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8.2 Appendices relating to assessments

Assessing misconduct and other reports

Misconduct reports from the public

Table 8.2.2 Misconduct issues, by outcome, 2019–20We record and assess every report of alleged misconduct we receive and we use this information to identify and respond to misconduct. In 2019–20, we dealt with 12,355 reports of alleged misconduct. Of these reports, 2,631 related to one specific matter and were merged into one case for consideration and finalised in July 2019.

Table 8.2.1 shows the outcome of the misconduct reports received by ASIC during the financial year.

Table 8.2.1 Misconduct issues, by category, 2019–20

2019–20

Corporations and corporate governance

Governance issues

12%

Failure to provide books and records or a report as to affairs to an insolvency practitioner

10%

Fraud allegations

4%

Insolvency practitioner misconduct

4%

Insolvency matters

3%

Other (e.g. shareholder issues, reporting issues)

12%

Subtotal

45%

Financial services and retail investors

Credit issues

13%

Operating an unregistered managed investment scheme or providing financial services without an AFS licence

10%

General licence obligations

6%

Other (e.g. insurance, advice, misleading or deceptive conduct, unconscionable conduct)

10%

Subtotal

39%

Market integrity – including insider trading, continuous disclosure, misleading statements, and market manipulation

6%

Registry integrity – including incorrect address recorded on ASIC’s register, lodging false documents with ASIC, and issues with business names

4%

Subtotal

10%

Issues out of ASIC’s jurisdiction

6%

Total

100%

Table 8.2.2 Misconduct issues, by outcome, 2019–20

Number

Total misconduct reports finalised1

12,355

Outcome

Percentage

Referred for action by ASIC2

19%

Resolved3

10%

Compliance achieved

1%

Warning letter issued

3%

Referred for internal or external dispute resolution

6%

Assistance provided

<0.5%

More appropriate agency

<0.5%

Analysed and assessed for no further action4

61%

Insufficient evidence

41%

No action

20%

No jurisdiction5

8%

No breach or offences

2%

Total

100%

1 Where ASIC receives reports about the same entity and issue, we merge these matters.

2 The matters ASIC takes into account when deciding whether or not to commence a formal investigation are set out in more detail in Information Sheet 151 ASIC’s approach to enforcement.

3 This can involve referral to an EDR scheme, ASIC issuing a warning letter to the party that may be in breach of the Corporations Act, ASIC providing assistance to the reporter in the form of guidance and information about how best to resolve the matter themselves, or ASIC taking action to achieve compliance.

4 Preliminary inquiries made and information provided analysed and assessed for no further action by ASIC, due to insufficient evidence or other reason, such as where another agency or law enforcement body or third party (e.g. a liquidator) is better placed to appropriately deal with the underlying issues or is already taking action.

5 Where relevant, ASIC directs reporters to the appropriate agency or solution.

Breach reports from licensees and auditors

The Corporations Act requires AFS licensees to tell us in writing within 10 business days about any significant breach (or likely breach) of their obligations. We also receive breach reports from auditors who have reasonable grounds to suspect a breach of the Corporations Act by the company, managed investment scheme, or AFS licensee that they are appointed to audit.

Table 8.2.3 provides a breakdown of the breach reports we assessed in 2019–20 by type and outcome.

Table 8.2.3 Breach reports by type and outcome, 2019–20

Type

Number

Auditor breach reports

1,172

Breach reports about AFS licensees and managed investment schemes

2,721

Total breach reports finalised

3,893

Outcome

Percentage

Referred for action by ASIC

18%

Referred for compliance, investigation or surveillance

17%

Assist existing investigation or surveillance

1%

Analysed and assessed for no further action

82%

No further action

81%

No offence identified

1%

Total

100%

For more information about the matters that require an auditor to report a breach of the law to ASIC, see sections 311, 601HG and 990K of the Corporations Act.

Statutory reports from liquidators, administrators and receivers

The Corporations Act requires liquidators, administrators and receivers to report to ASIC if they suspect that company officers are guilty of an offence. Liquidators must also report if the return to unsecured creditors may be less than 50 cents in the dollar. Table 8.2.4 provides details of the statutory reports we assessed in 2019–20 by type and outcome.

Table 8.2.4 Statutory reports from liquidators, administrators and receivers, 2019–20

Type

Number

Initial reports from liquidators, administrators and receivers1

8,040

Reports alleging misconduct

7,163

Reports not alleging misconduct

877

Supplementary reports

520

Total statutory reports finalised (initial + supplementary)

8,560

Outcome

Percentage

Supplementary report analysed and assessed, no further information required2

77%

Supplementary reports referred

23%

Referred for compliance, investigation or surveillance

21%

Assisted existing investigation or surveillance

2%

Total

100%

1 We requested a further report (supplementary report) from the external administrator in 15% of cases.

2 There was insufficient evidence to warrant commencing a formal investigation in 77% of the cases where a supplementary report was requested and subsequently it was determined that no further information was required. We retain these reports for intelligence purposes for possible future use.