Following criticism in the wake of the Hayne Royal Commission, ASIC has vowed to crack down on increasing business misconduct by implementing a new ‘litigate-first’ strategy. In doing so, the corporate regulator has committed to placing a greater emphasis on litigation, warning that it will ‘move more quickly to, and accordingly conduct more, civil and criminal court actions against larger financial institutions.’

The move follows the alarming findings of the Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, at which the regulator was denounced for being too soft on misbehaviour and for ‘rarely’ going to court.

Consequently, ASIC has admitted that it must change its approach, seeking to place greater emphasis on litigation and warning that it will first ask, ‘why not litigate?’ when assessing how to address misconduct.

However, ASICs strategy is already under scrutiny, after litigation efforts against Westpac saw the Federal Court impose a paltry $3.3 million fine for unconscionable conduct – a mere fraction of ASIC’s $58 million request.

This outcome has revealed that reform is necessary if further misconduct is be prevented, with Justice Beach declaring that although he wished to impose a much greater fine to deter others, this ‘seriously inadequate’ penalty was the most he could impose under law.

Despite this, ASIC commissioner Sean Hughes has warned that ‘it is inevitable that there will be more litigation and more people out there in the market who will have to be prepared for a much firmer, much stronger regulator, who is far less likely to compromise.  Whether such an approach is appropriate will have to be determined but the writer is sceptical that a firmer approach is warranted.  In the writer’s view, targeted litigation with genuine outcome ought to be the focus and as part of that process compromise must be balanced against the outcome sought.