An Update – ASIC’s Licensing Powers Strengthened

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ASIC licensing powers are a step closer to being further strengthened due to proposed new laws before parliament which would grant ASIC new powers in relation to the variation and cancellation of licences and extend ASIC’s powers in relation to the use of Search Warrants and banning provisions.

Key Points

The Bill implements recommendations from ASIC’s Enforcement Report to:

  • Align the penalties for false and misleading statements in AFS Licence and ACL applications ensuring ASIC can refuse to grant a licence when material in an application is false or misleading, and ensure that a licence can be suspended or revoked in certain circumstances (including where the financial services authorised by the licence have not been provided within 6 months of the licence being granted);
  • Grant ASIC new powers in relation to the variation and cancellation of AFS Licenses and Australian Credit Licences (“ACLs”);
  • Strengthen ASIC’s licensing powers by replacing the AFS Licence requirement to be of ‘good fame and character’ with an on-going requirement to be a ‘fit and proper person’ to provide the financial services covered by the AFS Licence;
  • Change the ACL regime to ensure broader application of the respective fit and proper person tests to all officers, partners and trustees of an applicant, and to extend the test to their controllers;
  • Extend ASIC’s powers in relation to banning a person from performing functions in a financial services or credit business and extend the grounds on which ASIC can issue banning orders to take into account a broader range of activities related to non-compliance with financial service laws and the management or oversight of the conduct of a financial services or credit business;
  • Allow interception agencies to provide lawfully intercepted information to ASIC for serious offences that ASIC can investigate or prosecute; and
  • Harmonise ASIC’s Search Warrant powers across different Acts and bring them into line with the search warrant powers under the Crimes Act.

ASIC’s Current Enforcement Functions and Responsibilities

ASIC’s core enforcement functions include (but are not limited to) the following:

  • Conducting investigations into suspected relevant contraventions of the law, which are enforceable by criminal prosecution, civil proceedings (including civil penalty proceedings) and/or administrative action;
  • Commencing and conducting or supporting the Commonwealth Director of Public Prosecutions to conduct criminal prosecutions in respect of such contraventions;
  • Commencing and conducting various types of civil proceedings in respect of such contraventions, such as proceedings for the imposition of civil penalties, proceedings to seek compensation for victims and interlocutory proceedings for injunctions in connection with investigations or proceedings being pursued by ASIC (for example, to freeze assets or prohibit persons from travelling overseas); and
  • Taking various forms of administrative action in respect of such contraventions such as proceedings to ban persons from managing corporations, providing financial services or engaging in financial services or credit activities.

Limits to ASIC’s Search Warrant Powers

Search warrants are one of the most effective investigative tools available to ASIC to obtain and secure evidential material and prevent the destruction and concealment of evidence. ASIC’s current search warrant powers limit ASIC’s ability to use them as an investigative tool. There are also a number of differences between the powers that lead to inconsistencies in the way that the current search warrant powers available to ASIC operate. The Bill seeks to rectify these limits by harmonising current powers and making them more effective. The Enforcement Report includes recommendations on 6 of ASIC’s current positions and how the changes will affect these positions going forward:

ASIC’s PositionCurrent RequirementEffect of Updates to Position
ASIC specific search warrant powers in various Acts should be consolidated into the ASIC Act.• ASIC is currently able to utilise specific search warrant powers contained in the ASIC Act, NCCP Act, SIS Act and RSA Act (as well as the general search warrant powers contained in the Crimes Act).
• When seeking a search warrant under the NCCP Act, SIS Act and RSA Act, ASIC must demonstrate that it has previously issued a notice to a relevant person requiring the production of books and the person has failed to produce those books.
• Search warrant powers to be centralised in the ASIC Act for investigations of contraventions of legislation administered by ASIC, including investigations of suspected contraventions of the Corporations Act, ASIC Act, NCCP Act, SIS Act and RSA Act.
• Remove the forewarning requirement from the NCCP Act, SIS Act and RSA Act.
ASIC Act search warrants to provide for search and seizure of ‘evidential material’.Search warrants issued under the ASIC Act, NCCP Act, SIS Act and RSA Act authorise the search for and seizure of specified ‘particular books’ and the subsequent search and seizure is limited to those books.• The updates seek to remove the requirement for search warrants issued under the ASIC Act, NCCP Act, SIS Act and RSA Act to specify particular books that can be searched and seized.
• Search warrants to be issued where there are reasonable grounds to suspect that there is or will be ‘evidential material’ at the premises identified in the warrant.
• Search warrants provide for search and seizure of the ‘kind of evidential material specified in the warrant’.
ASIC Act search warrants to be issued when there is a reasonable suspicion of a contravention of an indictable offence.A magistrate may issue a warrant authorising seizure of specified ‘particular books’ if satisfied that there are reasonable grounds for suspecting that such books are, or may be within the next 72 hours, on premises. Search warrants to be issued under the ASIC Act where there is a reasonable suspicion of a contravention of a provision of the Corporations Act, ASIC Act, NCCP Act, SIS Act and RSA Act that would be an indictable offence.
ASIC Act search warrant powers to include ancillary powers that mirror the Crimes Act provisions. Search warrant powers in the ASIC Act, NCCP Act, SIS Act and RSA Act are not supported by the range of ancillary provisions contained in the Crimes Act and the Competition and Consumer Act, including:
• the ability to apply for search warrants by telephone or other electronic means in urgent cases;
• ability to seize material that relates to other indictable offences;
• powers relating to the use of electronic equipment and copying or seizing data contained on electronic equipment;
• photographing or recording the search;
• temporarily ceasing the search; and
• with the exception of the ASIC Act there is no clear power to require an occupier to provide reasonable assistance.
The search warrant powers in the ASIC, NCCP, SIS and RSA Acts to include ancillary provisions that mirror the provisions in the Crimes Act.
Material seized under ASIC Act search warrants by ASIC should be available for use in criminal, civil and administrative proceedings. Books seized pursuant to the execution of the ASIC Act, NCCP Act, SIS Act and RSA Act search warrants can be used for the purpose of relevant investigations and any criminal, civil or administrative proceeding.ASIC will continue to be able to use and permit the use of material seized under an enhanced ASIC Act search warrant for the purposes of criminal, civil and administrative proceedings.
Use of material seized under search warrants by private litigants should be subject to appropriate limits. In some circumstances material seized under a search warrant may be, or may be required to be, released by ASIC to third parties for the purposes of separate legal proceedings. The updates allow ASIC the opportunity to provide additional protection to material seized under a search warrant that would limit the ability of private litigants to access that material.

Background Information

The Australian Government introduced the Bill into the House of Representatives in November 2019 as a follow up to its response to the Enforcement Report. The Bill seeks to amend the Australian Securities and Investments Commission Act (“ASIC Act”), Corporations Act 2001 (Cth) (“Corporations Act”), the National Consumer Credit Protection Act 2009 (Cth) (“NCCP”), Superannuation Industry (supervision) Act 1993 (Cth) (“SIS Act”) and Retirement Savings Accounts Act 1997 (Cth) (“RSA Act”).

Further Reading

If you would like to speak to us about how the proposed amendments to legislation could affect your business, please contact us.

About The Author

Ivana Josic

Ivana is responsible for all Marketing activities for Sophie Grace and assists both the Compliance and Legal teams with a particular focus on Compliance services. Ivana focuses on website development, management and ensures clients receive the latest regulatory updates through Sophie Grace social media channels, the newsletter and website blog page. Ivana also assists the Compliance team with drafting and amending compliance documentation, preparing AFSL and ACL Applications and implementing ongoing compliance solutions.

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