ASIC pushes the envelope on litigation in 2024
What you need to know
Expect more enforcement activity, less negotiation, and more litigation from ASIC.
The corporate regulator has signalled a shift towards conducting litigation to clarify where the law is uncertain, expand the scope of its enforcement powers, and cover a broader scope of financial services operators (eg non-AFSL holders).
Outline
ASIC has committed to 'pushing the envelope' and pursuing riskier litigation in 2024, doubling down on recent comments that promised a 'bold approach to enforcement'.
Reported recently in the Australian Financial Review, ASIC Chair Joe Longo said he anticipates more courtroom losses as the corporate regulator ventures further into the 'regulatory perimeter' in 2024.
The comments came only weeks after a loss for the regulator in the Federal Court, on which ASIC Deputy Chair Sarah Court remarked 'ASIC took on this case to clarify the [law]… ASIC enforcement action plays an essential role in testing legislation to ensure it affords consumers with appropriate protection’.
What we can expect
Our recent article, ‘ASIC’s enforcement priorities for 2024 – licensees beware’, set out our expectations for ASIC’s strategy of targeted litigation, which is likely to focus on identified enforcement priorities and areas of potential greatest harm.
The priority areas identified remain the same. However, these recent comments from the ASIC Chair and Deputy Chair signal a shift towards ASIC conducting litigation targeting those areas to:
seek clarification where the law is vague or uncertain;
effectively expand the scope of its enforcement powers (by seeking court endorsement of its approach); and
cover a greater scope of operators in the financial services market (including, for example, non-AFSL holders).
Continued evolution of ASIC's litigation strategy
The number of new proceedings commenced by ASIC has been in steady decline since ASIC abandoned its 'why not litigate' philosophy (see diagram below).
ASIC has explained away the downward trend as merely cyclical. Supporting this explanation is the uptick in completed proceedings in the same period.
Given the recent comments from the Chair and Deputy Chair and noting the continuing limited use of enforceable undertakings by ASIC as a regulatory enforcement tool, ASIC appears to have returned to its ‘litigation era’ again.
We expect ASIC will allocate more resources to new and existing investigations as it unloads its litigation burden. While it will take time for those investigations to result in the commencement of court proceedings, further litigation is inevitable.
However, the message from ASIC is now clear – expect more enforcement activity and, more importantly, less negotiation and more litigation, particularly in areas where ASIC considers the law to be uncertain.
We can help
ASIC’s greater appetite for riskier litigation, coupled with the prospect of more enforcement proceedings, raises the litigation risk for all financial services providers.
With our expertise across Banking & Financial Services and Commercial Dispute Resolution, we can help manage and mitigate against litigation risk, whether you are the subject of an ASIC investigation or preliminary inquiries, a defendant in proceedings brought by ASIC, or motivated to avoid ASIC enforcement altogether. For assistance, reach out to Jacob Uljans, Julian Hammond, Selina Nutley, and Simon Cho.
