Dear ASIC: How to respond to a regulatory notice

A poorly planned and inadequate response to either a general inquiry or statutory notice from ASIC typically leads to protracted surveillance and action.

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Trying to avoid an ASIC notice is futile. AF-SLs and advisers should accept that, at some point, they will get one, and probably multiple.

Responding to notices and dealing with regulators is just part of being in business.

A notice, in and of itself, isn't cause for concern. It isn't necessarily a sign of wrongdoing, although it's natural to worry. Even the most seasoned legal and compliance professionals get nervous when they see that blue bricked diamond.

Every year, ASIC receives thousands of tip-offs about misconduct and also uncovers misconduct through its own monitoring and surveillance activities.

As part of a formal investigation, ASIC gathers information from those that are the subject of investigation, as well as people and entities that may have relevant information but are not suspected of any wrongdoing. This may even include clients.

Voluntary or compulsory

At a high level, ASIC may seek a person's voluntary participation, or they may issue a statutory notice, which is compulsory. They are both very different and require a different approach.

A general enquiry will usually be by email or phone call. If a formal statutory notice is not attached to an email, it is a voluntary request.

It's natural and commendable to think, 'I've done nothing wrong and I've got nothing to hide so I'll hand over information,' but that approach may not be in a person's or company's best interest. As a general rule, businesses should not voluntarily hand over information.

Responding to a general enquiry

1. Don't ignore it

Read the request carefully, treat it seriously and enact your Regulatory Response Plan (RRP).

Every business should have a formal RRP that helps them to respond quickly and effectively to various requests. For businesses that are yet to formulate a plan, the points below provide a good starting point.

2. Get to the bottom of the matter