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ASIC seeks further powers to provide directions to licensees

Ann-Marie_ColemanThe ASIC Enforcement Review Taskforce (Taskforce) is seeking to expand ASIC’s powers to give directions to financial services and credit licensees (licensees). This follows on from the Taskforce’s earlier recommendation that ASIC’s banning powers be enhanced (see our previous update for more information – available here).

The key recommendations from the Taskforce are as follows:

  1. Where necessary to address or prevent compliance failures, ASIC should have the power to direct licensees regarding the conduct of their business (Directions Power). The legislation would set out the types of directions that ASIC can make.
  2. The Directions Power should be triggered where a licensee has, or will, contravene their licensing requirements (including relevant laws).
  3. ASIC should be able to apply to a court to enforce the direction and take administrative action if the licensee does not comply with the direction.

The Taskforce proposes that an appropriate process for the exercise of the Directions Power would be:

  • ASIC provides a notice to the licensee setting out the intention to make a direction, reasons and a reasonable time period for the licensee to respond;
  • If any response from the licensee does not adequately address ASIC’s concerns, ASIC may then make the direction; and
  • When making the direction, ASIC will set out the reasons and a time frame for complying.

These changes have been proposed as the Taskforce considers that there are shortcomings with respect to ASIC’s existing powers to require licensee’s to adopt internal systems or restrict their activities, including that the time it takes to impose additional conditions can leave financial customers at risk. Currently, ASIC may only make changes to the licence after giving the licensee the opportunity to appear at a private hearing before ASIC and make submissions. ASIC’s current powers also include the ability to apply for an injunction or negotiate an enforceable undertaking with the licensee.

The Taskforce has released a consultation paper on its recommendations and submissions will close on 20 November 2017.

Further information can be found here.