An Empirical Analysis of the Use of Enforceable Undertakings by the Australian Securities and Investments Commission between 1 July 1998 and 31 December 2015

89 Pages Posted: 18 Apr 2016 Last revised: 6 May 2016

See all articles by Helen Louise Bird

Helen Louise Bird

Melbourne Law School

George Gilligan

University of Melbourne - Centre for Corporate Law

Andrew Godwin

Melbourne Law School

Jasper Hedges

Australian National University, Research School of Social Sciences

Ian Ramsay

Melbourne Law School - University of Melbourne

Date Written: April 4, 2016

Abstract

This paper analyses enforceable undertakings or formally negotiated settlement agreements between the Australian Securities and Investments Commission (ASIC) and regulated firms and individuals. It reports the findings of an empirical study of 414 enforceable undertakings accepted by ASIC from 1 July 1998 (when ASIC was given the power to accept enforceable undertakings) to 31 December 2015. The first of its kind in size and scope, the study provides detailed insights into ASIC’s deployment of enforceable undertakings to address misconduct issues occurring within its regulatory remit. The study profiles the characteristics of parties giving enforceable undertakings, their misconduct and the undertakings given to address that misconduct. Proprietary companies and directors are shown to be the most common groups of companies and individuals giving enforceable undertakings. Activities involving financial services are the most common subject of enforceable undertakings and non-compliance with financial services laws, the most common form of misconduct addressed by enforceable undertakings. The study finds evidence of the regulator’s strategic use of enforceable undertakings to bring about systemic changes in the financial services industry, especially in relation to the quality of advice provided by the financial planning sector. This is achieved by regulating compliance from within financial planning and wealth management firms and accepting voluntary financial service activity bans from individual advisors and planners engaging in misconduct. This strategy explains the concentration of legal compliance review undertakings and cease and desist undertakings in ASIC accepted enforceable undertakings.

Keywords: enforceable undertakings; compliance; financial regulation; misconduct

JEL Classification: G18; G28; G38; K22; K42; M14

Suggested Citation

Bird, Helen Louise and Gilligan, George and Godwin, Andrew and Hedges, Jasper and Ramsay, Ian, An Empirical Analysis of the Use of Enforceable Undertakings by the Australian Securities and Investments Commission between 1 July 1998 and 31 December 2015 (April 4, 2016). CIFR Paper No. 106/2016. Available at SSRN: https://ssrn.com/abstract=2766134 or http://dx.doi.org/10.2139/ssrn.2766134

Helen Louise Bird

Melbourne Law School ( email )

University Square
185 Pelham Street, Carlton
Victoria, Victoria 3010
Australia

George Gilligan

University of Melbourne - Centre for Corporate Law ( email )

185 Pelham Street, Carlton, Building 106
Victoria 3010
Australia
+61 3 8344 1079 (Phone)

HOME PAGE: http://www.law-cclsr@unimelb.edu.au

Andrew Godwin

Melbourne Law School ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

Jasper Hedges

Australian National University, Research School of Social Sciences ( email )

Canberra
Australia

HOME PAGE: http://www.anu.edu.au

Ian Ramsay (Contact Author)

Melbourne Law School - University of Melbourne ( email )

University Square
185 Pelham Street, Carlton
Victoria, Victoria 3010
Australia
+61 3 8344 5332 (Phone)

HOME PAGE: http://law.unimelb.edu.au/about/staff/ian-ramsay

Register to save articles to
your library

Register

Paper statistics

Downloads
193
Abstract Views
879
rank
158,108
PlumX Metrics