The regulator released its major 200-page submission to the Senate Economics References Committee inquiry into the performance of ASIC yesterday.
The submission highlighted a number of “policy suggestions to enhance ASIC’s performance”, including a ramping up of the regulator’s power to issue search warrants.
ASIC’s powers to issue search warrants under the Commonwealth Crimes Act 1914 (Crimes Act) and the Australian Securities and Investments Commission Act (ASIC Act) have not kept pace with the increasingly complex financial services industry and accompanying markets, said the submission.
The ASIC Act only authorises a limited range of search activities, with the regulator having to name particular ‘books’ it intends to seize in advance of the warrant being issued, which creates practical difficulties, said the submission.
The Crimes Act authorises a far wider range of search activities, but does not accommodate all of the provisions under ASIC’s jurisdiction, such as civil penalty provisions and administrative remedies, said ASIC.
The submission called for an expansion of the search warrant powers in the ASIC Act, so that they are “as procedurally broad as those in the Crimes Act”, but “allow ASIC to collect information that could ultimately be used as evidence in any of the types of enforcement action ASIC may take”.
In regards to penalties, the submission pointed out that penalties in the Corporations Act have been in place for a long time and have either not been reviewed or only reviewed in a “piecemeal way”.
“This has led to shortcomings in the consistency or size of penalties, which create gaps between community expectations of the appropriate regulatory response to a particular instance of misconduct and what ASIC can do in practice,” said the submission.
By way of example, the submission pointed to the recent “London Whales trade” affair, which saw JP Morgan fined heavily for its losses of over $6 billion.
Regulators in the United States and the UK were able to fine JP Morgan hundreds of millions of dollars and force it to pay compensation to customers, said ASIC.
“In contrast, under the Corporations Act, the maximum civil penalty payable by a corporation for an offence is $1 million,” said the submission.
“We suggest that civil penalty amounts in the Corporations Act should also be set significantly higher (as they are under other legislation we administer) and should enable any benefit attributable to the commission of the offence to be removed,” said ASIC.
The regulator also called for a broader range of infringement notices, which would “allow ASIC to target misconduct at the lower end of the scale, while retaining other remedies for egregious conduct at the higher end”.
