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Penalties for basic obligations

Penalties for basic obligations in section 912A1 of the Corporations Act 2001 are there to enforce obligations that already exist.

“The organisation has been pressing for penalties to complete the picture, as, really, what we've got is already fairly direct. Cornerstone obligations reside in various provisions and various acts, and the people we regulate are expected to observe these obligations, according to the legislature in the Superannuation Act 1993, in Insurance further back in time, and in terms of 9120, 6 February 2002,” Australia Securities and Investments Commission Commissioner Daniel Crennan said, during the recent Meet the Regulators’ panel.

The Commissioner went on to say that the fact there were any penalties attached to these fundamental obligations, “…made our job as regulator fraught”.

The ‘fraught regulator’ has come under scrutiny for its seeming lack of litigative action and use of court enforceable undertakings (EUs). However, since the Royal Commission hearings, the ASIC Chairman James Shipton said ASIC would be taking a position of ‘why not litigate?’—a stance both the Commissioner and the Chairman explained in greater detail at the forum.

“’Why not litigate?’ is a procedural discipline on us to ask ourselves the question and to make sure we're making the right decisions,” Shipton explained. “Regarding the outcome of litigation, it has been made very clear that it should be used as a deterrence and an enunciation of wrongdoing when there has been a breach of the law.”

He indicated that having litigation as the starting point of enforcement was one of the things the Commissioner emphasised on the interim Report for the Royal Commission released late last year.

“I think this is really important in context because when we talk about our litigation strategy, we are also talking about how we make appropriate, fairly-reasonable and effective enforcement decisions. Essentially, what the Commissioner put twice last year in his interim report was that the starting point for enforcement of compliance is litigation. The proper starting point for the consequences of that contravention is court-based solutions,” Shipton continued.

Commissioner Daniel Crennan addressed a review conducted on ASIC last year and noted that the recommendations he made were effectively structural.

“We’re basically using what we have—we’re just changing the way we do things. It's linked to our changes in governance, whereby the commission is becoming more strategic so to speak, and executive directors who were put in place late last year—including the enforcement executive directors—will have a very strong executive role to play. Thus, there are a number of changes afoot within the organisation that are designed to make this process more effective and to encourage local organisations to become more inward-looking in terms of self-analyses. It is very important to keep up with changes as the world changes.”

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