Strengthening Penalties for Corporate and Financial Sector Misconduct

The Australian Securities and Investments Commission (ASIC) can pursue a range of regulatory and enforcement sanctions and remedies to respond to misconduct that occurs in the corporate, financial market or financial services sectors. Concerns have emerged in a number of forums that the penalties in the legislation administered by ASIC may not be effective in that they do not reflect community perceptions as to the seriousness of engaging in certain forms of misconduct.

• The effect of the key positions put in the paper would be to expand the range of civil penalty provisions and to increase maximum civil penalty amounts in the Corporations Act 2001 and National Consumer Credit Protection Act 2009 (Credit Act) to:
  • for individuals, 2,500 penalty units ($525,000); and
  • for corporations, the greater of: 12,500 penalty units ($2.625 million), or three times the benefit gained (or loss avoided) or 10% annual turnover.
• This would mean increases from $200,000 (individuals) and $1 million (corporations) in the Corporations Act and 2,000 penalty units ($420,000) for individuals and 10,000 penalty units ($2.1 million) for corporations in the Credit Act.
• To broadly align with planned changes to the Australian Consumer Law, penalties in the Australian Securities and Investments Commission Act 2001 would increase from 2,000 penalty units ($420,000) for individuals and 10,000 penalty units ($2.1 million) for corporations to:
  • for individuals, 2,500 penalty units ($525,000); and
  • for corporations, the greater of: 50,000 penalty units ($10.5 million), three times the benefit gained (or loss avoided) or 10% annual turnover.
• In addition to increasing civil penalties ASIC would be able to seek disgorgement remedies (removal of benefits illegally obtained or losses avoided) in civil penalty proceedings brought under the Corporations, Credit and ASIC Acts.
• Maximum terms of imprisonment would be increased for a range of offences. The most serious Corporations Act offences, given the nature and/or consequences of the offending (many involving dishonesty) will increase to the highest penalties available under the Act; 10 years imprisonment, 4,500 penalty units ($945,000) or 3 times benefits (individuals) and 45,000 penalty units ($9.45 million) or 3 times benefits or 10% annual turnover (corporations).
• Maximum fine amounts for other criminal offences would also increase, and be standardised by reference to a formula based on length of available prison term:
  • Maximum term of imprisonment in months multiplied by 10 = penalty units for individuals, multiplied by a further 10 for corporations.
• For strict liability offences, the lowest level fines would increase and ASIC would be able to deal with these offences through the existing penalty notice regime as an alternative to prosecution.
• ASIC would also be able to deal with a wider range of offences through infringement notice regimes.

Please note the closing date for submissions will be 17 November 2017 and any submissions received after this date may not be accepted.