Civil penalties racked up by ASIC court actions skyrocket as royal commission enforcement winds down

The corporate regulator’s annual report reveals the amount of money paid out as a result of civil actions has jumped by more than $160m.

ASIC chairman Joe Longo has delivered his first annual report. Picture: David Geraghty

Civil penalties as a result of enforcement actions by the corporate regulator blew out more than sevenfold to $189.4m as actions resulting from the financial services royal commission washed through the system.

The Australian Securities and Investment’s Commission’s annual report, released on Friday, shows that $189.4m in civil penalties were handed down by the nation’s courts, in the 2021 financial year, up from just $24.9m.

The “fees for no service” scandals, uncovered by the royal commission, which identified a class of products which charged customers for services which were not provided to them, generated a large pool of penalties. That included a $57.5m sting handed down to two NAB superannuation trustee companies (Nulis Nominees and MLC Nominees).

“This is one of the largest total penalties ever imposed in a civil action filed by ASIC and reflects the egregious nature of FFNS misconduct,’’ ASIC said.

ANZ was slugged $10m for breaching its obligations as a financial services licensee around fee issues, while the CBA was hit with a $7m penalty for false and misleading conduct relating to business overdraft interest.

The ASIC annual report said the regulator had now “finalised much of the enforcement action arising from the royal commission’’.

Chairman Joe Longo started on June 1 this year, following former chair James Shipton agreeing to step down after it was revealed ASIC paid more than $118,000 for him to receive personal tax advice.

Mr Longo indicated restructuring the organisation to be able to better deliver on its regulatory and enforcement functions would be a priority this financial year.

“The past year has been a challenging and significant one for ASIC,’’ he said in the annual report.

“We have worked with the government to help Australian businesses and consumers recover from the economic impact of the Covid-19 pandemic, and prioritised finalising the implementation of the important reforms arising from the financial services royal

commission.

“We have also had to confront some shortcomings in our own organisation. This was important for us to acknowledge and address to ensure that we meet the high standards set for us, and that we expect of ourselves, as we do from those we regulate.’’

Mr Longo said Vivienne Thom’s review of ASIC’s governance, handed down in January “highlighted that some of ASIC’s internal systems and processes needed to improve’’.

“ASIC completed its implementation of the recommendations of the Thom Review in August 2021,’’ Mr Longo said.

“We also established a chief risk officer and a head of office function. Respectively, these roles will support our new risk management framework and increase internal oversight and executive accountability.’’

He flagged that further change was on the way.

“The aftermath of the royal commission and the Covid-19 pandemic have had a profound impact on how we work, and have highlighted the importance of having the right organisational infrastructure to support our regulatory and enforcement functions and responsibilities,’’ Mr Longo said in the annual report.

“One of my first priorities as chair was to commission an independent review of our infrastructure to enhance ASIC’s strength and effectiveness by improving some of its internal capabilities. We will implement the recommendations of this review across the coming year.’’

Mr Longo said ASIC had to be “an active and credible law enforcement agency’’, and flagged a proactive approach.

“We will use our full enforcement toolkit as appropriate. Criminal charges, civil cases, enforceable undertakings, product interventions, financial penalties, bannings and licence conditions – they are all on the table and will be used to achieve what’s right.

“We will hold individuals and corporations to account and will act quickly and decisively to disrupt, deter and punish misconduct.’’

ASIC will also for the first time this financial year fall under the watch of the newly-established Financial Regulator Assessment Authority which will be tasked with assessing the “effectiveness and capability” of ASIC to carry out its role.

On the financial side, ASIC reported that it raised $1.51bn for the Commonwealth in fees, charges and supervisory cost recovery levies, up 11 per cent.

It reported a 79 per cent lower deficit of $14.4m, with expenses up just 1 per cent to $492.1m.

Remuneration for key management personnel fell from $9.3m to $7.3m but the number of those personnel also fell, from 22 to 19.

ASIC paid $2.87m to Melbourne-based State of Matter Consulting and in other reportable consultancy contracts paid Lab3 $793,727, Unify Solutions $514,900, Wardy IT Solutions $430,451 and Deloitte Access Economics $422,181.

“During 2020–21, ASIC entered into 39 new consultancy contracts, involving total

expenditure of around $5.826m,’’ the report says.

“In addition, 35 ongoing consultancy contracts were active during the year, involving total expenditure of $8.28m.’’

ASIC paid $9.79m in performance bonuses in total across 1459 of its staff, with the maximum bonus paid $28,537.

ASIC said no bonuses were paid to the senior executive team in 2020-21 due to the government age freeze and “ASIC is moving to remove bonuses from executive remuneration over the course of the next financial year, in line with the APSC Performance Bonus Guidance’’.

Mr Longo, who started on June 1, was paid $70,031 during FY21 while Mr Shipton was paid $721,355.

Mr Shipton also repaid the $118,557 relating to the tax advice, and The Australian points out that a review into the issue made no adverse findings against him.