Law reforms to strengthen ASIC powers

Proposed changes to the law will strengthen the Australia Securities and Investment Commission’s (ASIC’s) investigative powers and increase penalties for market-related offences, the Minister for Financial Services, Superannuation and Corporate Law Chris Bowen announced yesterday.

The proposed changes will increase the maximum criminal penalties that can be imposed when individuals and corporations breach market misconduct provisions, as well as better equip ASIC to investigate and prosecute serious corporate misconduct, said Bowen.

“The increased penalty provisions send a clear message to those who seek to profit from these types of market offences that behaviour that undermines the proper functioning of our financial markets will not be tolerated,” he said.

The proposed changes will increase the pecuniary penalties for individuals to $500,000 or three times the profit made or loss avoided (whichever is greater). For corporations, the penalty will be the greater of $5 million, three times the profit made or loss avoided, or 10 per cent of the corporation’s annual turnover during the period the breach occurred.

The maximum term of imprisonment for these offences will also be increased from five years to 10 years.

“These are substantial penalties, but they’re also penalties that fit the crime,” Bowen stated at a press conference. “The financial payoff from undertaking these offences is very substantial; it’s appropriate that the penalty be very substantial.”

The reforms also seek to increase ASIC’s investigative powers through access to telecommunications interception material, which will enable ASIC to obtain direct evidence of inside information.

They will also increase its search warrant powers, reducing the potential for evidence to be destroyed before a warrant is executed. Bowen added that these reforms would also bring ASIC’s investigative powers into line with other regulators, such as the Australian Competition and Consumer Commission.

The proposals would significantly strengthen Australia’s laws in relation to insider trading, market manipulation, false trading, market rigging, and making false and misleading statements.

In relation to a question about whether there is a serious problem in Australia, Bowen said the number of referrals from the Australian Securities Exchange to ASIC is substantial enough to warrant concern. He added that there is a noticeable trend of an increase in a firm share price before market sensitive announcements are made.

“Both of those things, together with ASIC’s advice to me that they have one hand tied behind their back when investigating these cases, justifies this decision,” Bowen said.