ACC704 Companies And Securities Law

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ACC704 Companies And Securities Law

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ACC704 Companies And Securities Law

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Course Code: ACC704
University: Kings Own Institute

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Country: Australia


You are expected to research a specified topic reading and interpreting cases, journal articles and law reform policy reports. You are also expected to analyse the effect and operations of these laws and policies on companies and their stakeholders and you are expected to report on corporate legal issues.

How can ASIC’s performance as a regulator be improved? Discuss. Your answer must discuss specific Australian legislation and case-law.


The Australian Securities and Investments Commission (ASIC) is an independent Australia government body which was formed on 1st July 1998. This body acts as Australia’s corporate regulator which focuses on governing the corporations operating in the country. The role of this authority is to enforce and regulate company and financial services laws across Australia. This authority focuses on protecting Australian consumers, creditors, and investors from unfair, illegal and unethical trading practices. The scope and authority of ASIC are determined by the Australian Securities and Investments Commission Act 2001 (Cth). The importance of governance of ASIC has increased in the country as the number of cases involving illegal and unethical practices of companies increased. The organisations are becoming larger than ever which makes it easier for them to effective a large number of people in a negative manner. Therefore, effective monitoring and evaluation of their actions are necessary to ensure that the rights of customers, investors, and creditors are protected. However, there are many areas in which ASIC lacks which create challenges for this authority to ensure that the right of parties is protected from unethical trading practices. The objective of this report is to provide recommendations which can assist in improving the performance of ASIC as a regular in the country. This report will evaluate the role of ASIC to understand how it operates to determine its importance in managing the corporate environment in the country. This report will analyse specific Australian legislation and case laws in order to understand how ASIC play a crucial role in protecting the interest of customers, investors, creditors and the public.
Role of ASIC
The ASIC has the responsibility to report to the Treasurer, and it has a responsibility for managing the administration of all or parts of various legislation in the country such as Corporations Act 2001 (Cth), National Consumer Credit Protection Act 2009 (Cth) and Insurance Contracts Act 1984 (Cth). The role of ASIC is to manage Australia’s company and business name registration. In this register, the information regarding companies’ names is included along with their number. This registry can be searched by anyone through the online portal of ASIC. There is a wide range of organisations which can be searched on the online portal of ASIC which include registered bodies, managed investment schemes, non-registered entities, companies, associations, and foreign companies. Along with the name of the company, the online registry maintained by ASIC also contains information regarding the history of the enterprise, unique identification number (ACN, ARBN, ARSN, ABN), date of registration, new review date, type of company (public company, limited by shares, proprietary company), location of the registered office, and any professional licenses which are acquired by the entity. The authority is responsible for integrating financial service, consumer credit regulator, markets and the corporate sector.
The vision of ASIC is to build a fair, strong and efficient financial system for all Australians. There are various regulatory tools which are used by the ASIC in order to achieve its vision. For example, the company can change behaviours in order to drive good consumer and investor outcomes which resulted in benefiting the economic growth of the nation. The corporation also has the authority to take actions against the misconduct of parties to maintain trust and integrity in the financial system. The corporation promotes a strong and innovative development of the financial systems in Australia. Lastly, the authority helps Australians in controlling their financial lives to ensure that they are able to trust and rely on its vision. The ASIC Act provides various powers to ASIC which include rules that are aimed to ensuring that integrity of the financial market is maintained in Australia. The corporation can seek civil penalties from the court on organisations which are found guilty of misconduct. The authority can also issue infringement notice to corporations in relation to alleged breaches in the country, and it has the power to commence prosecutions.
All these power are given to the ASIC to ensure that it is able to regulate and manage the corporations operating in Australia and impose penalties on those who violate any provision. A good example is ASIC v Adler [2002] NSWSC 171 case in which the ASIC conducted an investigation against HIH Insurance in which Adler was operating as a director of the company. He was found guilty of breaching duties which are given under the Corporations Act 2001 (Cth). The ASIC started an investigation in this matter, and it was found that Adler misused his position to use the money of the company to give unsecured loan to other companies and he was a major shareholder in one of those companies. He also used the funds of the company for personal usage. The ASIC charged him for violating section 180, 181, 182 and 183 of the Corporations Act and a case was filed in the court. This example shows that the ASIC acts as a guardian that is focused on protecting the interest of shareholders, customers, creditors, and the public.
Criticism of ASIC
Although the objective of establishing ASIC is positive, however, there are many actions taken by ASIC which are criticised. Many times the ASIC was unable to achieve to objective which resulted in creating challenges for a wider range of stakeholders. Recently, ASIC has become a major subject of criticism by public officials, consumers and consumer advocates for its inefficiencies to protect the interest of customers from large financial institutions. The ASIC has failed to ensure that these corporations are charged for violating the provisions given under the Competition and Consumer Act 2010 (Cth) which is focused on protecting the interest of customers. For instance, in the financial year 2015-16, ASIC was subject to a legal action of negligence which was filed by people who are affected in the Storm Financial collapse. In the class action, the aggrieved parties argued that the ASIC has failed to take action which among to malfeasance.
However, these arguments were rejected by Justice Gleeson of the Federal Court of Australia. Moreover, ASIC has failed to commence proceedings against the four major banks in Australia for rigging the Australian benchmark interest rates in 2016. The introduction of the Banking Royal Commission has also been ineffective in this matter because the ASIC has failed to work collaboratively to ensure that these large corporations are held liable for taking wrong actions. It is also a major topic of criticism that whether the Royal Commission into banking and financial services is required even ASIC is responsible for performing similar duties. There are many other cases as well in which the ASIC was criticised for its actions which raise the importance of making changes in its structures and operations in order to improve its effectiveness to ensure that it is able to achieve its goals.
Improvement in performance of ASIC
Without the growing pressure from the public and increasing number of cases involving illegal actions by major companies, the importance of improving the performance of ASIC has increased substantially. Following are various recommendations which can assist ASIC in improving its performance and achieving its vision to increase trust and integrity in the financial services market of Australia.

