Whether or not any financial services executives are criminally prosecuted as a result of a referral from the Financial Services Royal Commission, the current Parliament in its last months has passed two Acts which together with ASIC’s new enforcement policy will require financial service providers to review their risk management and compliance system.
The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 and the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 together have created a new compliance framework which:
- increases civil and corporate penalties for financial services and credit licensees;
- impose new penalties for offences under the Corporations Act and National Credit Act which previously did not have a penalty;
- expand the infringement notice powers of ASIC; and
- provide whistleblower protections for employees of licensees who report breaches to ASIC.
In line with Commissioner Hayne’s recommendations, the general conduct obligations of licensees have an increased status.
Under ASIC’s new ‘Why not litigate?’ enforcement policy ASIC will have a greater focus on court-based outcomes to provide strong public denunciation and punishment of wrongdoing. But its new infringement notice powers mean that in many circumstances a financial penalty can be quickly imposed without court delays.
Together with the recent Acts, the changes mean that operational risks and non-compliance with licence conditions now carry significant financial and reputational risk.
ASIC’s powers will be enhanced when the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 is passed.
And the personal accountability of financial services executives will be expanded when the BEAR regime is extended to all APRA-regulated entities.
