ASIC has released updated guidance on its approach to enforcement 

On 22 November 2021, the Australian Securities and Investments Commission (ASIC) released updated regulatory guidance on its enforcement approach generally - Information Sheet 151 ASIC's approach to Enforcement (INFO 151) – and its use of court enforceable undertakings (EUs) - Regulatory Guide 100 Court Enforceable Undertakings (RG 100). The changes were not announced via media release.

In a speech, ASIC Chair Joe Longo said that ASIC's updated guidance clarifies the regulator's stance on the use of court enforceable undertakings (EUs). Mr Longo stated that the guidance:

'highlights that court-enforceable undertakings are a flexible enforcement tool that will be used to improve compliance with the law. They are one of the options that allow us to take targeted, proportionate action. We will only use court enforceable undertakings where it is in the public interest. Offenders should be held accountable for their poor conduct, and publicly acknowledge that accountability, regardless of which enforcement tool we use against them'.

The focus on use of the full range of regulatory tools available, and the focus on targeted and proportionate action, is consistent with Mr Longo's previous comments on ASIC's enforcement approach more generally, with the narrative in the regulator's latest Corporate Plan, and with ASIC's recently released 'Statement of Intent' published in response to the government's Statement of Expectations for the regulator.

Use of enforceable undertakings: Revisions to RG 100

RG 100 sets out ASIC's approach to accepting an EU. RG 100 states that:

  • ASIC will only consider accepting and EU 'when we consider it will achieve an effective and appropriate regulatory outcome that is in the public interest'.
  • ASIC 'will generally only consider accepting a court enforceable undertaking after we have weighed up the effectiveness of the regulatory outcome offered by the undertaking compared to outcomes offered by other available enforcement remedies'.

The Revised RG 100 makes clear that ASIC will not 'usually accept' an EU from a party:

'instead of referring a brief of evidence to the Commonwealth Director of Public Prosecutions (CDPP) for potential criminal prosecution; where the misconduct is deliberate or involves a high level of recklessness; after a matter has been referred to an ASIC delegate or other specialist body; or as an alternative form of relief if conditional relief has not been complied with'.

RG 100 also makes clear that:

'when ASIC accepts a court enforceable undertaking in final resolution of a matter, we will generally require that it contains admissions that the promisor contravened specific legislative provisions'. Further, ASIC will 'generally' not accept EUs that do not include details of the conduct that gave rise to the undertaking.

Importantly, a key concern around ASIC's use of EUs made by the Hayne Commission, was the lack of acknowledgement of wrongdoing. Commissioner Hayne stated that:

'When an entity fails to acknowledge that it has done wrong the risk is that it considers the promises made in the EU as no more than the cost of doing business or the cost of placating the regulator'

ASIC's enforcement stance post-Hayne

In response to Hayne Recommendation 6.2, ASIC adopted a 'why not litigate?' approach to enforcement which entailed a shift away from 'negotiated outcomes'.

This shift is reflected in ASIC's reported enforcement outcomes post-Hayne. For example, ASIC's enforcement update for the January to June 2018 period (REP 585), reports that ASIC agreed to 12 court enforceable undertakings, decreasing slightly to nine for the July to December 2018 period (REP 615).

A review of all subsequent enforcement reports up to the latest report covering the January to June 2021 period (REP 699) shows an apparent move away from the use of EUs – for the whole of 2019, ASIC reports that there were no EUs (REP 625, REP 660), for the July to December 2020 period (REP 688), there were two EUs reported and for the January to June 2021 period there was only one (REP 699).

The shift is further confirmed by a table prepared by ASIC setting out the results of ASIC's enforcement activity over the period 1 July 2011 to 30 April 2021. According to ASIC's table, in the 2018-19 financial year, ASIC completed 25 civil proceedings, and secured 10 EUs. In 2020-21, the number of civil proceedings completed had spiked to 43 while the number of EUs had decreased to just two.

A recalibration of ASIC's approach

The release of ASIC's updated enforcement guidance, consistent with the shift away from the term 'why not litigate?' to describe its enforcement approach, and consistent with the government's revised expectations of the regulator is arguably further confirmation of a recalibration in ASIC's enforcement stance under ASIC Chair Joe Longo. More particularly, it underlines ASIC's renewed focus in ASIC Chair Joe Longo's words on use of the full suite of tools available to regulate 'in a way that both supports legitimate business activity and allows for the independent discharge of our key regulatory and enforcement responsibilities'.

[Sources: Information Sheet 151 ASIC's approach to Enforcement (INFO 151); Regulatory Guide 100 Court Enforceable Undertakings (RG 100)]