ASIC and civil penalties–30 years on: is it ‘fit for purpose’?

Abstract

Enforcement is often viewed as the cornerstone of ASIC’s role as regulator. As such, it is appropriate that this article reflects on the issues facing ASIC when considering its enforcement record. This is especially since 2023 marks 30 years since ASIC has been equipped with the civil penalty regime, and due to the continuing incidences of corporate and financial wrongdoing, such as by Australian banks publicised by the recent Banking Royal Commission. The Commission disapproved of ASIC ‘rarely’ going to court to enforce misconduct and relying on negotiated compliance instead, which resulted in such key recommendations that ASIC change its enforcement culture. ASIC accepted this and initially committed to a new ‘Why not litigate?’ approach. However, after the outbreak of the COVID-19 pandemic, ASIC’s priorities shifted to more business-friendly approach. While this might be seen as proper in a pandemic, it nevertheless raised concerns that ASIC was backing away from litigation against corporate wrongdoers to effectively become a ‘toothless tiger’. With such sentiments and community disheartenment with ASIC’s track record continuing, it is unsurprising that this led to the commissioning of the recent Senate inquiry into ASIC investigation and enforcement and to calls (including by Shipton, former ASIC chair) for ASIC to be reconstituted and/or broken up and replaced by other regulators, such as a new federal civil law enforcement agency.