08 November 2018
6 min read
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In late September the Government released the Treasury Laws Amendment (ASIC Enforcement) 2018 Bill (Bill) seeking consultation from the public in relation to its proposed reforms. The Bill seeks to amend the Corporations Act, ASIC Act, Credit Act and the Insurance Contracts Act in response to a number of recommendations made in the ASIC Enforcement Review Taskforce report.
The amendments proposed by the Bill introduce a stronger penalty framework with an aim to deter misconduct and improve community confidence in the corporate and financial sector. The Treasurer, Hon. Josh Frydenberg MP, has stated that the “proposed changes would double maximum imprisonment penalties and significantly increase financial penalties for some of the most serious ‘white-collar’ criminal offences bringing Australia’s penalties in closer alignment with leading international jurisdictions.” The consultation period closed on 23 October 2018.
The ASIC Enforcement Review Taskforce
On 19 October 2016, the Government established the ASIC Enforcement Review Taskforce. The Taskforce was asked to review the enforcement regime available to ASIC and assess the suitability of the existing regulatory tools available to ASIC to perform its functions. The Taskforce made a series of recommendations, including to enhance the requirement for financial services and credit licensees to report significant breaches to ASIC, strengthen ASIC’s licencing powers and extend ASIC’s powers to ban individuals from managing financial services businesses.
The Taskforce also recommended implementing a stronger penalty framework. It separated this into two broad categories:
On 16 April 2018, the Federal Government agreed to all the recommendations made, except the maximum civil penalty amounts, where the Federal Government considered a stronger response was necessary.
Key proposed changes
The key amendments which are made by the Bill include:
Room for improvement?
According to ASIC’s annual report for the 2017-18 financial year (Annual Report), the market which ASIC regulates has:
The Annual Report provides that during the 2017/18 financial year, ASIC achieved the following through its actions:
When comparing ASIC’s achievements as against the priorities of the Bill, it may suggest that ASIC requires further frameworks to achieve their overall objective of reducing corporate and financial sector misconduct. As an example, the impact of increasing the penalties for criminal offences may not achieve the reach ASIC requires given the nominal 22 criminal convictions within the 2017/18 financial year.
While the Bill is a step in the right direction of re-instilling consumer confidence in the corporate and financial sector, it is a long path to achieve the cultural change in the industry that will reinforce the theoretical concepts that ASIC ideally seeks to achieve through this amendment.
What do we hope to see more of?
Realistically, the reach of ASIC’s Taskforce is limited based on their capacity and funding. Given the size of the market ASIC is regulating and the objectives set out in ASIC’s 2017/18 Corporate Plan, it is surprising the Bill does not address further protections of those who can assist achieve ASIC’s overall objectives. As a result, what we hope to see is further protections for whistle-blowers and more practical consequences for wrong-doers (such as market bans or restrictions, rather than mere financial penalties).
How can we help you?
Holding Redlich can provide you and your business with:
Authors: Lyn Nicholson & Olivia Pasternak
Contacts:
Sydney
Lyn Nicholson, General Counsel
T: +61 2 8083 0463
E: lyn.nicholson@holdingredlich.com
Darren Pereira, Partner
T: +61 2 8083 0487
E: darren.pereira@holdingredlich.com
Melbourne
Dan Pearce, Partner
T: +61 3 9321 9840
E: dan.pearce@holdingredlich.com
Brisbane
Trent Taylor, Partner
T: +61 7 3135 0668
E: trent.taylor@holdingredlich.com
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