Australia: What is an enforceable undertaking and why do they exist?

An enforceable undertaking, or EU, is an undertaking offered to ASIC, by what we affectionately refer to as "the Pingee", which sets out in writing certain actions that the Pingee is prepared to undertake to address ASIC's concerns. Those concerns will usually have arisen from a surveillance or investigation conducted by ASIC. Typically that surveillance or investigation will have involved the issue of notices by ASIC to gather documentary and, perhaps, oral evidence.

The objective of the Pingee in offering an EU is, of course, to prevent further action by ASIC. That action may, depending upon the matters that ASIC is concerned about and the extent of the evidence it has gathered, be of a criminal, civil penalty or administrative nature. ASIC's objective in accepting an EU is to obtain a good regulatory outcome without having to conduct proceedings which would require it to prove its case and may result in an outcome that is less flexible or less comprehensive. If the Pingee breaches the enforceable undertaking, ASIC can take action for that breach without the necessity of proving the underlying activity that led to the undertaking.

ASIC's legislation gives ASIC the power to "accept" an EU but not to demand one. Of course, it can create the environment in which it is becomes attractive to offer one. ASIC will not always accept an EU and its guidance to industry about when it will and when it won't can be found in RG100.

Over a number of years we have been involved in various ways with EU's entered into with ASIC and also with the ACCC. Our roles have included: advising clients in their dealings with the regulator, acting as expert consultants to assist clients in meeting their obligations under the EU, acting as reviewers to provide reports to the regulator on whether clients have met their obligations under the EU and providing training mandated in the EU to directors, responsible managers and staff.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.