Australian govt invites comments on plans for tougher penalties for financial sector misconduct

Maria Nikolova

Under the plans, the penalties in the Australian Securities and Investments Commission Act 2001 will increase to 2,500 penalty units ($525,000) for individuals, and the greater of: 50,000 penalty units ($10.5 million), three times the benefit gained (or loss avoided) or 10% annual turnover for corporations.

Australia’s government is inviting comments on plans to strengthen penalties for corporate and financial sector misconduct.

The Australian Securities and Investments Commission (ASIC) can act in a variety of ways, including imposing regulatory and enforcement sanctions and remedies in response to misconduct that occurs in the corporate, financial market or financial services sectors. However, concerns have been voiced 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 of the gravity of engaging in certain forms of misconduct.

Among the effects of the proposals 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);
  • 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 compares with current penalties of $200,000 for individuals and $1 million for 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.

Also, in order to align with planned changes to the Australian Consumer Law, penalties in the Australian Securities and Investments Commission Act 2001 are set to 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.

ASIC would also be allowed to seek disgorgement remedies, that is, removal of benefits illegally obtained or losses avoided, in civil penalty proceedings brought under the Corporations, Credit and ASIC Acts.

The proposals also envisage tougher prison penalties, with maximum terms of imprisonment to be increased for a range of offences. The most serious Corporations Act offences, such as those involving dishonesty, will increase to the highest penalties available under the Act. That is, the penalties will be 10 years imprisonment, 4,500 penalty units ($945,000) or 3 times benefits for individuals, and 45,000 penalty units ($9.45 million) or 3 times benefits or 10% annual turnover for corporations.

Maximum fines for other criminal offences are also set to increase, and be standardised by reference to a formula based on length of available prison term.

The changes will also affect the penalties for strict liability offences, with the lowest level fine amounts to rise and ASIC to be able to deal with these offences through the existing penalty notice regime as an alternative to prosecution.

The closing date for submissions is November 17, 2017. The comments may be sent via email to: [email protected], or by post to ASIC Enforcement Review, Financial System Division, The Treasury, Langton Crescent, PARKES ACT 2600.

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