The taskforce charged with reviewing ASIC’s enforcement powers, including penalties regime, has recommended nearly tripling penalties for corporate and financial sector misconduct.
In a position paper, published this week, The ASIC Enforcement Review Taskforce expressed concern that penalties available to address corporate and financial sector misconduct are inadequate, inconsistent or too low to act as a credible deterrent.
The taskforce noted that previous reforms to penalties in ASIC-administered legislation have not been conducted holistically. Specifically, while the penalties for some offences have not been reviewed since 1993, the pecuniary penalties for other offences have been substantially increased, creating a disparity between the penalties for misconduct of equivalent seriousness.
In particular, the taskforce stated that maximum civil penalties in the Corporations Act 2001 “no longer reflect the seriousness of contraventions and may, in some cases, be substantially lower than the potential profits from misconduct.”
To resolve inconsistencies between penalties, where the misconduct is comparable, the Taskforce proposed increasing maximum civil penalties in the Corporations Act 2001, the ASIC Act 2001, the National Consumer Credit Protection Act 2009 and the National Credit Code.
The taskforce recommended setting the maximum civil penalties, under the Corporations Act 2001 and the National Consumer Credit Protection Act 2009, at $200,000 for individuals. In the case of corporations, it recommended the maximum civil penalty be set at $2.65 million or three times the value of benefits obtained or 10% of annual turnover. This would mean increases from $200,000 for individuals and $1 million for corporations in the case of the Corporations Act and increases from $420,000 for individuals and $2.1 million for corporations in case of the Credit Act.
Meanwhile, the taskforce recommended penalties, under the ASIC Act 2001, increase from $420,000 to $525,000 for individuals. In the case of corporations, it recommended penalties be set at $10.5 million (up from $2.1 million) or three times the benefit gained (or loss avoided) or 10% annual turnover – whichever sum is greater.
The taskforce called for criminal offences under the Corporations Act to attract –in the case of individuals – a maximum of ten years imprisonment, $945,000 in fines or an amount three times the benefits gained. In the case of corporations, it was recommended the most serious corporations Act offences attract fines of $9.45 million, three times the benefits gained or 10% annual turnover.
The taskforce also recommended that disgorgement remedies be available in civil proceedings brought by ASIC under the Corporations, Credit and ASIC Acts. It explained that this would allow ASIC to seek to recover the profit gained or loss avoided due to a contravention and so ensure misconduct is not profitable for individuals.
The Taskforce has invited comment from interested stakeholders on its position paper. The consultation period ends on 17 November, after which the Taskforce will provide its final recommendations to Government.