Australia: Australian Financial Services Subject To Perfect Storm Of Enforcement

Recent strategies and initiatives announced by Australia's corporate and prudential regulators and the Australian government's release in August 2019 of its Financial Services Royal Commission Implementation Roadmap provide a very clear signal—a new wave of regulatory proceedings is gathering against financial services institutions, their directors and other officers, and will hit Australian boardrooms before the year's end.

The government's Roadmap outlines an ambitious agenda over the next several years, including the introduction of significant legislative reform, to give effect to all 76 recommendations in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The Roadmap also details a further 18 commitments on the part of the government which have been developed in response to the observations of Commissioner Hayne in the Final Report.

Recent strategies and initiatives announced by Australia's corporate and prudential regulators and the Australian government's release in August 2019 of its Financial Services Royal Commission Implementation Roadmap provide a very clear signal—a new wave of regulatory proceedings is gathering against financial services institutions, their directors and other officers, and will hit Australian boardrooms before the year's end.

The government's Roadmap outlines an ambitious agenda over the next several years, including the introduction of significant legislative reform, to give effect to all 76 recommendations in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The Roadmap also details a further 18 commitments on the part of the government which have been developed in response to the observations of Commissioner Hayne in the Final Report. In summary, the government action outlined in the Roadmap seeks to:

  • Set clear objectives for the Australian Securities and Investments Commission ("ASIC") and the Australian Prudential Regulation Authority ("APRA"), with provision for the government to issue updated Statements of Expectations to continually refine the regulators' mandates;
  • Increase the accountability of regulators by the establishment of a financial regulator oversight authority, which will independently assess the regulators' effectiveness in delivering on their mandates;
  • Arm regulators with substantially expanded powers and greater funding;
  • Increase the accountability of financial firms, their senior executives and boards; and
  • Strengthen consumer protections and improve remediation and redress mechanisms.

The financial services sector is the current focus, but it is likely that the regulatory mindset-shift will extend well beyond this sector in the months and years to come.


The political and public pressure from the Royal Commission has triggered four major developments resulting in the "perfect storm" for regulatory proceedings:

  • ASIC's greater willingness to litigate
  • Increased penalties
  • Increased regulator resourcing
  • Greater access to information for regulators


Having been chastised by Commissioner Hayne for having an ineffective enforcement culture and being susceptible to capture by those whom they are bound to regulate, ASIC is moving at speed to institute a number of court proceedings. ASIC has established an Office of Enforcement, and the regulatory mindset has changed from that of consensual compliance to a "why not litigate?" approach, whereby ASIC considers first why it would not be in the public interest to litigate. ASIC's aim is to approach suspected contraventions of the law by asking itself why it would not be in the public interest to bring court proceedings, based on the view that litigation is of clear public benefit because it achieves deterrence, public denunciation and punishment of wrongdoing. Only if the public benefits from litigation are outweighed, will another approach be adopted. This does not mean litigation in every instance, but it does mean that there will be a significant uptick in regulatory litigation. This change in enforcement approach is also coupled with a greater preparedness on the part of the regulator to utilise the media to highlight its enforcement activities. ASIC's changing approach and willingness to pursue litigation is evidenced by the sharp decline in the number of enforceable undertakings accepted by ASIC since the Royal Commission. Since 1 January 2019, ASIC has entered into only one enforceable undertaking (compared with the 20 enforceable undertakings accepted in 2018).

ASIC's increased focus on enforcement is also demonstrated by ASIC's Corporate Plan 2019-23 released in August 2019, which lists as the regulator's first priority "[h]igh-deterrence enforcement action." The Corporate Plan sets out actions for 2019-20 and identifies the focus of enforcement as follows:

Focusing on cases with high deterrence value and that involve the most serious misconduct, including cases that:

  • involve the exploitation of vulnerable consumers;
  • involve large institutions;
  • allow us to use ASIC's new powers and remedies to achieve better outcomes; and
  • will hold individuals accountable for poor governance or conduct that results in harm.


