The Australian Securities and Investments Commission (ASIC) has warned investors about solely relying on the regulator’s enforcement powers to resolve issues of corporate misconduct.
In response to a question about criticism of ASIC’s enforcement capability, and record in chasing misconduct and protecting the public, commissioner John Price said in comparison to international regulators ASIC “stacks up very, very favourably”.
Price underscored enforcement is a critical part of ASIC’s role in the financial system.
“There’s no doubt about that, and if you have a look at the constituent legislation that sets up ASIC, it sets up in black and white that one of our roles is to enforce the laws of the land,” he told the 2018 Australian Shareholders’ Association Conference in Sydney today.
“I think people need to be very careful in terms of thinking about enforcement as the panacea to fix all the ills because if litigation is the answer to everything, [I put] to you, what was the question, if you see what I mean.
“While not undermining the importance of enforcement in any way, shape or form, it is and will continue to be a critical part of ASIC’s role, but it is not the answer to every problem.”
He also warned enforcement should not be the only tool used against corporate misconduct.
“There are some disadvantages with enforcement in some cases,” he noted.
“It can be a very costly tool, a tool that takes a very long time before any result is achieved, and it’s a very uncertain tool.
“In some cases where you’re concerned about the well-being of investors who may well have lost a substantial portion of their money, enforcement may not be the best outcome – the best outcome may be negotiating a settlement to get the investors’ money back and making changes so it doesn’t happen again.”
He added the government this year agreed to a substantial increase in penalties for financial services misconduct.
“My great hope is that they are applied strongly by the courts for future cases that come forward,” he said.
