ASIC licence enforcement powers review

The ASIC Enforcement Review Taskforce has published a Position and Consultation Paper on ASIC’s Directions Powers.

The Taskforce reviewed ASIC’s existing powers to modify an AFS or credit licensee’s ongoing systems and conduct after the relevant licence has been granted.

These existing powers include to:

  • vary, suspend or cancel the licence if ASIC can establish the licensee has breached the law, and the breach justifies this action;
  • apply to the court for an injunction; or
  • negotiate an enforceable undertaking with the licensee .

The Taskforce however considers that ASIC’s existing powers to require licensees’ to adopt internal systems or to restrict their activities have shortcomings.

The Taskforce considers that ASIC should be able to require compliance with AFS or credit licence obligations in real time, and that the regulator should be given powers to direct licensees to take or refrain from taking actions where appropriate for this purpose.

The Taskforce has developed preliminary positions on a set of reforms aimed at filling a gap in the existing licensing regimes. These positions are:
Position 1: ASIC should have the power to direct financial services or credit licensees in the conduct of their business where necessary to address or prevent compliance failures.
Position 2: The directions power should be triggered where a licensee has, is or will contravene AFS or credit licensing requirements (including relevant laws).
Position 3: ASIC should be able to apply to a court to enforce the direction and take administrative action if an AFS or credit licensee does not comply with a direction.

The new powers would include directing an AFS or credit licensee to:
a. cease appointing authorised representatives;
b. cease accepting new clients;
c. conduct a review or audit of an authorised representative’s records;
d. engage properly qualified compliance staff;
e. cease transferring business to another licence;
f. cease making specific representations about financial products or services;
g. appoint a person nominated by ASIC to review and report on compliance processes;
h. establish a programme to assess claims for restitution or compensation to customers.

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