What ASIC has been doing all this time – enforcement outcomes report Jan-Jun 2015

The Australian Securities and Investments Commission (ASIC) is under constant pressure to prove itself useful to the finance industry, with the most recent enforcement outcomes report showing us exactly what has been going on underneath the regulatory cloak. The latest report covers January to June 2015, revealing what ASIC is focusing on, and the outcomes of this scrutiny. 

Most of what ASIC does is surveillance and enforcement of financial law-breakers – 70 per cent, in fact – which uses up most of its resources and power, often taking a heavy-handed approach where possible to act as a deterrent. In the past six months, ASIC has caught out and punished 323 people or entities, including criminal, civil and administrative actions. The outcomes vary from enforceable undertakings, negotiated outcomes, or a public warning.

In a nutshell:

  •  10 people were charged with 82 criminal charges;
  • 25 people were banned from the finance or credit industries;
  • 6 enforceable undertakings were accepted; and
  • 19 directors were disqualified.


ASIC is enthusiastically delving into the pervasive culture of companies, in particular that of insurers, dealer groups and advisers. Also on ASIC’s list of priorities has been retail margin foreign exchange (FX) trading, and illegal phoenix activity, primarily by the construction industry.

Poor culture

Culture is the shared set of values or assumptions that dictate our behaviour in specific groups, reflecting the overall mindset and intentions of an organisation. Culture drives conduct directly, and in the financial services industry, poor culture has been responsible for several large-scale failures and scandals. The main outcomes have been institutionalised poor advice in big and small companies, the mis-selling of financial products, and benchmark and FX manipulation both at home and internationally.

The restoration of trust and integrity to the industry requires a cultural shift, one that ASIC has been actively pursuing by rewarding good behaviour and trying to weed out poor behavers. Poor culture costs, as several large finance companies have recently borne witness to – remediation costs are not cheap in either time or money, compensation comes with interest, and compliance with inquiries takes manpower and money. The loss of brand worth cannot be underestimated. The cost of poor conduct on global banks from 2008 to 2012 was estimated to be $250 billion, and since 2011, the largest banks in the United Kingdom have paid nearly 60 per cent of all their profits in fines and customer repayments.

Remediation matters

Consumers are the ultimate losers of poor culture, however, with the impact of shonky advice, procedures and products on Australian lives significant. Net losses are often unrecoverable and devastating, and even with legal action and compensation, time is of the essence, but not always abided. Court cases can take years, meanwhile lives go on, retirement is entered into with very little, and times can be very tough. Remediation policies count, and good policies are reflective of a desire to support consumers and minimising problems. ASIC’s work here has been invaluable in ensuring consumers have received appropriate compensation for wrongdoings by many companies, and that those companies have proper systems in place to deal with issues. 

Retail margin FX trading

This type of trading is high-risk and rather complex in its intricacies. Retail margin FX trading involves buying a foreign currency, then selling another foreign currency simultaneously in the hope that the value of the currency bought increases against the currency sold, and vice versa. The risks include investors trading with borrowed money, and investors only paying for a small amount of the trades, but being responsible for all losses.

Small movements in the market can make a huge impact on both wins and losses, and additionally, FX trading takes up a lot of time monitoring markets - it is a risky business in many ways, not unlike high-stakes gambling. Currencies can be extremely difficult to predict the movements of, since exchange rates are affected by a substantial number of factors.

Protection of FX traders

Many companies in the past few years have applied for licenses to set up retail margin FX trading broker businesses in Australia. A reasonably and unfortunately common occurrence has been that a licensed entity changes hands post-licensing, with some instances of new entrants into the market trying to avoid the eyes of the Australian financial services licensing (AFSL) investigation and scrutinising process. Many AFSL’s have been cancelled of these types of businesses in the past year.

Illegal phoenix activity

Illegal phoenix activity involves the current or previous directors of a company in debt transferring assets of the company to a new company to avoid paying creditors, tax or employee entitlements. This is illegal and dishonest, and costs between one and four billion annually. The construction industry in Australia has been under the spotlight, and a new taskforce has been set up by the Australian Tax Office (ATO) since the owners and directors of insolvent construction companies appear unable to do the right thing in many cases, with the sly help of liquidators and other professionals. 

Download the full ASIC report PDF