ASIC’s power to ban senior managers of financial services and credit businesses

The federal government’s ASIC Enforcement Review Taskforce has released a position paper on potential expansion of ASIC’s powers, proposing ASIC be given the power to ban senior managers of financial services and credit businesses who breached their legal obligations from the industry.

The paper identifies that ASIC’s banning power currently only prevents individuals from providing financial services. This means ASIC may not be able to prevent banned individuals from managing financial service or credit businesses.

As a threshold issue the paper notes that section 920A of the Corporations Act currently does not cover directors or senior managers who may not have breached financial services laws but were nonetheless integral to the operation of the business.

The Taskforce’s positions are:

Position 1: Once the administrative banning power is enlivened ASIC should be able to ban a person from:

  • performing a specific function in a financial services business, including being a senior manager or controller of a financial services business; and/or
  • performing any function in a financial services business.

Position 2: The grounds for ASIC’s power to ban under section 920A of the Corporations Act should include circumstances:

  1. Where ASIC has reason to believe that the person is not:
    * a fit and proper person to provide a financial service or financial services, or to perform the role of officer or senior manager in a financial services business; and/or
    * adequately trained, or is not competent, to provide a financial service or financial services, or to perform the role of officer or senior manager in a financial services business.
  2. Where a person has been an officer, partner or trustee of a financial services or credit licensee that has been:
    * the subject of a report by the Australian Financial Complaints Authority regarding a failure to comply with a determination of that authority; or
    * a corporation that was wound up and a liquidator lodged a report under subsection 533(1) of the Corporations Act about the corporation’s inability to pay its debts.
  3. Where a person has breached their duty under sections 180, 181, 182 or 183 of the Corporations Act.

The suggested extensions to ASIC’s powers would complement the government’s Banking Executive Accountability Regime (BEAR) by putting more responsibility for misconduct in the financial services sector on senior managers.

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