Increasing penalties for white-collar crime
The government has released a raft of proposals aimed at strengthening ASIC’s power and regulatory tools to deal with perceived misconduct in the corporate and financial sector.
The changes include increasing imprisonment penalties to reflect the seriousness of the misconduct and increasing financial penalties for a wider range of offences. The proposal applies to behaviours of individuals, AFSL licence holders, and body corporates covered under the Corporations Act, ASIC Act or Credit Act.
As the Royal Commission into the misconduct in the banking, superannuation and financial services industry rolls on and uncovers more unscrupulous behaviour by the corporate and financial sector, the government is attempting to get on the front foot by addressing the perceived persistent misconduct by proposing to strengthen the penalty framework and enforcement regime available to ASIC to restore community confidence.
The proposal actually stemmed from a review commissioned in 2016 which identified a number of options to strengthen ASIC’s power and regulatory tools which the government has now acted on. Broadly, the government is proposing to:
- increase maximum imprisonment penalties for certain criminal offences to reflect the seriousness of misconduct;
- introduce a formula for the calculation of maximum financial penalties;
- remove imprisonment as a penalty and increasing the financial penalties for all strict and absolute liability offences;
- modernise and expand the civil penalty regime by increasing financial penalties for contraventions and making a wider range of offences subject to civil penalties;
- harmonise and expand the infringement notices regime;
- introduce a new test that applies to all dishonesty offences under the Corporations Act;
- clarify that the courts are to give priority to compensating victims over ordering the payment of financial penalties.
The proposed changes would apply to individuals, AFSL licence holders, and body corporates.
For example, the imprisonment penalty for AFSL holders failing to provide assistance to ASIC if requested will increase from 6 months to 2 years and AFSL holders that are aware of a defective financial services guide but do not rectify the defect could be jailed for 5 years (up from 2 years). Similar increases in imprisonment penalty applies to individuals involved in the contravention of certain corporate law.
The other interesting thing about the proposal is that it attempts to ensure that victims who suffer damage as a result of a contravention of a civil penalty provision in the Corporations Act will be compensated before the payment of financial penalties. Currently, only the ASIC Act and Credit Act provide for the compensation of victims in situations where the defendant does not have sufficient financial resources to pay both a financial penalty and compensation.
Under this new proposal, the court can make any order it sees fit to ensure an amount remains available for compensation. Compensation proceedings need not have been commenced for the court to consider the amount that might reasonable be likely to be payable and to make an appropriate amount for compensation available.
Want to find out more?
If you’re a director of a company, these changes could potentially apply to you. To find out more details about the penalties and what could be caught under the new proposal, contact us today.