27 March 2017

Finance Regulation

The Senate Economics References Committee's report 'Lifting the fear and suppressing the greed’: Penalties for white-collar crime and corporate and financial misconduct in Australia addresses a November 2015 referral regarding evidentiary standards and penalties for corporate and financial misconduct or white-collar crime.

The Committee's salient key recommendations are that:
  • the government consider making infringement notices available to ASIC in relation to breaches of the financial services and managed investments provisions of the Corporations Act; 
  • the current level of civil penalties under the Corporations Act 2001 (Cth) be increased, both for individuals and bodies corporate; 
  • civil penalties be set as a multiple of the benefit gained or loss avoided; 
  • disgorgement powers for ASIC in relation to non-criminal matters be introduced; 
  • the government consider reforms to clarify the evidentiary standards and rules of procedure in civil penalty proceedings;
  • ASIC consider ways to enhance the accessibility and usability of the banned and disqualified register. 
The report is an instance of 'once more, with feeling', following the
  •  March 2014 ASIC report Penalties for corporate wrongdoing (Report 387), noting  that overseas civil penalties  were higher, and that there were differences between the types and size of penalties for similar wrongdoing in the current legislation; 
  • June 2014 Senate Economics References Committee report Performance of the Australian Securities and Investments Commission recommending review of penalties for contraventions of the legislation administered by ASIC; 
  •  December 2014 Financial System Inquiry (FSI) Final Report recommending that the maximum civil and criminal penalties for contravening ASIC legislation should be substantially increased, and that ASIC should be able to seek disgorgement of profits earned as a result of contravening conduct; 
  • December 2015 ASIC Capability Review 
  • October 2016 terms of reference for an ASIC Enforcement Review Taskforce, including the adequacy of civil and criminal penalties for serious financial system contraventions, the need for alternative enforcement mechanisms and the adequacy of existing penalties for serious contraventions, including disgorgement of profits. 
Unsurprisingly the Senate Committee noted inadequacies and inconsistencies in the penalty framework, in  particular
  • failure to increase the maximum civil penalties under the Corporations Act for individuals and corporations ($200,000 and $1 million respectively) since the introduction of those penalties over than 10 years ago, 
  • inconsistencies in the penalties available for similar types of offence, 
  • inconsistencies arising from the introduction of new legislative instruments (penalties provided for in recent legislation being considerably higher than those available in relation to similar conduct under older legislation).