For many brokers the first response to a visit from ASIC is ‘fight’ and for some disreputable brokers the response is ‘flight’ but there is a third option – work with the regulator for a more successful outcome.
This is the advice from former ASIC senior lawyer and APRA liaison and now senior lawyer at The Fold Legal Dr Hillary Ray who says working with ASIC after a breach may be a better, quicker way for financial services businesses to get back on track, rather than ‘lawyering up’.
“Many businesses panic when ASIC serves them with a notice. A smarter strategy may be to put themselves in ASIC’s shoes and work with them to resolve the issue. Businesses shouldn’t underestimate how helpful the regulator can be if approached the right way.”
The Fold recently released When to Hold and When to Fold, a white paper designed to help financial services businesses on the receiving end of an ASIC notice.
“The first thing businesses need to do when served with a notice, is to keep calm and not panic. Then they need to start preparing for investigation. This involves finding out who they are dealing with – there are many different sections in ASIC and they will each have a different approach.”
Businesses then need to revisit their business strategy to remind themselves of their goals, objectives and the needs of their clients, before looking at what the actual issue is.
“We recommend businesses do a triage and look at the conduct or product that is at issue. It may be something that can be remedied relatively easily, for example by putting together a robust compliance plan that includes communicating with clients.”
At various stages along the way, if a business needs legal advice, Ray suggests engaging a commercial lawyer rather than a litigator.
“Lawyers bring an extra set of eyes to the business and can also help to set out and prioritise the issues, review processes and assist with strategy. However, litigators can be quite aggressive and adversarial and may not be well-suited to meeting with the regulator if they are not trying to resolve the issues, but want to fight on.
She says commercial lawyers, on the other hand, seek common ground upon which to forge a deal that both parties can live with.
“This style is better-suited for a frank discussion with the regulator.”
Ray also recommends self-reporting any potential regulatory issues.
“ASIC does not expect every business to exist without a breach, however, they like proactive stakeholders who deal with breaches as manageable occurrences. If in doubt, report it.”
Ray says taking a partnering approach with the regulator can also help businesses with the release of new products.
“Discussing the new product with the regulator can not only iron out any potential breach, but will also educate the regulator on the direction of products, technology and software.”