This Bill implements a number of recommendations made by the ASIC Enforcement Review Taskforce in December 2017. In some cases, the Bill goes further than the Taskforce recommendations on the basis that a stronger response was warranted following the Royal Commission findings. The Bill increases the maximum civil penalty and expands the civil penalty regime. ASIC will now be able to pursue significantly larger fines and jail time for businesses and their leaders across the financial sector.
ASIC’s new powers will include:
Increasing maximum prison penalties for the most serious offences to 15 years. These include breaches of director’s duties (section 184), false or misleading disclosure and dishonest conduct.
Significantly increasing civil penalties for companies, now to be capped at $525 million.
Increasing maximum civil penalties for individuals to $1.05 million and it can also take into account profits made.
Applying civil penalties to a greater range of misconduct, including licensee’s failure to act efficiently, honestly and fairly, failure to report breaches and defective disclosure.
How can this impact your business?
The stronger penalties underscore the substantial obligations under law on directors and officers of a company. There are further obligations that apply for directors and officers of businesses providing regulated services. These penalties should compel a closer look at risk and compliance management policies and processes of any business.
This Bill adds to the list of reforms that further embolden and empower ASIC. ASIC recently released its update on implementation of the Royal Commission recommendations, confirming a new “why not litigate” approach to enforcement. Further, ASIC is committed to fully implementing the 12 recommendations that are directed at ASIC. As part of that commitment, ASIC is determined to establish a separate Office of Enforcement and has established a taskforce to put the Office of Enforcement in place this year.
With increased funding and the ability to enforce harsher penalties, ASIC is likely to enlarge its surveillance activities and investigate on the conduct of businesses. Directors and officers should consider whether their organisational approach to dealing with ASIC remains appropriate and whether they are able to defend the robustness of the management of the risk and compliance policies and process of their business.
It is important that businesses review and assess the adequacy of their risk and compliance policies and processes to mitigate any unnecessary risks. Directors and officer should have a sound understanding of the practices that the company undertakes and be able to demonstrate that they are committed to sound governance principles.
Our financial services team has a broad based understanding of compliance from a practical and regulatory perspective. We also have extensive experience in advising clients in ASIC inquiries and investigations, particularly in enforcement matters. If you have any questions about ASIC’s new powers and how these new powers may impact your business, we encourage you to contact Hillary Ray or Richard Beissel.