ASIC: see how crooked bankers run now!
ASIC is tightening the noose around the necks of crooked bankers with laws that have real teeth as it accuses them of dragging their feet on fees-for-no-service response. ASIC has gone after the major banks for failing to complete their investigations into fees charged for no services. Now the scoundrels at fault are most likely to see the inside of the klink for their unconscionable behaviour. The days of sneering at the people they robbed are about to change.
The corporate watchdog plans to target senior executives and company directors as part of a tough new police-style approach to enforcing the law set out in a confidential internal report obtained by The Australian.Under the new regime proposed by the Australian Securities & Investments Commission’s enforcement specialist, Daniel Crennan QC, the regulator plans to focus on bringing prosecutions against both large corporates, especially in the scandal-ridden finance sector, and “individual accountability, particularly at executive and board level”.
Source: News Corp
Bosses in ASIC’s crosshairs
The ambitious new focus on both criminal and civil litigation, which would up-end decades of practice at the often-criticised regulator, is detailed in a heavily redacted 125-page review of enforcement policies, processes and decision-making procedures, obtained by The Australian under Freedom of Information laws.
As previously reported by The Australian, Mr Crennan’s report, handed to his fellow commissioners in December, sets out a blueprint for a new Office of Enforcement within ASIC solely focused on bringing alleged wrongdoers to justice that has a prejudice in favour of litigation and against negotiated agreements.
“Once ASIC is satisfied that breaches of the law are more likely than not, ASIC should ask itself: why not litigate?” Mr Crennan said in his report.
Implementing Mr Crennan’s reforms, which in part respond to criticism by banking royal commissioner Kenneth Hayne of ASIC’s unwillingness to take legal action against financial services industry players, would result in a titanic surge in court action brought by the regulator and require significant additional funding — something it has already flagged with Canberra.
The proposals respond to community expectations following the royal commission and a five-year wave of finance sector scandals that include the desire for a tougher regulator and the rejection of negotiated settlements including enforceable undertakings, where a company agrees to mend its ways but often does not admit it did anything wrong in the first place.
In other reforms, Mr Crennan also proposes a strict six-month time frame between ASIC receiving a report of misconduct and deciding whether or not to prosecute — a time period regarded within the regulator as ambitious — and says detailed reasons should be provided when investigations end with no action being taken.
He told ASIC the Hayne inquiry raised “the spectre of a ‘cost of doing business’ attitude towards financial penalties and enforceable undertakings imposed on companies”.
“Such an attitude cannot be tolerated,” he said. “When appropriate, proceeding against both the corporation and the individual corporate officers responsible for the contravening actions of the company should be the Office of Enforcement’s primary objective.”
Mr Crennan made it clear this included putting company directors at risk for the failings of their underlings in order to “compel cultural change within those parts of corporate Australia where compliance with the law has been less than optimal, to say the least”.
“Boards which fail to drive a culture of strict compliance with the law will find their directors subject to reputational damage,” he said.
When setting up the Office of Enforcement, he said ASIC should consider the principles recently adopted by the Division of Enforcement at the US Securities and Exchange Commission, which include focusing on retail investors and individual accountability.
The model also involves separating ASIC’s regulatory role, where it concerns itself with trying to uphold standards across entire industry sectors, with the more narrow-minded role adopted by a law enforcement body such as a police force, which measures its effectiveness through the number of arrests it makes and criminals it locks away.
Mr Crennan said ASIC’s functions and powers “extend far into all aspects of commercial activity in Australia”.
In what is believed to be the first reference in an ASIC document to the regulator possessing a police function, he said its role “has now evolved to one of being the regulator and the corporate police”. “The role of a regulator and the role of a police officer are, conceptually, very different,” he said.
Under the new model, ASIC will adopt a four-stage investigation process, starting with an initial assessment of misconduct reports, before moving to preliminary inquiries, a formal investigation using the regulator’s suite of compulsory information-gathering powers and finally a decision on whether to go to court for criminal or civil proceedings or accept an enforceable undertaking.
In a move that will dramatically up the stakes for corporate Australia, ASIC will no longer cut deals with suspected wrongdoers until the end of the formal investigation.
At the end of any investigation that fails to come up with enough evidence to support legal action, ASIC officers will also be required to write a two-page report detailing the reasons why.
All investigations that end without a result are currently recorded in a “no action report”, but these have sometimes been unsatisfyingly brief documents that have occupied as little as half a page.
The Office of Enforcement is to have its own oversight committee, made up of a former judge or senior silk, a legal academic, an economist and a senior law enforcement officer from outside ASIC.
Mr Crennan also endorsed the ideas of expanding the criminal jurisdiction of the Federal Court and Federal Circuit Court to take in ASIC cases.