Australia: ‘Lifting The Fear And Suppressing The Greed'

Last Updated: 15 May 2017
Article by Janette McLennan and Sarah Sharp

Australian Senate Committee recommends expansive reform to civil penalty regime

The Senate Economics References Committee (the Committee)  has recommended sweeping changes to the civil penalties regime contained in the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commissions (ASIC) Act 2001 (Cth) to respond to perceptions that the current framework is too weak to properly regulate and deter corporate crime and breaches of regulatory provisions.

The report and its context

The Committee published its report'Lifting the fear and suppressing the greed': Penalties for white-collar crime and corporate and financial misconduct in Australia on 27 March 2017. The broad impetus of the report, with accompanying public consultation process, is to resolve perceived procedural and remedial inadequacies in the regulation of corporate misconduct so as to bring Australia into line with community expectations and impose monetary penalties consistently with other jurisdictions.

This article will consider the recommendations that directly relate to the application of the civil penalties regime for corporate regulatory breaches, including in relation to increasing penalty amounts.1 Any increase to the quantum of penalties will increase potential exposures for directors, officers and companies. A natural flow on from that is an increased exposure to Directors' & Officers' liability (D&O) insurers where such losses are capable of being indemnified.

The quantum of civil penalties

A primary recommendation of the report is that the quantum of civil penalties that can be imposed on individuals and bodies corporate be increased. Penalties are currently capped at:

  • AUD 200,000 for individuals (introduced in 2001);2
  • AUD 1 million for bodies corporate (introduced in 2004).3

The current cap levels have not been altered since their introduction and are not indexed to inflation.

Many submissions to Tthe Committee noted that Australia's penalty system imposes penalties that are materially lower than equivalent foreign jurisdictions.  Following a breach of continuous disclosure obligations by an individual, Canada allows an administrative penalty equivalent to AUD 1.05 million, Hong Kong permits the equivalent to AUD 1.12 million, and the United Kingdom does not apply a cap.4 These figures are almost identical for insider trading, market manipulation, misleading and deceptive conduct, and inappropriate financial advice.5

Further, penalties levels under the Corporations Act are lower than analogous penalties in more recent legislation. For example, an individual who conducts unlicensed credit activity may be liable for AUD 360,000 penalty under the National Consumer Credit Protection Act 2009 (Cth).6 

Although ASIC did not propose a particular cap, the Australian Shareholders Association (ASA) suggested a cap of AUD 5 million for a body corporate and AUD 1 million for an individual as appropriate. The ASA argued that a cap of AUD 200,000 for contraventions by individuals is too low when contrasted against current executive remunerations levels.

While tThe Committee recommended that the scale of civil penalties be expanded, it declined to identify appropriate numerical limits. The Committee did suggest that "and that in doing so [increasing penalties] it should have regard to non-criminal penalty settings for similar offences in other jurisdictions". Perhaps the implicit import of the recommendation is that the government consider setting penalties for individuals at approximately AUD 1 million to bring the Australian regime in line with Canada and Hong Kong.

Disgorgement powers

ASIC submitted that penalties are sometimes considered a "cost of business" by companies – a loss that may be strategically incurred to unlock greater profits or loss-avoidance. Therefore, ASIC proposed that deterrence measures should be focussed towards negating financial benefits flowing from contravening conduct.

To this end, The Committee recommended that the government introduce disgorgement powers for ASIC in non-criminal matters. In this context, disgorgement is "the removal of financial benefit (such as profits illegally obtained or losses avoided) that arises from wrongdoing."7 Although the Australia and New Zealand corporate regulators lack disgorgement powers in non-criminal matters, Canada and Hong Kong do provide for such powers in certain circumstances.8

Submissions proceeded in the context that Australia lacks a non-criminal equivalent to the Proceeds of Crime Act 2002 (Cth), which allows the Commonwealth Director of Public Prosecutions or the Australian Federal Police to trace and recoup proceeds generated by indictable Commonwealth offences.9

The Committee further recommended that the government provide for civil penalties in respect of white-collar offences to be set as a multiple of the benefit gained or loss avoided, as is the approach in New Zealand, Singapore and the United States.

Implications for Directors' & Officers' liability

Any increase in the quantum of penalties would create an increased exposure to D&O insurers. Further, the prospect of the introduction of disgorgement powers is likely to result in an increase in the complexity of calculating an appropriate penalty, which would likely require complex evidence to quantify gains and losses. 

The Committee deferred to the ASIC Enforcement Review Taskforce to suggest the precise quantum of penalties to be implemented in any legislative reform. The taskforce is expected to provide its recommendations to the government prior to October 2017. Therefore, while this report may spark momentum towards legislative reform, the extent of its impact will remain unclear for some time. However, the report is an important litmus test for potential political and public support for increasing ASIC's regulatory powers. Companies and insurers should monitor this space closely for relevant legislative reform.


1 Clyde & Co have also published an examination of anti-bribery structures recently proposed by the Australian Government.

2 Corporations Act 2001 (Cth) ("Corporations Act") s. 1317G (1); (1B) (b); (1F) (a)

3 Corporations Act s. 1317G (b) (b); (1F) (b)

4 Other countries set a figure approximate to AUD1 million, or allow a multiple of the gain made or loss avoided by breach: see below. The figures stated for Canada and Hong Kong in Australian dollars were calculated by the Committee based on the daily exchange rate published by the Reserve Bank of Australia as at 31 December 2013.

5 These figures were submitted in Australian Securities and Investments Commission (ASIC) Submission 49, Senate inquiry into penalties for white-collar crime (April 2016), pp. 9 – 10

6 National Consumer Credit Protection Act 2009 (Cth) s. 31 sets the cap at 2000 penalty units.

7 Report, p. 80 [6.32]

8 A notable exception is for breaches of continuous disclosure obligations.

9 See Report, p. 80

With contribution from Andrew Bell.

'Lifting The Fear And Suppressing The Greed'

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Janette McLennan
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.