Recovery of investigation expenses and costs

This information sheet (INFO 204) is for people who:

  • are being investigated by ASIC
  • have been convicted of an offence in a prosecution begun as a result of an ASIC investigation
  • have had judgment, a declaration or other order made against them in court proceedings begun as a result of an ASIC investigation.

It explains our power to make orders to recover the expenses and costs of investigations we conduct, and a change in our approach to exercising that power.

It covers the following topics:

In this information sheet a reference to ‘people’ or ‘person’ includes body corporates.

Our power to recover investigation expenses and costs

Generally, ASIC must pay the expenses of investigations we conduct. However, under section 91 of the Australian Securities and Investments Commission Act 2001, we may make an order to recover our investigation expenses and costs if, as a result of our investigation:

  • a person is convicted of an offence, or
  • judgment is awarded, or a declaration or other order is made against a person in a proceeding in a court.

We may make an order that the person pay, or reimburse ASIC:

  • for the whole, or a specified part, of the expenses of the investigation
  • for the whole, or a specified part, of the costs to ASIC of making the investigation, including the remuneration of ASIC staff concerned in the investigation.

ASIC has a similar power to recover the expenses and costs of our investigations under section 319 of the National Consumer Credit Protection Act 2009.

This power allows ASIC to make an order to recover investigation expenses and costs, including, for example:

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

Investigation expenses and costs are not the same as litigation costs that may be awarded by a court.

When we will use our power to recover investigation expenses and costs

The purpose of these provisions is to allow ASIC to recover the expenses and costs of our investigations from a person found by a court to have contravened the law. To date, ASIC has rarely recovered its investigation expenses and costs.

However, we have reviewed our approach and consider that we should more frequently seek to recover the expenses and costs of an investigation from the person who has caused those expenses and costs to be incurred. Accordingly, we will consider making an order for the recovery of our investigation expenses and costs in each case where the legislative requirements are met.

However, we will not usually seek to recover our investigation expenses and costs where the only bases for exercising our powers are judgments, declarations or orders:

  • which are interlocutory in nature
  • which are in the nature of asset preservation or travel restraint orders, or
  • made in proceedings which solely concern legal challenges to the exercise of our powers (e.g. challenges to information gathering notices).

When our new approach will start

Our new approach to section 91 orders will apply to all persons the subject of an investigation commenced after the release of this information sheet (i.e. 29 July 2015). It will also apply to a person the subject of an investigation commenced before the release of this information sheet, unless, before the release of this information sheet:

  • we have commenced proceedings in a court (other than proceedings in which we only seek a judgment, declaration or order which is interlocutory in nature or which is in the nature of an asset preservation or travel restraint order), or charges have been laid, against that person
  • an agreement has been reached with that person to resolve the subject matter of the investigation. (If such an agreement deals with our investigation expenses and costs, the agreement will operate in accordance with its terms.)

We may also decide not to apply our new approach to a person the subject of an investigation commenced before the release of the information sheet where to do so would, in our view, in all of the circumstances and having regard to our past approach, be unfair to the person concerned.

Factors we will consider before making an order

We will consider all the circumstances of a case in deciding whether to make an order to recover our investigation expenses and costs and, if so, the amount of the order. The factors we will consider and the weight that we will afford to each of those factors will vary according to the circumstances of the case.

Broadly, however, we will consider the factors listed in Table 1. These factors are not listed in order of importance and it is not an exhaustive list.

Table 1: Factors we will consider before making an order

FactorExplanation

Impecuniosity of the person

For example, if there is little or no prospect that the   person would be able to pay the order.

Exceptional hardship to the person

Payment of our investigation expenses and costs will usually result in some hardship, and this will not generally be a reason for us not to make an order.

However, in some exceptional cases, severe hardship may justify not making, or reducing the amount of, an order – for example, the person, or someone in their family, is suffering from a severe medical condition and the payment of an order would have a significant impact on the person’s capacity to care for that family member.

The amount recoverable under an order

For example, we may consider that the cost to ASIC of   enforcing an order could outweigh any amount we could recover.

Extent of ASIC’s success in the proceedings

For example, we might not make an order, or we might decide to reduce the amount of an order, if we have   only been partly successful in the proceedings.

Likely effect on victims

We will usually not seek to recover our investigation expenses and costs if it will, or is likely to, come at the expense of consumers or investors who have suffered loss.

Degree of culpability

Section 91 is concerned with recovering our investigation expenses and costs, and is not punitive. The degree of culpability of a person found by a court to have contravened the law will generally not be relevant to our decision.

However, in some cases the degree of culpability of a person may be a reason for not making, or reducing the amount of, an order – for example, if a court finds that the degree of wrongdoing involved in the person’s misconduct was minor and less than that alleged by ASIC.

Degree of cooperation

Voluntarily cooperating with ASIC will often reduce the   length of investigations and thereby reduce the amount of any orders for recovery of investigation expenses and costs.

Further, when a person has provided a high degree of voluntary cooperation in a timely manner which has significantly reduced the length of an investigation, we will consider not making, or further reducing the amount   of, any order.

We may also consider not making, or reducing the amount of, any order when a person pleads guilty, or consents to orders being made to resolve a matter: see Information Sheet 172 Cooperating with ASIC (INFO 172).

Scope of the investigation

For example, we will limit any order to the expenses and costs of those parts of ASIC’s investigation that were relevant to the subject of the proceedings.

Our approach when there are multiple defendants

When there are multiple defendants from whom we can recover investigation expenses and costs, the form of orders that we make will depend on the circumstances of the matter.

For example, we will generally apportion the investigation expenses and costs between the defendants having regard to all the circumstances, including:

  • whether some of the time and cost of the investigation can be attributed to particular defendants
  • the factors outlined in Table 1 above.

Your right to be notified and make submissions

ASIC will notify you, prior to any sentence hearing or hearing on penalty or other relief, if we are considering making an order against you to recover the expenses and costs of our investigation. We will also inform you of the proposed amount of any order.

You will be given a reasonable period of time to consider the proposed order and to make written submissions to ASIC about whether the order should be made, the amount and the form of the order. We will consider any submissions before making a decision.

How we enforce an order

An order to recover the expenses or costs of our investigation is enforceable in court as a debt due to ASIC. If you do not comply with an order that ASIC has made within the time specified in the order, we will generally take action to recover any amount unpaid.

If you do not comply with an order, you may be liable to a penalty of $8,500 or imprisonment for one year, or both.

Your right to a review of an order

A decision by ASIC to issue an order for the recovery of our investigation expenses and costs can be the subject of an application for review to the Federal Court of Australia under the Administrative Decisions (Judicial Review) Act 1977.

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.

 

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Last updated: 23/03/2016 03:08