Implementing new supervisory approaches

Based on the criticism of the operations of the ASIC, it should focus on implementing new supervisory approach to improve its effectiveness. The government should increase the funding in ASIC to ensure that it has enough resources to protect the interest of the public. Resources will enable the ASIC in conducting thorough investigation in different cases and ensuring that parties are not able to get away after violating any law. The reason for implementing the Banking Royal Commission shows that ASIC did not have enough resources to ensure that it is able to thoroughly check the operations of the company. Since there are a large number of small businesses in Australia, the ASIC did not have enough resources to ensure that it is able to monitor their operations to identify any breaches in-laws. The funding in the ASIC should cover a number of initiatives which are in relation to the supervisory approach of the regulatory authority.

Close and continuous monitoring

One of the key roles of ASIC is that it monitors the operations and performance of enterprises to ensure that they did not violate any laws. However, there are many cases in which the ASIC has failed to ensure that it monitors the operations of the organisations to ensure that they are able to avoid unethical and illegal practices. A good example is recent case of Peter Gregg in which he is found guilty of falsifying records of the companies such as Qantas and Primary Health. Close monitoring of the operations of these corporations would have assisted in avoiding this falsification of records which shows that the ASIC has failed to maintain close monitoring in the company. The ASIC should focus on closely monitoring the operations of the companies by checking their accounts and conducting surprise investigations to ensure that they are able to identify any discrepancies in their operations. Continuous compliance with these monitoring policies is also important for ASIC since currently, it did not have the resources to continuously check their operations. ASIC should understand that it plays a major role in overseeing of the operations of Australia enterprises which is important to achieve the objective of the enterprise which is to protect the interest of investors, creditors, and customers. Therefore, it should introduce new policies to improving its monitoring process and avoid taking any actions which resulted in violating the monitoring policies of the company. In order to improve its monitoring process, the ASIC should focus on following factors.
1. It should focus on driving significant improvements in the breach reporting process. Currently, the policies implemented by ASIC for breach reporting in the company are not sufficient to ensure that the interest of key stakeholders is protected. The corporation should implement a robust baseline data by evaluating the review of companies which have reported a breach in the past four years.This baseline data should be used as a benchmark which can be used to assess how the reporting process should be improved by avoiding key issues in the same.
2. ASIC should also enforce policies on companies to change their internal control structure. In the case of banking companies, ASIC should collaborate with APRA (Australian Prudential Regulation Authority) in order to impose new policies which are targeted towards implemented an ethical internal control system in the enterprise.
3. ASIC should also focus on understanding the key differences between the change in culture and practices between different institutes. It should focus on evaluating difference in governance, reporting practices, products sold, structure and organisation, gaps, and distribution arrangements which will assist it in effectively implementing change in the outcomes of the monitoring process.
4. The company should identify key decision makers in the corporations to understand how they influence the decisions in the company to hold them liable for their conduct. For example, in the judgementof ASIC v Narain [2008] FCAFC 120 case, the ASIC focused on identifying the key decision maker or influencer to hold liable rather than the parties who took the actions.

