ASIC's corporate plan persists with its "Why Not Litigate" approach to enforcement
Australia's corporate regulator has released its Corporate Plan, which outlines its strategic litigation goals and governance initiatives over the next four years.
On 31 August 2020, the Australian Securities and Investments Commission ("ASIC") released its Corporate Plan for 2020-2024. The Corporate Plan articulates the corporate regulator's ambitious agenda, strategic priorities, and enforcement strategy.
A key area of focus is ASIC's response to the COVID-19 pandemic, in particular, its prioritization of measures which aim to protect vulnerable consumers and maintain the resilience and stability of Australia's financial system. Notably, following a temporary hiatus or easing of a number of enforcement work streams due to the pandemic, the regulator has resumed that body of work, including its implementation of the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry ("Royal Commission").
Significantly, the Corporate Plan makes clear ASIC's intention to persist with its "Why not litigate?" approach to enforcement despite several recent losses in the courts (for example, see our Commentary on the recent judgment in ASIC v Mitchell). In FY21, enforcement action is slated to account for approximately 45% of ASIC's annual budget of A$471M, with another 26% allocated to supervision and surveillance activities. ASIC's enforcement priorities include:
- Matters that engage ASIC's powers or statutory provisions that carry new or higher penalties (for example, the provisions introduced by the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth)), so that the metes and bounds of those powers and new laws can be tested;
- Cases involving serious misconduct which have a high deterrence value, such as cases that involve large market participants or vulnerable consumers;
- Misconduct by individuals, particularly criminal conduct or governance failures, at a board or executive level;
- Significant market misconduct such as insider-trading, market manipulation and continuous disclosure matters;
- Illegal phoenix activity;
- Auditor misconduct; and
- Case studies and referrals arising from the Royal Commission.
New and continuing governance initiatives outlined in the Corporate Plan include:
- Preparing for the implementation of the proposed Financial Accountability Regime ("FAR"), which would extend the existing Banking Executive Accountability Regime ("BEAR") to directors and senior executives of the Australian Prudential Regulation Authority ("APRA") regulated insurers, financial services institutions and Registrable Superannuation Entity licensees; and
- Conducting a targeted governance review of a particular company to assess shortcomings in culture, governance and accountability frameworks.
The Corporate Plan provides regulated entities, and their boards and management, with a useful road map as to the regulator's key areas of focus and enforcement in the coming years.