1. Introduction

Background

1.1The House of Representatives Standing Committee on Economics (the Committee) is empowered to inquire into, and report on, the annual reports of government departments and authorities tabled in the House that stand referred to the Committee in accordance with the Speaker’s schedule.

1.2Annual reports of the Australian Securities and Investments Commission (ASIC) stand referred to the Committee in accordance with this schedule.

1.3On 9 August 2022, the Committee resolved to undertake an inquiry into the ASIC Annual Report 2021.

1.4On 29 March 2023, the Committee resolved to undertake an inquiry into the ASIC Annual Report 2022.

1.5On 29 November 2023, the Committee resolved to undertake an inquiry into the ASIC Annual Report 2023.

1.6ASIC is Australia’s integrated corporate, markets, financial services and consumer credit regulator. It is an independent Commonwealth statutory authority and administers the Australian Securities and Investments Commission Act 2001 (ASIC Act), the Corporations Act 2001 (Corporations Act) and a range of additional legislation.[1]

1.7ASIC was established in 1991 as the Australian Securities Commission, replacing the National Companies and Securities Commission and the Corporate Affairs offices of the states and territories. It was renamed ASIC in 1998 when it was given responsibility for consumer protections in superannuation, insurance and deposit taking. ASIC’s responsibilities were expanded in 2010 to regulate trustee companies; consumer credit and finance broking; and for supervising trading on Australian licensed equity, derivatives and futures markets.[2]

1.8ASIC’s vision is for a ‘fair, strong and efficient financial system for all Australians.’[3] It pursues this via regulatory tools to:

• change behaviours to drive good consumer and investor outcomes
• act against misconduct to maintain trust and integrity in the financial system
• promote strong and innovative development of the financial system
• help Australians to be in control of their financial lives.[4]
  9. ASIC’s key performance outcome is ‘improved confidence in Australia’s financial markets through promoting informed investors and financial consumers, facilitating fair and efficient markets and delivering efficient registry systems’, which ASIC aims to achieve by:
• pursuing enforcement outcomes
• undertaking supervision and surveillance
• providing guidance to industry
• assessing licence and registration applications
• engaging with consumers and industry stakeholders
• providing regulatory relief where appropriate
• educating consumers.[5]

Areas of responsibility

1.10ASIC is Australia’s integrated corporate, markets, financial services and consumer credit regulator. Under the ASIC Act, its role is to:

• maintain, facilitate and improve the performance of the financial system and entities in it
• promote confident and informed participation by investors and consumers in the financial system
• administer the law effectively and with minimal procedural requirements
• receive, process and store, efficiently and quickly, information we receive
• make information about companies and other bodies available to the public as soon as practicable
• take whatever action we can, and which is necessary, to enforce and give effect to the law.[6]
  11. ASIC’s Service Charter describes further responsibilities as part of ASIC’s administration and enforcement of corporate, markets, financial services and consumer credit laws, including to:
• register companies and managed investment schemes
• register auditors and liquidators
• register business names
• license financial services and consumer credit businesses and
• examine new market licence proposals.[7]
  12. ASIC also maintains publicly accessible registers of companies, and registered and licensed entities, as well as disqualified directors and people who are banned from the financial services industry.[8]
  13. Following recommendations by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Hayne Royal Commission), legislation passed in 2019 strengthened the criminal and civil penalties for financial sector misconduct, introduced a design and distribution obligations (DDOs) regime for financial services firms, and gave ASIC a new product intervention power.[9]
  14. ASIC annual reports include metrics on enforcement activities, including investigations, criminal and civil litigation, administrative actions, court enforceable undertakings, infringement notices and summary prosecutions.[10]

Enforcement outcomes

1.15ASIC is responsible for pursuing companies or individuals that may have breached the laws it administers. The ASIC Act directs ASIC to ‘take whatever action it can take, and is necessary, in order to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it’.[11]

1.16Following recommendations by the Hayne Royal Commission, ASIC adopted the ‘Why Not Litigate?’ enforcement approach in October 2018, and established an Office of Enforcement in July 2019.[12]

1.17ASIC’s approach to enforcement continues to evolve. It is currently set out in Information Sheet 151.[13] ASIC’s enduring enforcement priorities include:

