ASIC chair Joe Longo defiant over enforcement record

The chair of the corporate regulator, Joe Longo, will defend its enforcement record, warning the agency faced competing demands for its attention and resources.

ASIC chairman Joe Longo says the regulator ‘is very much committed to law enforcement’. Picture: NCA NewsWire / Ian Currie

Australian Securities and Investments Commission chair Joe Longo will strike a defiant tone in a speech on Tuesday, warning “assertions” by critics that the regulator was failing were “flying in the face of evidence”.

In a speech to be delivered on Tuesday at ASIC’s annual forum, Mr Longo pushes back on critics of the corporate regulator, which oversees the conduct of financial market participants and punishes breaches of corporate law.

Mr Longo, who took charge of running ASIC in June 2021, says the regulator “is very much committed to law enforcement”.

“Regulation is only half the story. Without strong enforcement, it’s incomplete,” he will say. “If misconduct isn’t deterred or identified and punished, then we resign ourselves to never reaching our destination.”

Mr Longo will say ASIC was faced with a “policy trilemma”, that the regulator “can at best” achieve clear rules, maintain market integrity, or encourage financial innovation.

“Effective regulation and strong enforcement help us manage the trade-offs that the trilemma highlights, and they connect the three objectives,” he will say. “Effective enforcement means that when clear rules are broken there are consequences. This inevitably promotes trust and market integrity.”

Mr Longo’s speech, which will open the regulator’s annual forum, comes in the wake of a major restructure of the agency. This has seen several veterans depart the regulator.

Mr Longo will say he is aiming to ensure ASIC was “ambitious and confident in discharging its regulatory and enforcement responsibilities”, but was faced with “the question of where to dedicate resources”.

The regulator has to decide “when and where to enforce and to litigate, and when and where to educate, or perhaps just nudge”.

Mr Longo will say many ASIC watchers will feel the regulator has only just finished reforms recommended for the agency in the wake of the financial services royal commission in 2018. The inquiry made 13 referrals to ASIC for investigation as well as a number of recommendations.

Mr Longo will say many of the reforms to ASIC “are still in their implementation stages”, including the design and distribution obligations, the financial accountability regime, and reportable situations regime.

The ASIC chair will also observe in his speech the increasing fragmentation of financial markets, with the rise of automated systems presenting further risks.

Mr Longo will say the harm from these automated systems may “far exceed that caused by errors stemming from manual processes”.

“For this reason, technological and operational resilience remains integral to ASIC’s mandate to supervise financial markets.”

Mr Longo will say while there were “clearly fewer market participants than individuals and firms who trade on our markets” the regulator would focus on “the gatekeeper level” in a bid to “send a strong message to those with the greatest potential to have a meaningful impact on market integrity”. “But let me be very clear: we won’t focus on gatekeepers to the exclusion of those who engage in market manipulation.”

The forum comes as two new commissioners at ASIC kicked off their five-year terms.

ASIC has been under scrutiny in parliament with Liberal Senator Andrew Bragg leading a charge against the regulator’s enforcement record.

The regulator has been forced to reveal bullying investigations against deputy chair Karen Chester and disclose documents close to several investigations.

Senator Bragg said “ASIC’s enforcement record is appalling”.

“Corporate crime is endemic and Labor has appointed new commissioners with virtually no law enforcement experience.

“Bizarrely, criminal penalties have not applied in the cases of Nuix, Dixon and many others. The failure to prosecute sends the green light to crooks. Things can only get better.”

Originally published as ASIC chair Joe Longo defiant over enforcement record