Watchdog attacks critics, vows to sue rogues identified by Hayne

ASIC has vowed to test the law to its fullest in tackling financial crime and deterring future misconduct within the fiscal sector.

Australian Securities & Investments Commission chairman James Shipton has declared he will test legal boundaries and may lose cases in a bid to clarify the law and deter misconduct. Picture: AAP

Criticism of the corporate watchdog’s tough new stance on dragging financial companies to court “suggests there are still things to hide”, according to the regulator’s chairman James Shipton, who has declared he will be “testing the boundaries” of the law and may lose cases in a bid to clarify the law and deter misconduct.

Mr Shipton, who joined the Australian Securities & Investments Commission last year, said it was only 50 days since Kenneth Hayne handed down his final report for the banking royal commission but the sector was already pushing back against its new vigorous approach to tackling financial crime.

“We will be testing the law,” Mr Shipton said. “We are seeking clarity around what the law is and what the law means.”

By “actively being courageous and actively pursuing clarification in the law” there would be a very strong net benefit for the whole financial sector.

“Sometimes there will be a headline that says ASIC failed,” he said, noting that bringing on test cases that were risky would usher in “greater clarity, greater consistency, and greater certainty” of the law. “Knowledge of the boundaries of the law is important.”

Mr Shipton also hit out at resistance among financial companies to admitting wrongdoing.

“There are still pockets of legal resistance. There are still technical arguments being put to us. We want fairness — what is the right thing to do — to be the primary consideration,” Mr Shipton said.

ASIC head of enforcement, Daniel Crennan QC, called on companies to fold and admit guilt rather than drag out legal cases when they knew they were in the wrong. “They shouldn’t engage in brinkmanship and gamesmanship,” Mr Crennan said.

“A better course would be to co-operate with us as fully as they can. There are ways of getting out of litigation including making admissions and moving on.”

ASIC recently scored a victory after law firm Clayton Utz handed over documents scandal magnet AMP had argued were the subject of legal privilege.

ASIC was forced to initiate federal court proceedings to get the documents for its investigation into the company’s fees-for-no-service disaster, where it is alleged the company misled the regulator almost two dozen times.

The comments came as ASIC commissioner Michael Saadat said the regulator was developing technology to trawl through sales calls for products such as life insurance, which were often sold alongside heavy-handed techniques to customers who don’t understand the product, don’t need it and won’t benefit from it.

Red-flag indicators of illegal activity to be picked up by the artificial intelligence include the tone of the call, hesitation on the customer’s behalf, and sales representatives talking far more than the customer.

The Morrison government has announced a new criminal division of the Federal Court will be established to try cases exclusively against banking executives and institutional misconduct as part of a $600 million funding boost to regulators in response to the Hayne recommendations.

Already 50 ASIC staffers are sifting through some 100 referrals, breach reports, and case studies for potential enforcement action, including seven financial advisers who will likely be referred to the Commonwealth Director of Public Prosecutions.

ASIC also has flagged prosecuting senior bank executives from almost 40 investigations into alleged fiduciary breaches.