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ASIC Charging for Investigation

Under Section 91 of the Australian Securities and Investments Commission Act 2001, ASIC has statutory powers to recover costs for investigations where possible. This applies to all individuals and entities (defendants) subject to an ASIC investigation after 29 July 2015. 

What are the charges?

In circumstances where a defendant is convicted or a judgement is made in favour of an ASIC investigation, ASIC is able to make an order which requires the defendant to reimburse ASIC’s investigative expenses.

The types of expenses ASIC may claim include:

  • salary costs for ASIC staff who have worked on the investigation;
  • travel expenses when required to interview witnesses; 
  • the cost of external legal counsel; or
  • the cost of employing an expert to perform an analysis

Most notably from the above is that the defendant, who is subject of the investigation, may be required to cover a portion of the salaries of ASIC staff involved in the investigation and this may result in defendants with judgements or orders made against them being subject to a very expensive invoice following the investigation. For defendants, there is a significant level of risk and financial management that needs to be implemented prior to and during the investigation in order to ensure they are financially capable of paying the costs of the investigations.

ASIC’s procedure in recovering costs

ASIC will consider a range of factors when deciding whether to recover the costs of an investigation. These factors may include:

  • impecuniosity of the individual or entity;
  • the amount recoverable under an order;
  • the effect on any victims; and
  • the scope of the investigation.

The defendant will be notified prior to a recovery order being made against them and will be given an appropriate amount of time to make submissions to ASIC. ASIC will set what it believes as a reasonable amount of time for the defendant to make submissions. Given the likelihood of legal counsel being utilised by the defendant to make these submissions, this simply serves to increase the final cost. Any defendant who does not comply with a recovery order made against them by ASIC will be subject to a fine, imprisonment or both. ASIC also has the power to commence proceedings in a relevant court for any amount due to ASIC.

This charging structure which was implemented in 2015 following the Senate’s inquiry into the performance of ASIC.  The objective is to recover costs from those who monopolise ASIC’s time in a similar way to the ASIC Industry Funding Levy.

Impact on defendant

The increased likelihood of ASIC recovering costs against defendants is likely to be at the detriment of the defendant. The defendant will be required to cover not only their own legal expenses but also the expenses incurred by ASIC. Previously, there were no large annual costs imposed on Australian Financial Services Licence (AFSL) holders or Australian Credit Licence (ACL) holders. The cost of an AFSL or ACL holder being the subject of an ASIC investigation could become quite onerous and may impact on the AFSL or ACL holder’s ability to meet their ongoing financial requirements.

AFSL and ACL holders should speak with their professional indemnity insurance providers to determine if their policy will cover any of these costs, or whether it can be extended at a reasonable price to cover any such costs order.

If you would like to know more about how these may impact your business, please contact us.

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