Under the banner of ‘when pilots become enduring practice’, ASIC Deputy Chair Karen Chester has announced that ASIC will supplement its traditional investigations processes with ‘Express Investigations’ (EI), ASIC’s new and preferred approach to enforcement.
Corporate regulatory investigations are often legally and factually complex, high-stakes and process-heavy. Mountains of documents and witness evidence are commonplace. They are known to follow an orthodox path, despite having greater uncertainty of outcome and potentially more twists and turns than commercial litigation.
As such, EI is a significant development which could substantially curtail the time spent in investigative processes by seeking to produce an outcome in six months or less, resulting in quicker compensation for any adversely affected consumers, and enhancing the general deterrence effect of enforcement action by increasing the timeliness of case guidance for the market.
The details are yet to be spelled out but it is clear from Karen Chester’s speech at the AFR Summit on 10 March, that it is reliant upon the cooperation of target entities, and (although not stated expressly) if they decline, ASIC will have no hesitation in utilising its substantially enhanced powers and penalties instead.
This will move the ASIC enforcement approach to one similar to that used by the ACCC or DPP, which rely upon early admissions or pleas and agreed fact statements in Court, to secure penalty reductions. Ms Chester confirmed in response to a question, that this approach will involve abandonment of enforceable undertakings (ASIC’s erstwhile mainstay for negotiated outcomes, which was criticised in the Banking Royal Commission).
At first blush, EI appears contrary to the “Why not litigate?” approach ASIC adopted in the aftermath of the Hayne Royal Commission, but seen in context ASIC is not signalling a desire to resolve instances of apparent misconduct by agreement, as is evidenced by the fact that ASIC announced five new court proceedings in the two weeks before the Deputy Chair’s speech.[i] So, EI does not represent a shift in thinking away from the focus on punitive measures – it will enable it to move to this stage more quickly with admissions or pleas.
Processing potentially significant volumes of documents quickly and getting to the heart of matters with primary witnesses will also be of heightened importance. Increased use of technological and artificial intelligence solutions, is likely to be key for entities under the pressure of an EI.
ASIC’s introduction of EI appears to be a step toward tougher regulation, utilising its enhanced powers and penalties as leverage, rather than a renewed focus on achieving outcomes through agreement.
EI is about how ASIC proposes to conduct investigations and create inducements for early cooperation. EI can be expected to be the means by which ASIC identifies entities with inherent cultural issues, based on whether they cooperate or not with ASIC when approached, which will enable ASIC to take a more targeted approach to perceived recalcitrant and subjecting them to greater, ongoing scrutiny.
EI creates new strategic challenges for entities involved in ASIC investigations but, well-organised, well advised entities, will be able to use EI to create opportunities to help shape the investigation process and outcomes, emerge stronger (culturally, financially and from a reputation perspective), and better-positioned for future regulatory engagement.
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Edward Martin, Partner
Kate Mills, Partner
James Macdonald, Senior Associate
[i] ASIC has commenced civil penalty proceedings against NAB, CommSec and AUSIEX, and REST and, on referral from ASIC, the Commonwealth Director of Public Prosecutions is pursuing criminal charges against Alliance and AWP.