Enforceable undertakings deter misconduct: Study

Academic research reveals financial services and credit providers fear being sanctioned by enforceable undertakings despite criticism that the regulatory contracts are ineffective.

The ASIC report of a pilot study done by the University of New South Wales (UNSW) found that financial services and credit providers wanted to avoid the perceived effects of harsher sanctions, such as civil penalties.

The study found they also wanted to avoid the financial and time costs in discharging the terms of EUs to effect change in the business.

UNSW professor Dimity Kingsford-Smith said the clear finding of the study, which the researchers did not anticipate, is that a majority of interviewees reported their organisation being deterred by EUs with their competitors.


“The critical mechanisms of deterrence referred to by many interviewees were the costs of EUs and avoiding reputational damage and loss,” she said.

“Businesses were also motivated by EUs to avoid the intrusion of outsiders, such as supervising experts, in the operation of the business.”

ASIC said it will move on to a scoping study on potential options for further research into the impact of EUs and other regulatory actions, as well as discuss with other regulators the potential to work collaboratively on future research.

Enforceable undertakings deter misconduct: Study
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Adrian Flores

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].

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