ASIC today released Report 387 Penalties for corporate wrongdoing (REP 387).
REP 387 reviews penalties in Australia for corporate wrongdoing to assess whether they are proportionate and consistent. It compares ASIC’s penalties with:
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those in other countries;
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those of other Australian regulators; and
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across ASIC’s regime.
The findings in REP 387 will inform ASIC’s submission to the Australian Government’s Financial System Inquiry.
The key findings show that:
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on the international comparison —
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while our maximum criminal penalties—jail and fines—are broadly consistent with those available in other countries, there are significantly higher prison terms in the US, and higher fines in some overseas countries for certain offences;
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there is a broader range of civil and administrative penalties in other countries, they are higher, and they include the ability to remove financial benefit from wrongdoing (i.e. disgorgement);
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on the comparison with other Australian regulators—
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the maximum civil penalties available to ASIC are lower than those available to other regulators and are fixed amounts, not multiples of the financial benefits obtained from wrongdoing; and
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on the comparison across ASIC’s regime—
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there are differences between the types and size of penalties for similar wrongdoing. For example, providing credit without a licence can attract a civil penalty up to ten times greater than the criminal fine for those who provide financial services without a licence.
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‘Effective enforcement is critical for ASIC in pursuing our strategic priorities of promoting fair and efficient financial markets and ensuring confident and informed investors and financial consumers. It depends on outcomes that genuinely deter corporate wrongdoing’, ASIC Chairman Greg Medcraft said.
‘The public expects ASIC to take strong action against serious corporate wrongdoers. Those who break the law and cause severe damage should face tough penalties. This will make them and others think twice about breaking the law.
‘Tough penalties have a powerful deterrent effect.
‘At the lower end of the scale, more proportionate sanctions can work better. For example, infringement notices can provide more timely and efficient outcomes.’
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Background
REP 387 surveys the penalties that apply to wrongdoers in Canada (Ontario), Hong Kong, the United Kingdom and the United States, other Australian Government regulators, and across ASIC’s regime for wrongdoing involving insider trading, market manipulation, continuous disclosure, false statements to the market, inappropriate advice, unlicensed conduct, fraud, and false or misleading representations.
For the purposes of REP 387, corporate wrongdoing is misconduct that occurs in the corporate, financial market or financial services sectors.
In our submission to the Senate Inquiry into ASIC’s performance, we noted that our penalties have not been comprehensively reviewed for over a decade and, in many cases, do not meet community expectations.