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BFCSA: Lazy Useless ASIC reviews penalties after Hayne shaming

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ASIC reviews penalties after Hayne shaming

Australian Financial Review Sep 21 2018 11:00 PM

John Kehoe


EXCLUSIVE  The corporate regulator has launched an internal review into how it negotiates settlements and the size of monetary penalties with offending companies, following revelations at the banking royal commission that it was sometimes too soft on banks and insurers.

AFR Weekend has learnt that Daniel Crennan, the new deputy chairman of the Australian Securities and Investments Commission, has been made responsible for ASIC's enforcement policies and tools, including its pursuit of criminal and civil penalties, as well as the use of administrative or court enforceable undertakings.

The quantum of monetary penalties imposed on infringing firms is also being examined, said sources with direct knowledge of the ASIC review.

It coincides with intense pressure on the regulator from Treasurer Josh Frydenberg, who recently lashed ASIC for alleged past enforcement shortcomings committed before new chairman James Shipton took charge in February.

Questionable punishments

"There are a number of cases that have been highlighted in the royal commission that raise legitimate questions as to whether the decision by ASIC to litigate or negotiate an outcome was the right choice," Mr Frydenberg told AFR Weekend.

"Understandably you can't litigate every breach and each needs to be considered on its facts.

"However, the public has a right to know why such gross misconduct has not been dealt with by the heaviest penalties possible."

Kenneth Hayne's probe has shone a light on ASIC's propensity to negotiate settlements with infringers and impose penalties well short of the maximum.

For example, CommInsure was slapped on the wrist with a $300,000 donation for misleading advertising, compared to a maximum penalty of $8 million.

ClearView committed at least 300,000 breaches of direct selling laws through unsolicited phone calls trying to sell people life insurance, but escaped with a remediation.

Suncorp's misleading advertising led to a fine of $43,200, below the maximum of $7.2 million.

ASIC has recouped $1.8 billion in compensation and remediation for investors and consumers since July 2011.

More power to impose penalties

ASIC for years sought from the government increased powers and tougher penalties, which the government agreed to last year and has pledged to further strengthen.

An ASIC spokesman said the review of ASIC's approach to enforcement was a "forward-looking" review and mindful of the royal commission.

"The review is about ensuring ASIC's approach to enforcement and the tools we choose – whether criminal, civil, administrative, or court enforceable undertakings - make the most of the new powers the government has agreed to provide to ASIC," he said.

"ASIC has sought stronger powers and penalties and wants to be in a position to use these from day one of the new powers. Moreover, the project will review policies governing the extent and quantum of penalties to be pursued in matters."

As Labor repeatedly attacks the Coalition's original opposition to holding the royal commission and closeness to financial companies, the new Treasurer has deflected attention to the regulator and its performance under Labor-appointed chairman Greg Medcraft.

Mr Medcraft, now an executive at the OECD in Paris, did not comment when contacted this week and was said by an associate to be travelling overseas.

Overhaul from top

ASIC deputy chairman Peter Kell this week resigned eight months before his extended term was due to end, after a torrid year responding to the royal commission.

ASIC chairman Mr Shipton, who began in February, started an immediate strategic review of ASIC's operations and was granted $70 million in extra funding. He also gained additional senior personnel, including Mr Crennan, a QC.

The government has flagged it will give ASIC new powers to speedily compensate victims of misconduct.

The Coalition government last year announced that ASIC will be given new powers to deal with misconduct in the financial sector, including criminal penalties of up to 10 years' imprisonment for individuals, and corporate fines of at least $9.45 million, triple the benefits gained or 10 per cent of annual turnover.


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