• Misconduct damaging market integrity

• including insider trading, continuous disclosure breaches and market manipulation

• Misconduct impacting First Nations people
• Misconduct involving a high risk of significant consumer harm

• particularly conduct targeting financially vulnerable consumers

• Systemic compliance failures by large financial institutions

• resulting in widespread consumer harm

• New or emerging conduct risks within the financial system
• Governance and directors’ duties failures.[14]
  18. The 2020–21 annual report identified the following additional priorities:
• misconduct related to superannuation and insurance
• cases that engage our new powers or provisions that now carry penalties or higher penalties
• illegal phoenix activity
• auditor misconduct
• new types of misconduct, including misconduct carried out online or using emerging technologies.[15]
  19. In response to the COVID-19 pandemic, ASIC also pursued:
• conduct that seeks to exploit the pandemic environment, including predatory lending, mis-selling and poor claims handling
• opportunistic conduct, including scams
• failures to disclose materially negative information
• opportunistic and misleading market announcements
• egregious governance failures within corporations, schemes and superannuation funds.[16]
  20. In 2020–21, 29 people were convicted of criminal offences as a result of ASIC’s investigations. ASIC also completed 46 civil court actions with a 93percent success rate, with total penalties worth $189.4 million. ASIC banned, removed or restricted 49 people or companies from providing financial services, and 46 people or companies from providing credit services. It further disqualified or removed 49 people from directing companies. ASIC issued three infringement notices and received a total of $392,000 in payments. Two hundred and twenty-four summary prosecutions yielded $669,906 in fines and costs.[17]
  21. In the 2021–22 reporting cycle, ASIC focused on:
• serious misconduct that harms confidence in markets, business and the economy or exacerbates consumer hardship
• poor product design and governance, mis-selling, and failure to comply with conflict of interest requirements and disclosure obligations
• perpetrators of egregious digital and other financial sector scams
• failure to adequately manage cyber risks that harm consumers
• failure to implement new standards set by law reform initiatives.[18]
  22. According to the annual report, ASIC investigations led to 33 criminal convictions, and ASIC completed 61 civil actions with a 100percent success rate, with total penalties worth $229.9 million. ASIC banned, removed or restricted 39 people or companies from providing financial services, and 18 people or companies from providing credit services. It further disqualified or removed 58 people from directing companies. ASIC issued three infringement notices and received a total of $136,890 in payments. One hundred and eighty-one summary prosecutions yielded more than $1million in fines and costs.[19]
  23. ASIC’s 2022–23 enforcement priorities were:
• Enforcement action targeting poor design, pricing and distribution of financial products

• including in relation to insurance, superannuation and other investment products and credit

• Misleading conduct in relation to sustainable finance including greenwashing
• Misconduct involving high risk products including crypto assets
• Combating and disrupting investment scams

• including working with other regulators, industry and social media platforms to reduce consumer harm

• Protecting financially vulnerable consumers

• impacted by predatory lending practices or high-cost credit including conduct by unlicensed or 'fringe' entities

• Misleading and deceptive conduct relating to investment products

• which obscures the risk, performance or nature of financial products

• Misconduct in the superannuation sector

• including misleading conduct and poor governance

• Failures by providers of general insurance

• to deliver on pricing promises to consumers

• Misconduct that involves misinformation through social media

• about investment products, including 'finfluencer' conduct

• Governance and directors' duties failures

• including those related to property schemes that expose investors to significant loss

• Manipulation in energy and commodities derivatives markets
• Unfair contract terms

• including in insurance products[20]
  24. Over 2022–23, ASIC investigations led to 35 criminal convictions, and ASIC completed 52 civil actions, with a success rate of 94percent and total penalties of $185.4million. ASIC banned, removed or restricted 77 people or companies from providing financial services, and 28 people or companies from providing credit services. It further disqualified or removed 32 people from directing companies. ASIC issued 20 infringement notices and received a total of $6.7million in payments. This included five notices issued by ASIC’s Markets Disciplinary Panel to a market participant, with a total of $6.49 million in penalties for alleged breaches of the market integrity rules—including one infringement notice of $4.5 million, the largest ASIC has ever imposed. Two hundred and ten summary prosecutions yielded $1.6million in fines and costs.[21]

Scope and conduct of the review

1.25ASIC appeared before the Committee at public hearings on 11 October 2022 and 25October 2024. Hearing details and witnesses are listed in Appendix A.

