All Eyes On ASIC – Enforcement Update to June 2022

On 28 July 2022, the Australian Securities and Investments Commission (ASIC) released “ASIC enforcement and regulatory update: January to June 2022” (Report 733). In this blog, we are going to:

1. Review the key data points in Report 733 and compare them against the previous update – ‘ASIC Enforcement Update July to December 2021’ (Report 722)- which we previously covered here:
2. Provide you with our insights and commentary;
3. Review the relevant data for financial services specifically; and
4. Provide you with our contact details in case you have any questions.

Key data points from Report 733

The first half of 2022 has seen a slight decline in activity for ASIC’s Enforcement Team. However, there has been a significant increase in civil penalties awarded by the courts. Here at Hamilton Locke, we pay attention to ASIC’s biannual Enforcement Updates to monitor themes and trends. And, of course, we share our analysis with you.

Below are the figures for the first half of 2022 identified in Report 733 compared against the second half of 2021 (as outlined in Report 722):

*Only two (2) people were imprisoned, although ASIC obtained seven (7) custodial sentences. For consistency, we have only included the number of people imprisoned, in keeping with Report 733.

** NR = Not Reported.

What does this tell us?

We can see that in the first half of 2022, ASIC enforcement activity slowed across most market segments.

At the same time, however, ASIC secured an increase in:

1. The value of the civil penalties imposed by the courts (an increase of over 70%);
2. Individuals disqualified or removed from directing companies;
3. Infringement notices issued; and
4. Investigations commenced.

Given this data, we anticipate that the next Enforcement Update (July to December 2022) will see a noticeable increase in enforcement activity. This is because:

1. There remain 40 civil penalty cases before the courts; and
2. ASIC has commenced 60 investigations since April 2022.

What does this mean for the financial services industry?

Report 733 showed a significant increase in enforcement activity across the financial services industry more broadly, which is a smaller subset of the total data referred to in the table above.

When comparing the reported figures in Report 733 to those in Report 722, we see the trends outlined in the table further below.

NOTE:

1. The figures represented are the differences between the two Reports. For example, the first reported number of +1 for ‘Credit’ means that there was 1 more criminal credit case outcome in Report 733 vs Report 722; and
2. Other financial services was not addressed in Report 733:

From this we can see that:

1. ‘Credit’, ‘Financial advice’ and ‘Investment management’ saw significant increased enforcement activity during the first half of 2022;
2. ‘Superannuation’ experienced a minor decline in  enforcement activity;
3. ASIC has either not entered into any enforceable undertakings during the first half of 2022 or has decided not to report these figures.

These trends accord with what we are seeing in the market at the moment:

1. ‘Credit’ has become an area of intentional increased activity by ASIC as a result of the continued emergence of new players in the Buy Now Pay Later (BNPL) space;
2. ‘Financial advice’ remains an area of sustained scrutiny by ASIC as it secured increased outcomes for criminal, civil and administrative matters; and
3. ‘Investment management’ experienced an increase in the number of administrative outcomes secured by ASIC.

We note that ‘Superannuation’ figures remained relatively constant during the first half of 2022.

Importantly, we note that ASIC has not released any reporting on the enforceable undertakings (if any) ASIC accepted in the first half of 2022 as that data set has been omitted from Report 733.

What next?

We anticipate that the next Enforcement Update from ASIC will show an increase in the enforcement activity undertaken in the second half of 2022. This is due to:

1. The latter of the year being a typically busier period as business activities continue to increase throughout the year; and
2. The increasingly higher number of investigations commenced during the first half of 2022.

This is in line with what we are seeing, and we encourage our clients to seek professional advice as early as possible when they receive a communication from ASIC.

If you’ve had contact from ASIC and are unsure of what to do, please contact us. We deal with ASIC every day and will be happy to navigate you through the process.

Please reach out to either Simon Carrodus or Glenjon Aligiannis for any questions or queries you may have.