Insights / November 1st, 2017

ASIC’s enforcement toolkit to be upgraded

The ASIC Enforcement Review Taskforce, which was established in 2016 to examine ASIC’s enforcement regime, has released a position paper ‘Strengthening Penalties for Corporate and Financial Sector Misconduct'. The Taskforce has been focussing on potential improvements to ASIC’s enforcement toolkit and reviewing penalties to ensure they are set at the appropriate level for deterrence.

The position paper looks at the adequacy of current civil and criminal penalties, as well as the need for alternative enforcement mechanisms such as infringement notices and potential peer disciplinary review panels. The Taskforce identified three key problems with the current penalties regime:

  • the variety of penalties available for some kinds of misconduct is inadequate to address the range and severity of misconduct;
  • some penalties are too low to act as a ‘credible deterrent’; and
  • some penalties are inconsistent with the penalties for equivalent Commonwealth and State provisions.

Some of the Taskforce’s recommendations include:

  • Increasing the maximum penalties and terms of imprisonment for a number of criminal offences.
  • Removal of imprisonment as a possible sanction for strict and absolute liability offences and empowering ASIC to issue infringement notices for those offences.
  • Setting infringement notices at 12 penalty units for individuals and 60 penalty units for corporations for any new infringement notice provisions.
  • Setting pecuniary penalties for strict and absolute liability offences at 20 penalty units for individuals and 200 penalty units for corporations.

As an alternative to criminal sanctions, ASIC can seek civil penalties for conduct which falls short of criminal conduct but nevertheless requires sanction in order to promote compliance. The Taskforce is of the view that current pecuniary penalties have not kept pace with inflation and in any case are set too low considering the seriousness of financial services and markets infringements. In addition, the maximum civil penalty can be lower than the benefit of misconduct, which means that a wrongdoer may still profit from misconduct even after paying a penalty.

According to the Taskforce, maximum civil penalty amounts in ASIC-administrated legislation should be increased as follows:

The Taskforce is confident that increased penalties will address the issue of deterrence and that companies will have less incentive to infringe because of them.

The Taskforce will provide recommendations to the Government by the end of November this year. Stakeholders have been invited to comment on the Taskforce’s positions by 17 November 2017.

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