ASIC's new work schedule and priorities in light of the COVID-19 crisis

By Kim Reid, Keerthi Ravi
ASIC COVID-19 Financial Services

In brief

On 14 April, ASIC published a media release detailing changes to its regulatory framework and priorities in light of COVID-19. This follows an earlier statement by ASIC, which indicated that it would temporarily change its regulatory work and priorities to allow it and regulated entities to focus on the impact of COVID-19.

In this update, ASIC has addressed its perceived heightened risk of significant consumer harm, the possibility of serious breaches of the financial services laws, challenges in ensuring market integrity, and the continued funding of companies and the economy.

To reflect this, ASIC has taken steps to redeploy staff and reprioritise certain non-time-critical regulatory initiatives. ASIC has published Changes to regulatory work and priorities in response to COVID-19, which sets out its changed regulatory priorities and support arrangements that are available on a temporary basis (possibly until at least 30 September 2020).

Key takeaways include:

  • ASIC will allow additional time for the industry to respond to ASIC notices. In our experience, a similar approach has been adopted by other financial services regulators.
  • Enforcement action will continue, but there may be some changes to the timing and process of investigations to take into account the impact of COVID-19.
  • Reporting of remediation programs: Unless otherwise indicated by ASIC, licensees can provide updates on remediation consistent with their internal reporting in lieu of the current form and scheduling of reporting arrangements.
  • Financial advice licensees should put measures in place that allow on-site audits of their representatives for compliance with general obligations to be conducted remotely.

In reprioritising and responding to COVID-19, ASIC has highlighted that its approach is to:

  • increase:
    • market monitoring to ensure investors are appropriately informed, and protected against manipulation and abuse;
    • support for consumers who may be vulnerable to scams and sharp practices, receive poor advice, or need assistance in finding information and support should they fall into hardship; and
    • support to firms to facilitate the timely completion of capital raisings and other urgent transactions, providing regulatory relief, where appropriate, and identifying measures to support small business;
  • defer:
    • various consultations, regulatory reports, and reviews; and
    • ASIC's 'enhanced approach of Close and Continuous Monitoring Program' (although remote monitoring and APRA information sharing will continue); and
  • change:
    • the timing and process of investigations and enforcement to reduce the regulatory burden on firms to the extent possible;
    • constraints created by variations to usual court procedures;
    • the order of priority of action – bringing some forward.

In its update, ASIC reminds industry participants that, despite the challenges posed by COVID-19 that have caused the regulator to shift its priorities, compliance with existing obligations is critical, particularly in relation to reporting of material breaches, record keeping and appropriate supervision of the provision of financial services.

What this means for you:

  • If you are experiencing challenges responding to an ASIC regulatory notice due to the impact of COVID-19, you may request a time extension from ASIC.
  • This increased flexibility carries with it an increased burden. Regulated entities must engage with ASIC early, and provide meaningful reasons for any extension request, together with an appropriate and realistic estimate of time for compliance with a notice.
  • ASIC will expect that any agreed, extended timeframes will be met. It will not welcome justifications for failing to comply with extended deadlines, particularly where appropriate disclosures have not been made to the regulator about the ability to comply.
  • These arrangements are not an opportunity for compliance hibernation. ASIC has reminded regulated entities that they must continue to treat customers fairly, avoid further financial harm or burden to consumers, and act to maintain the integrity and efficiency of markets.

ASIC will continue to investigate and take action where appropriate. In addition to its usual remit, it will be especially vigilant in addressing predatory practices, scams and fraud.