ASIC’s powers to compel (or ‘notices to produce’) are far-reaching and embedded within legislation across the Corporations Act 2001 (Cth) (‘Corporations Act’) and the ASIC Act 2001 (Cth) (‘ASIC Act’). However, these powers are ultimately dictated by the purpose for which they are being used and fall into two different categories:
Market surveillance; or
Investigation and enforcement.
During the ordinary course of ongoing surveillance of the financial services industry, ASIC has a range of powers to issue notices to produce. Those most commonly used include requests for information under s.912C of the Corporations Act and requests for documents under s.33 of the ASIC Act.
It is important however to remember that there are limitations to the type of information that ASIC can request when carrying out market surveillance. Its powers in these circumstances are generally limited to the inspection and/or production of documents and the production of information.
Investigation and enforcement
The situation changes when a formal investigation has commenced because ASIC holds a reasonable suspicion that there has been a contravention of financial services law. In this case it may initiate a formal investigation under s.13 of the ASIC Act. On most occasions this occurs as a result of a referral from ASIC’s market surveillance team or a complaint to ASIC’s internal enforcement team.
Importantly, ASIC must have a reason to suspect that there has been a breach of law; it must be more than a mere suspicion but less than prima facie evidence and based upon reasonable grounds. This requirement has been established by case law but the setting of such a low threshold provides little comfort to financial services firms facing a notice to produce.
Once a formal investigation is underway, ASIC’s powers are significantly broadened and can include the ability to apply for and issue search warrants as well as compelling individuals to provide reasonable assistance.
It can sometimes be difficult to identify when a formal investigation has commenced, but it is easily discernible for those accustomed to the process. Once a formal investigation has occurred, ASIC will not retreat easily, and it is critical that financial services firms have sound support throughout the process.
What and how to produce?
When ASIC issues a notice to produce, it must be in writing and include a description of the documents or information sought with the required time and place for production. The notice must also, in general terms, outline the basis on which ASIC requires the documents and the legislative authority on which it relies.
Legal Professional Privilege
The notice to produce documents will customarily set out the requirement to produce documents and your right to claim legal professional privilege.
ASIC will generally consider claims for legal professional privilege that are based on either advice or litigation privilege. This must be done in accordance with its regulatory guidance which stipulates the level of detail required when making a claim.
Disregard for the process is likely to amount in a dispute, inevitably increasing your ongoing expenses and the level of risk in maintaining a claim for privilege.
How can we help?
Entities in receipt of ASIC notices often have a range of questions including:
What documents and/or information is captured (or not) by the notice?
What can legal professional privilege be claimed over and how is it claimed?
Is ASIC required to keep my documents confidential if they are market sensitive?
What can be done if the request for information is unreasonably broad?
What should I do if ASIC have not provided sufficient time to respond to the notice to produce?
What is the breadth of liability if things go wrong?
There are often complex issues at play with these matters that require careful consideration. If you have received an ASIC notice and need assistance navigating your next steps, please do not hesitate to contact us and someone from our Financial Services team will be able to assist.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.