The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth) increases maximum prison penalties for the most serious offences to 15 years. It significantly increases civil penalties for companies, now to be capped at $525 million, with maximum civil penalties for individuals increasing to $1.05 million. Alternatively, if the court can evaluate the benefit derived from, or detriment avoided by, the contravention, it is empowered to impose a penalty of up to three times that number.

As part of the same reforms, there are an additional 60 provisions that ASIC will be able to enforce by way of civil penalty proceedings. Significantly, this includes making the obligation to "to do all things necessary to ensure the financial services covered by the licence are provided efficiently, honestly and fairly" a civil penalty provision.


Regulator resourcing has also increased. In March 2019, the federal treasurer announced additional funding over four years for ASIC, $404 million, and for APRA, $151.7 million. This funding will enable both regulators to expand their investigation and enforcement teams with a view to increasing enforcement and supervision activity.

However, more significant that the increased funding from government is the move to ASIC being industry funded. In 2017, the Australian Parliament passed legislation that adopted a cost recovery model that required market participants to reimburse the regulatory cost of ASIC's activities, including education, surveillance and enforcement. Prior to July 2017, when the regulator took some form of enforcement action, the cost was borne by the taxpayer. Since July 2017, under the

cost recovery model, enforcement costs are included in the regulatory costs charged to industry. ASIC's ability to charge back enforcement costs may have far-reaching effects as it encourages ASIC to incur the costs of top-shelf litigation practitioners from private practice. If ASIC loses a case and has to pay costs to its opponent, then those costs may be charged back to industry.


Key to effective enforcement is being able to prove the facts that establish a contravention of the law. Access to information is a necessity. ASIC has always had strong coercive investigatory powers, including being able to require individuals to answer questions, even if self-incriminatory, and to produce documents. It also could call on the search warrant powers in the Crimes Act 1914 (Cth) with the help of the Australian Federal Police. However, the government has committed to giving ASIC its own search warrant powers and access to telecommunications intercepts. Added to this, AFSL holders must lodge breach reports with ASIC, and a failure to do so will expose the entity to a civil penalty. As Commissioner Hayne stated in the Final Report: "ASIC will approach litigation knowing that the first document to be tendered in evidence will show what the entity has said it has done or may have done in contravention of the law". The banking and financial services sector is required by law to confess and, in doing so, help prove the regulator's case.

The combination of new civil penalty provisions, increased penalties and greater access to information has led to ASIC noting that it is now possible "to properly punish corporate wrongdoing in Australia". When a preparedness to pursue criminal prosecutions and civil penalty actions is added, enforcement is far more likely than in the past.


Having seen the combination of factors that make regulatory litigation more likely, the financial services sector, and individual directors and officers in particular, must consider what to expect and how to respond.

  • Expect the upcoming litigation to target individuals, not just companies—and to reach beyond boards and further down the executive ranks than has been seen before.
  • Expect new approaches and more aggressive litigation strategies in regulatory proceedings: (i) Not just breaches of officers' duties, but allegations of misleading conduct by individuals (both civil and criminal). (ii) Not just communications to customers and shareholders, but communications to boards and regulators. (iii) Use of the ASIC Act 2001 (Cth), the Competition and Consumer Act 2010 (Cth) and the Superannuation Industry (Supervision) Act 1993 (Cth), not just the Corporations Act 2001 (Cth).
  • Individuals targeted by regulatory proceedings should prepare on the basis that their interests may not be closely aligned with those of the company: (i) Individuals should obtain their own independent advice in respect of their interests, separate to the company, and they should get support early on. (ii) Individual officers and executives in the regulators' crosshairs should obtain independent advice as to whether they should be represented by the company's counsel. (iii) Early steps taken (or not taken) by individuals or the company in regulatory proceedings can significantly affect the position of individuals in litigation.
  • Formal legal processes are often there to protect individual's rights, it is entirely proper to invoke those procedures, and in the current environment, it is critical that individuals obtain independent advice in that regard.
  • It is important to understand the information gathering powers that ASIC, APRA and the Australian Federal Police have—before they come knocking.
  • Individuals should clarify their indemnity and information access rights with the company and relevant insurers, as well as take steps to understand who has privilege in any legal advice they have relied on to date.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions