Enforcement of ASIC's Market Integrity Rules: An Empirical Study

Abstract

The Australian Securities and Investments Commission (ASIC) has been responsible for the supervision of Australia’s licensed financial markets, such as the Australian Securities Exchange, since August 2010. As part of this responsibility, ASIC has developed market integrity rules (MIRs) with which market participants are obliged to comply. This article reports the results of an empirical study of the enforcement of the MIRs between 1 August 2010 and 30 June 2014. Although ASIC has available to it a range of enforcement options when it believes there has been a contravention of a MIR, our research finds that enforcement of the MIRs has been undertaken solely by means of infringement notices. We therefore examine all infringement notices issued in the relevant period, investigating matters such as the issuance of infringement notices over time; the recipient of the infringement notice; the MIR allegedly breached; the quantum of the penalty and how the quantum of the penalty compares to the maximum penalty available; how long the matter took; details of the alleged breach; whether the entity self-reported the breach; other remedial measures; and relevant factors taken into consideration in making the decision to issue an infringement notice. We compare our findings with the stated objectives of the infringement notice regime as it applies to the MIRs and locate our findings in the broader literature documenting the growth in the use of infringement notices by regulators.