An Update  – ASIC’S Powers Strengthened

Following the Hayne Royal Commission, ASIC has held strengthened powers, specifically in relation to the use of Search Warrants and banning provisions.

 

Key Points

Recommendations from ASIC’s Enforcement Review Taskforce Report (Report) have been implemented to:

  • Extend ASIC’s powers in relation to making a banning order, including expanding the grounds for making an order and the scope of a banning order; 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 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.

ASIC’s Banning Powers

ASIC’s banning powers have been extended by expanding the grounds on which ASIC can make a banning order. Grounds now include circumstances where:

  • the person is not fit and proper to provide financial services, perform functions as an officer of a business that carries on a financial services business or to control such an entity;
  • the person has, in the last 7 years, been an officer of a company involved in a financial services or credit business that is unable to pay its debts;
  • ASIC has reason to believe that the person is not adequately trained or competent to perform any function as an officer of a company that carries on a financial services business, or control such an entity;
  • The person has, at least twice, been linked to a refusal or failure to give effect to an AFCA determination.

The scope of banning orders has also been expanded to allow ASIC to ban any person from controlling company that carries on a financial services or credit business or performing any function involved in such a business (including as an officer, manager, employee, contractor or in some other capacity). This is much broader than the previous scope which was limited to providing a financial service or engaging in credit activities.

Since the Act took effect, ASIC has been using its new powers, with a range of individuals being the subject of banning orders in recent months.

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 previous search warrant powers limited ASIC’s ability to use them as an investigative tool and there were a number of differences between the powers that led to inconsistencies in the way that the search warrant powers available to ASIC operated. The Act rectifies these limits by harmonising search warrant powers and making them more effective.

  • Search warrant powers are now centralised in the ASIC Act for investigations of contraventions of legislation administered by ASIC, including investigations of suspected contraventions of the Corporations Act 2001, Australian Securities and Investments Commission Act 2001 (ASC Act), National Consumer Credit Protection Act 2009 (NCCP Act), Superannuation Industry (Supervision) Act 1993 (SIS Act) and Retirement Savings Account Act 1997 (RSA Act);
  • Search warrants can be applied for by ASIC where the contravention would be an indictable offence under one of these Acts. ASIC also has broader powers to seize evidential material under the Crimes Act 1914;
  • The search warrant powers in the ASIC, NCCP, SIS and RSA Acts now mirror the provisions in the Crimes Act;
  • ASIC is no longer required to forewarn a person under investigation that it may apply for a search warrant;
  • ASIC now has the ability to search and seize evidential material, not just particular books. The search warrant will now be stated to be linked to the offence to which it relates and the type of evidential material that can be searched for and seized under the warrant;
  • ASIC can use the evidential material collected under the warrant for the performance of its functions or duties, or the exercise of its powers, this includes for the purposes of criminal, civil and administrative proceedings; and
  • Private litigants can only obtain access to the seized material via a court or tribunal order.

Background Information

The ASIC Enforcement Review Taskforce was established to review the enforcement regime of ASIC and the existing regulatory tools available. The Report was released in April 2018 in conjunction with the Government response to the report. The Government response agreed, or agreed in-principle, to all recommendations in the Taskforce report. The Financial Sector Report (Hayne Royal Commission Response – Stronger Regulators(2019 Measures)) Act 2020 commenced on 18 February 2020 and implements the recommendations from the Report.

Further Reading

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

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