our capabilities.”

He explained to the commission that the measurement of regulatory performance is a complicated area that regulators struggle with and that means that they need to consider how to approach this.

“We should be starting with how the financial system is improving and performing as regards to fairness and equity towards customers and adherence to the law, once we develop those metrics… that would be a measure of our performance,” Shipton explained.

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