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

Abstract

EXECUTIVE SUMMARYThis working paper reports the findings of a detailed empirical study of 414 enforceable undertakings accepted by the Australian Securities and Investments Commission (ASIC), the corporate, market, finance and credit services regulator from July 1998 to 31 December 2015, a period of 17.5 years.The study is unique in size, scope and comprehensiveness. It presents a detailed profile of all parties giving enforceable undertakings and the misconduct issues in their undertakings over a 17.5 year period; and breaks new ground by offering the first empirical analysis of the core commitments or undertakings given by parties to enforceable undertakings to rectify their misconduct. It constructs a much needed road map through the maze of regulated firms, activities, misconduct and undertakings involved in ASIC's deployment of enforceable undertakings. Characteristics of Regulated Individuals and FirmsThe study offers a comprehensive profile of the regulated firms and individuals who are the subject of ASIC accepted enforceable undertakings. Key findings were that: ASIC accepted almost identical numbers of enforceable undertakings from companies (n=174) and individuals (n = 176). Enforceable undertakings by companies in combination with individuals (n = 64) declined in number over the study period.  The most common regulated entities from whom ASIC accepted enforceable undertakings were private companies (n = 156 or 50.2% of all companies giving EUs) and individuals in their position as directors (n =137 or 57.8% of all individuals giving EUs).  Publicly listed companies were a small subset of parties giving enforceable undertakings (n = 30 or 9.6% of all companies giving EUs). Activities and Misconduct Regulated by Enforceable UndertakingsThe study also offers a detailed profile of the types of misconduct addressed by enforceable undertakings accepted by ASIC. Key findings were that: