As discussed in our previous blog, on the back of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (‘Royal Commission’) ASIC has made it clear that it will be using the full range of enforcement tools available to them to ensure compliance with Corporations Act obligations and to restore the communities faith in the standards that businesses should uphold.
The Royal Commission, along with the ASIC Enforcement Review Taskforce established in October 2016, found that the penalties previously available under the Corporations legislation was unlikely to act as a large enough deterrent for corporate misconduct. Their findings led to the implementation of the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019.
The introduction of this act results in increased penalties, applicable to conduct from 13 March 2019, under certain provisions of the Corporations Act 2001, ASIC Act 2001, National Consumer Credit Protection Act 2009 and the Insurance Contracts Act 1984. The increased penalties, when coupled with ASIC’s default position of ‘Why not litigate?’ will see corporate misconduct in the spotlight more now than ever.
Out with the old, in with the new (financial penalties)
The penalties for offences under these acts were deemed to be insufficient and outdated. The new maximum penalties are:
- for individuals, the greater of $1.05M or 3 times the benefit derived from the conduct or loss avoided and
- for corporations, the greater of $10.5M or 3 times the benefit derived from the conduct of loss avoided, or 10% of the company’s annual turnover capped at $525M.
Criminal Penalties have also increased
The new maximum criminal penalty for an individual who is found to be in breach of their directors’ duties under s 184 of the Corporations Act is 15 years imprisonment and/or 4,500 penalty units (which currently equates to $945,000), in addition to a relinquishment order.
There is also increased penalties for those who fail to assist ASIC, including for failing to report relevant breaches, giving false information and obstruction. These breaches now carry a penalty of up to 5 years imprisonment (the previous maximum was two years).
As we have previously reported the increased penalties are focussed on providing a sufficient deterrent to potential infringers as well as enforcing a standard of behaviour that the community would expect of the corporate sector. No longer will fiscal penalties be seen as ‘just another business cost’; as ASIC’s penalties bear heavier on an infringer’s bottom line.
ASIC’s new penalties will force businesses to reconsider how they deal with their compliance and risk management. If you suspect you may be non-compliant with any areas of the Corporations Act, aren’t sure what your obligations are or are subject of a ‘please explain’ or enforcement action by ASIC, please contact us.