The planned changes were announced in the wake of a spate of
failed ASIC prosecutions, including most notably against Fortescue
(currently on appeal) and One.Tel (subject to appeal). The Minister
for Financial Services, Superannuation and Corporate Law, Chris
Bowen, explained 'these changes will ensure that ASIC is
properly equipped to investigate and prosecute serious corporate
misconduct which has the potential to cause significant harm to the
economy and investors.'
At present, the maximum penalties for individuals found guilty
of market misconduct is $22,000 (or $220,000 for insider trading)
and/or five years' imprisonment, whilst corporations can be
penalised up to $1 million. If the planned changes proceed,
individuals could soon face civil penalties of $500,000, or three
times the profit made or loss avoided (whichever is the greater)
and a criminal penalty of maximum 10 years' imprisonment.
Companies could be liable for a civil penalty of $5 million or
three times the profit made or loss avoided, or 10 per cent of the
corporation's annual turnover (whichever is the greater). The
penalties will likely apply to all forms of market misconduct,
including insider trading, market manipulation, false trading,
market rigging and making false and misleading statements.
The proposed changes are also set to bolster ASIC's
investigation capabilities. ASIC will no longer be required to
issue a notice to produce prior to a search warrant being enforced.
Further, market and insider trading offences will be listed as
serious offences under the Telecommunications (Interception and
Access) Act 1979 (Cth). Through this amendment, ASIC will have the
ability to work with the AFP to obtain intercepted telephone
material. Presently, ASIC must rely on largely circumstantial
evidence in its prosecutions. Having access to the content of phone
calls will inevitably assist the regulator in gathering evidence
against suspected offenders.
The increased investigation powers are not however unfettered,
as the telecommunications interception material must be obtained
under a court-issued warrant.
Accordingly, a judge must still be satisfied of procedural
requirements and presented with enough evidence in order for the
warrant to be justified. This planned increase to ASIC's
investigative capability brings the regulator's powers further
in line with the Australian Consumer and Competition Commission,
which already has such powers.
Despite the planned changes, the market misconduct provisions
contained in Part 7.10 of the Corporations Act 2001 (Cth) remain
complex and vague. Without addressing the concerns about the
drafting of these provisions, it is likely that ASIC will still
face significant obstacles in achieving successful
An exposure draft on the proposed changes is expected to be
released later this year.
DLA Phillips Fox is one of the largest legal firms in
Australasia and a member of DLA Piper Group, an alliance of
independent legal practices. It is a separate and distinct legal
entity. For more information visit
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