Director and officer oversight

ASIC should focus on evaluating the role of board and officers in the company while conducting its investigations to ensure that these officers are not able to infringe their duties towards the corporation. ASIC should evaluate the role of directors based on the duties given under the Corporations Act 2001 (Cth) which are focused on ensuring that the directors did not misuse their positions and they should avoid causing any harm to the interest of the company and its stakeholders. ASIC will be able to improve the integrity of the financial market by over-sighting the actions taken by the directors in companies. During this oversight process, the corporations should focus on key areas which need improvements. For example, it should focus on investing in executive remuneration practices of companies to ensure that they did not misuse their position to get higher salary packages. The controversy of the salary of the CEO of Qantas Airline is a good example who earned $25 million per day in 2017. It shows that the ASIC should investigate the policies of the company relating to executive remuneration.
Based on the above observations, it can be concluded that ASIC plays a crucial role in managing the financial service market in Australia. It plays a crucial role in ensuring that the corporations and banking institutes are not misusing their powers to illegally conduct their activities. ASIC investigates to ensure that corporations comply with the relevant laws while conducting their operations. Various recommendations are given which can assist ASIC in improving its performance as a regulator in Australia. It should implement new supervisory approach which is focused on giving more importance to supervision of the companies to ensure that corporations are not violating the interest of customers, investors, and creditors. ASIC should improve monitoring process to ensure that it closely and continuously keeps an eye on actions of companies operating in Australia. Lastly, it should focus on over-sighting the performance of directors of companies by evaluating whether they breach any duties given under the Corporations Act and whether they are misusing executive remuneration policies. Based on these policies, ASIC will be able to improve its performance as a regulatory which will result in improving the integrity in financial market of Australia and sustaining its future growth.
A Articles/Books/Journal
Agnew, Julie, ‘Australia’s retirement system: Strengths, weaknesses and reforms,’ (2013) Centre for Retirement Research 13-15.
Batrouney, Ed, “Are the legal risks faced by company directors in Australia intolerable?,’ (2016) (159) Victorian Bar News 68.
Boros, Elizabeth and John Duns, Corporate Law (Oxford University Press, 3rd ed, 2013).
Carey, Peter, Robert Knechel and George Tanewski, ‘Costs and benefits of mandatory auditing of for?profit private and not?for?profit companies in Australia,’ 23 (1) Australian Accounting Review 43-53.
Chitimira, Howard, ‘A Comparative Synopsis of the Enforcement of Market Abuse Prohibition in Australia and South Africa,’ (2017) 9 (1) African Journal of Legal Studies 46-77.
Lipton, Phillip, Abe Herzberg and Michelle Welsh, Understanding Company Law (Thomson Reuters, 19th ed, 2017).
Monroe, Gary and Sarowar Hossain, ‘Does audit quality improve after the implementation of mandatory audit partner rotation,’ (2013) 12 (2) Accounting and Management Information Systems 263-279.
Redmond, Paul, Corporations and Financial Markets Law (Thomson Reuters, 6th ed, 2013).
Taylor, Grantley and Grant Richardson, ‘International corporate tax avoidance practices: evidence from Australian firms,’ (2012) 47 (4) The International Journal of Accounting 469-496.
West, Jason, ‘Financial literacy education and behaviour unhinged: combating bias and poor product design,’ (2012) 36 (5) International Journal of Consumer Studies 523-530.
B Cases
ASIC v Adler [2002] NSWSC 171
ASIC v Narain [2008] FCAFC 120
C Legislation
Australian Securities and Investments Commission Act 2001 (Cth)
Corporations Act 2001 (Cth)
Insurance Contracts Act 1984 (Cth)
National Consumer Credit Protection Act 2009 (Cth)
D Others
ASIC, Laws we administer (2017) < https://asic.gov.au/about-asic/what-we-do/laws-we-administer/>.
ASIC, Our Role (2018) .
Baker, Richard and Nick McKenzie, Businessman Peter Gregg found guilty of falsifying records (2018) .
Frydenberg, Josh, Banking royal commission: ASIC failed to enforce the law (2018) .
Hamilton-Smith, Lexy, Storm Financial former directors breached law, Federal Court finds (2016) .
Myer, Rod, Qantas CEO Alan Joyce flies high with a $25 million pay day (2017) < https://thenewdaily.com.au/money/finance-news/2017/09/15/qantas-ceo-alan-joyce-flies-high-with-a-25-million-pay-day/>.
Ward, Lawrie, Personal Liability For Misleading Or Deceptive Public Announcements (2008) < https://www.mondaq.com/australia/x/69090/Compliance/Personal+Liability+For+Misleading+Or+Deceptive+Public+Announcements>.

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