ASIC enforcement during coronavirus shutdown

ASIC has announced a range of measures aimed at promoting a regulatory environment where companies can focus on immediate priorities and the needs of their customers during the COVID-19 crisis: https://asic.gov.au/about-asic/news-centre/find-a-media-release/2020-releases/20-070mr-asic-recalibrates-its-regulatory-priorities-to-focus-on-covid-19-challenges/\n\nASIC says that it will maintain its enforcement activities and continue to instigate and take action where the public interest warrants it doing so.\n\nBut, in purely practical terms, ASIC’s claims of business as usual for enforcement don’t hold water.\n

Compulsory Examinations - Practically impossible.

\nA critical component of the ASIC enforcement toolkit is the compulsory section 19 examination process under the ASIC Act. Having represented clients at many section 19 examinations in small, airless rooms with multiple people present, we can confidently say that there is no way these can be conducted consistent with ‘social-distancing’ requirements.\n\nMeanwhile, ASIC does not have any published protocols for conducting these interviews remotely.\n\nEven if a provision was made to conduct compulsory interviews remotely, we expect there would be significant problems at ASIC’s end in conducting them effectively. We understand ASIC’s systems were not set up to work remotely and there have been serious issues as it seeks to roll-out a new system – which contain access to sensitive government data – for access offsite.\n\nASIC, and the business community-at-large, would be better served if ASIC was upfront about its limited enforcement capabilities at this time and instead focus its efforts on surveillance. The better message would be that ASIC is watching, consolidating evidence, and building its case. When the pandemic crisis is over, it can and will take the necessary action.\n\nAny person that is called to give compulsory evidence at ASIC at this time, or who would be prejudiced if they did not otherwise appear at a non-compulsory hearing that materially affected their interests – such as in a banning hearing – would be justified in giving close consideration to the case of Northern Territory v Mengel (1995) 69 ALJR 527, which recognised the tort of ‘misfeasance’ in public office. In other words, if a person was called upon under a compulsory statutory power to sit in a small, airless room with several people for multiple hours in a section 19 examination, it would be difficult for ASIC to argue that the possibility of that person contracting COVID-19 was not unforeseeable. If that happened, Mengel confirms ASIC could be liable.