ASIC Annual Forum 2022 – Six key takeaways
Last week, with Mackay Chapman Director Michael Chapman, I attended ASIC's Annual Forum 2022. It was a great opportunity to get face to face with key people at ASIC, hear directly from them, experts and other industry participants and 'read the tea leaves' on the Regulator's intent for the year ahead.
Below are our six key takeaways. Given our specialisation, they are biased towards enforcement and regulatory risks that our clients may face, in particular credit providers, financial services licensees and ARs, property scheme operators and SMEs. But they are relevant to all who are under ASIC’s regulation or operate in markets they control.
We will be circulating some more specific content in the coming days and weeks, with a particular focus on enforcement, ASIC's enforcement priorities and credit.
But for now our six key takeaways:
1. ASIC is not soft on enforcement. At least it insists it isn't, and recent history (post Hayne) both suggests and supports that when ASIC says it will take a particular approach in the enforcement space, while it may not be executed perfectly, it takes that approach. ASIC Deputy Chair Sarah Court was at pains in her address to stress that while its mantra is no longer 'why not litigate' ASIC has not gone soft. Enforcement remains central to ASIC's regulation. It will litigate, and is litigating, but will also use its full enforcement toolkit.
2. Consumer harm is a key ASIC driver. Throughout the forum consumer harm kept arising as a reference point - throughout and behind ASIC's enforcement priorities and the major issues discussed. Coupled with the commitment to active enforcement, risk of or actual consumer harm will be a key determinant of where, when, and how aggressively ASIC acts in the year ahead.
3. Crypto is not to the Regulator's liking and firmly under its spotlight. In the words of ASIC Chair Joe Longo 'the inherent risks associated with investing in cryptocurrencies are often opaque, and the risk equation is never static. They are highly volatile, inherently risky, and complex.’ Translation – ASIC sees crypto as a major consumer risk and act in response to rogue operators or high risk products. The Chair's comments mirror the reasoning behind ASIC's first crypto related product intervention to stop distribution of crypto related fund products. This intervention won't be the last, and any entities looking for an AFSL to issue or deal in crypto related financial products should expect ASIC to take a long hard look at their application.
4. At the same time as it cracks down on crypto, the Regulator is grappling with how to regulate it and blockchain technology more generally, to mitigate the consumer risks of crypto and promote the potential of blockchain in commercial and international finance and related innovation. This will unfold this year..
5. The Design and Distribution obligation (which came into effect on 5 October 2021) will be one of the most significant reforms of recent memory in financial services and banking. It has forced a paradigm shift in the relationship between product issuers, distributors and consumers. Its impact will be significant, and ASIC is intent on using it as a regulatory sword, with multiple interventions already occurring in the managed fund industry based on DDO.
6. Cyber threats and greenwashing are major issues from the Regulator's perspective, both as risks to consumers, business and capital markets. Having heard from ASIC, experts and industry leaders at the forum, each of these are more significant than consumers, small business and those outside ESG may have thought. Investment scams are rife. Cyber attacks on major institutions are impacting consumer confidence in online commerce and data retention by firms. Many SMEs are also suffering cyber attacks. Meanwhile the capital flows in ESG are growing hugely, with misinformation and misconduct around ESG becoming a major issue. Watch this space.
These were our main six.
Keep an eye out for more detailed analysis in the days and weeks to come.
The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such. It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only. You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.