1.26ASIC also gave evidence to the Committee’s concurrent inquiry into insurers’ responses to 2022 major floods claims (on 2 February 2024)—discussed in the Committee’s report Flood failure to future fairness for that inquiry.[22]

1.27The proceedings of the hearings were webcast through the Parliament’s website, allowing interested parties to view or listen to the proceedings as they occurred. The transcripts of the hearings are available on the Committee’s website.

1.28ASIC’s responses to the Committee’s questions on notice and in writing are provided on the Committee’s website and are listed in Appendix B.[23]

1.29This report focuses on matters raised at the public hearings.

Footnotes

[1]Australian Securities and Investments Commission (ASIC), Laws we administer, asic.gov.au/about-asic/what-we-do/our-role/laws-we-administer/, viewed 28 January 2025.

[2]ASIC, History, asic.gov.au/about-asic/what-we-do/our-role/history/, viewed 28 January 2025.

[3]ASIC, Our vision and strategic priorities, asic.gov.au/about-asic/what-we-do/our-role/our-vision-and-strategic-priorities/, viewed 28 January 2025.

[4]ASIC, Our vision and strategic priorities.

[5]This list evolved during the inquiry. See ASIC, Annual Report 2020–21, October 2021, p. 30; ASIC, Annual Report 2021–22, October 2022, p. 28; ASIC, Annual Report 2022–23, October 2023, p. 18.

[6]ASIC, Our role, asic.gov.au/about-asic/what-we-do/our-role/, viewed 28 January 2025.

[7]ASIC, ASIC service charter, asic.gov.au/about-asic/what-we-do/how-we-operate/performance-and-review/asic-service-charter/, viewed 28 January 2025.

[8]ASIC, ASIC service charter.

[9]The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 and Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019.

[10]See ASIC, Annual Report 2020–21, pp. 32–34; ASIC, Annual Report 2021–22, pp. 29–31; ASIC, Annual Report 2022–23, pp. 22–24.

[11]Australian Securities and Investments Commission Act 2001, section 1.

[12]Sean Hughes, Commissioner, ASIC, ‘ASIC’s approach to enforcement after the Royal Commission’, Speech to the 36th Annual Conference of the Banking and Financial Services Law Association, Gold Coast, Queensland, 30 August 2019, asic.gov.au/about-asic/news-centre/speeches/asic-s-approach-to-enforcement-after-the-royal-commission/, viewed 28 January 2025; ASIC, ASIC Annual Report 2020–21, p.44.

[13]ASIC, Information Sheet 151:ASIC’s approach to enforcement, asic.gov.au/about-asic/asic-investigations-and-enforcement/asic-s-approach-to-enforcement/, viewed 28 January 2025.

[14]ASIC, ASIC enforcement priorities, asic.gov.au/about-asic/asic-investigations-and-enforcement/asic-enforcement-priorities/, viewed 28 January 2025.

[15]ASIC, Annual Report 2020–21, p. 45.

[16]ASIC, Annual Report 2020–21, p. 45.

[17]ASIC, Annual Report 2020–21, pp. 32–34, 46.

[18]ASIC, Annual Report 2021–22, pp. 42–43.

[19]ASIC, Annual Report 2021–22, pp. 29–31, 43; ASIC, Annual Report 2022–23, p. 24.

[20]ASIC, ASIC enforcement priorities.

[21]ASIC, Annual Report 2022–23, p. 24, 60.

[22]House of Representatives Standing Committee on Economics (House Economics Committee), Flood failure to future fairness: Inquiry into insurers’ responses to 2022 major floods claims, October 2024, www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/FloodInsuranceInquiry/Report, viewed 26 March 2025.

[23]House Economics Committee, Review of the Australian Securities and Investments Commission Annual Report [2021–]2023, Documents, www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/ASICAnnualReport2023/Documents, viewed 26 March 2025.