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Clifford Chance

Clifford Chance

Regulatory Investigations and Financial Crime Insights

More bite required? Enforcement overhaul for Australia's corporate watchdog

Years after criticism was squared at the country's leading corporate watchdog, ASIC has confirmed a major rehaul of its enforcement division and an increased focus on tech reliance, all with its eye on faster enforcement decisions

Five years ago, after being in the firing line during the highly publicised Financial Services Royal Commission for alleged weaknesses in its enforcement track record, the Australian Securities & Investments Commission famously adopted the mantra "Why Not Litigate?". It was a divisive approach to take, although met with approval from Commissioner Hayne and showed promise of a new world order for Australia's corporate regulator. Industry took note and behaved accordingly, preparing for the courtroom battleground instead of boardroom negotiations with ASIC.

Current ASIC Chair, Joe Longo, took up the top position in June 2021, after the untimely exit of both the former chair and deputy chair. It was widely considered Mr Longo was tasked with getting the regulator back on track as a dominant force for protecting consumers.

Fast forward to 2023 and while ASIC's presence in the courtroom has certainly increased, enforcement action remains somewhat in a state of flux. Modifications to ASIC's structure involving consolidating the enforcement teams under one leadership have been announced. The restructure was signalled earlier this year and appears to have been confirmed (according to public reports) with the naming of new leads during staff meetings held in early May.

Heading up the newly rebranded enforcement and compliance team will be Tim Mullaly, who has been with ASIC for more than two decades. The new structure will have Mr Mullaly heading what was previously financial services enforcement and markets enforcement. According to media reporting, the changes are aimed at "streamlining and modernising the regulator". Speed is the motivator, with ASIC hoping to be able to make decisions faster in their enforcement endeavours, citing a priority to use "more capable tech staff". Given ASIC has a track record of sometimes taking years to bring enforcement actions, this will come as a welcome proposal to the corporate community.

There has been some criticism of the proposed restructure by members of parliament and industry groups, who are concerned the restructure is not enough to rectify what they see as the current failings of ASIC's enforcement processes. There have even been reports of ASIC "insiders" who claim there is a need for "new talent" in order to effect any meaningful change.

Earlier this year ASIC released its 2023 priorities, with the focus being on "greenwashing, predatory lending and misleading insurance pricing promises". The overall priority is to protect consumers from financial harm. So far, this year has seen a slew of director disqualifications and corporate charges. Earlier this year, ASIC secured its largest ever penalty for continuous disclosure breaches, and perhaps of equal note, it was the result of a fully litigated process and not an agreement on penalties between the parties to be approved by the court. We've also seen ASIC's first greenwashing case in court. Mr Longo, in a recent seminar, noted ASIC win most of the cases they take on and, in what is perhaps a sign of things to come, shared his view that ASIC did not take on enough risk when deciding whether to commence proceedings, that it was not their job to run "safe" cases, and that further testing of boundaries might be required.

The restructure is set to be in effect from July. Time will tell if it will be the answer to the regulator's woes.

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