Minister for Financial Services, Superannuation and Corporate Law
9 June 2009 - 14 September 2010
Greater Powers to The Corporate Regulator To Pursue Market Misconduct
The Minister for Financial Services, Superannuation and Corporate Law today announced proposed changes to the law to strengthen the Australian Securities and Investment Commission's investigative powers and increase penalties for market related offences.
The proposals will increase the maximum criminal penalties that can be imposed when individuals and corporations breach market misconduct provisions.
"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," Minister Bowen said.
"The increased penalty provisions send a clear message to those who seek to profit from these types of market offences that behaviour that undermines the proper functioning of our financial markets will not be tolerated."
The changes will increase the pecuniary penalties for individuals to $500,000 or three times the profit made or loss avoided, whichever is greater. For corporations, the penalty will be the greater of $5,000,000, three times the profit made or loss avoided, or 10 per cent of the corporation's annual turnover during the period the breach occurred.
To ensure compliance and increase deterrence, the maximum term of imprisonment for these offences will be increased from five years to 10 years.
As part of the proposals, ASIC will be able to access telecommunications interception material collected by the Australian Federal Police under a court-issued warrant. ASIC's search warrant powers will also be improved to dispense with the need to issue a notice to produce before a warrant is enforced.
"Importantly, these reforms will bring ASIC's investigative powers into line with other regulators, such as the Australian Competition and Consumer Commission," Minister Bowen said.
"The proposed change to ASIC's search warrant power will significantly reduce the potential for evidence to be destroyed before a warrant is executed," Minister Bowen said.
The Government will release an exposure draft of the proposed changes later this year.
28 January 2010
Increased penalties for market misconduct offences
Currently, the penalties in the Corporations Act 2001 (Corporations Act) for the offences of insider trading, market manipulation, false trading, market rigging and making false and misleading statements provide insufficient deterrence, as the gain from engaging in market misconduct often far outweighs the penalties imposed for a breach.
It is proposed that the pecuniary penalty for individuals would be increased from the current maximum of $22,000 (or $220,000 for insider trading) to $500,000 or three times the profit made or loss avoided by the conduct that constitutes the offence.
The maximum penalty for a corporation would be increased from the current maximum of $1 million to $5 million, three times the profit made or loss avoided, or 10 per cent of the annual turnover of the corporation in the relevant period.
In order to remain consistent with this level of pecuniary penalty, the Government proposes to increase the penalties for an individual from a maximum term of five years imprisonment to a maximum term of ten years imprisonment.
Expanded ASIC investigative powers
The Telecommunications (Interception and Access) Act 1979 (the TIA Act) currently limits the offences for which interception can be used as an investigative tool. Interception may only be conducted under a warrant obtained by an interception agency in relation to the investigation of a serious offence.
It is proposed that the law will be amended so that a serious offence for these purposes includes market and insider trading offences investigated by ASIC.
A telecommunications interception agency, such as the AFP, would execute the warrant, then ASIC and the agency would work together on the investigation.
This will enable ASIC to obtain direct evidence of inside information, such as the content of conversations, rather than simply relying on circumstantial evidence, such as the mere existence of suspect telephone calls.
Telephone interception would only be available where a Court is satisfied that appropriate
evidentiary and procedural requirements have been satisfied and would be subject to stringent record keeping and reporting obligations.
The TIA Act also regulates what can be done with any intercepted information that is collected and prohibits its use in evidence except in prescribed circumstances.
Further, all interception agencies are subject to stringent record keeping and reporting obligations, which are independently inspected by, in the case of Commonwealth interception agencies, the Commonwealth Ombudsman.
Additionally, ASIC's search warrant powers will also be improved to dispense with the need to issue a notice to produce before a warrant is enforced.