‘Why not litigate’?
This was the message from the ASIC Commissioners at the ASIC Annual Forum 2019 held in Sydney last week.
On the back of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (‘Royal Commission’) ASIC made it clear that while still utilising the full range of enforcement tools available to them, their default position will remain ‘why not litigate’?
But I’m not in the financial services sector?
While ASIC’s stance is in response to the Financial Services Royal Commission their position is not limited to that sector. At the forum ASIC expressed that they will not only target the financial services sector but will spread focus across the whole of the corporate sector. This announcement should raise a red flag for any business that has obligations under the Corporation Act 2001 ( (‘Corporations Act’). ASIC may pursue any business that is not strictly compliant with the relevant regulatory provisions and may take enforcement action through the court, resulting in monetary and/ or custodial penalties.
What penalties apply for non-compliance?
ASIC are under ever increasing public pressure to address the high standards and community expectations expected from the corporate sector. They must ensure that action taken by them and the subsequent penalties imposed by the court act as a sufficient deterrent and punishment for non-compliance. As such, at the forum ASIC explained the introduction of increased monetary and custodial penalties for non-compliance. These penalties will not only apply to the financial services sector (as a result of the Royal Commission) but to all directors and boards notwithstanding the sector they are in. One such penalty increase deals with breaches of section 184 of the Corporations Act. Section 184 deals with director duties, namely ensuring that your directors act in the best interests of your business. A breach of this section could now see your directors face up to 15 years imprisonment (and/ or substantial fines).
What should I do?
If you think you may be non-compliant with any areas of the Corporations Act (or aren’t sure) please contact us to talk through your obligations. Given ASIC’s ‘why not litigate’ position, it could save you more than just money in the long run!
If you are subject to enforcement action from ASIC, please contact us for help.
Lauren is an Associate Director in our Disputes and Regulatory team and attended the ASIC Annual Forum 2019.