ASIC's Powers to Pursue Market Misconduct Strengthened

28 January 2010

Proposed legislative changes to strengthen the Australian Securities and Investment Commission's investigative powers and increase penalties for market related offences were announced today.  The Minister for Financial Services, Superannuation and Corporate Law, the Hon Chris Bowen said that the proposals would increase the maximum criminal penalties that can be imposed when individuals and corporations breach market misconduct provisions. 

Increased penalties for market misconduct offences

Currently, the penalties in the Corporations Act 2001 for the offences of insider trading, market manipulation, false trading, market rigging and making false and misleading statements provide insufficient deterrence, as the gain from engaging in market misconduct often far outweighs the penalties imposed for a breach.

It is proposed that the pecuniary penalty for individuals would be increased from the current maximum of $22,000 (or $220,000 for insider trading) to $500,000 or three times the profit made or loss avoided by the conduct that constitutes the offence.

The maximum penalty for a corporation would be increased from the current maximum of $1 million to $5 million, three times the profit made or loss avoided, or 10 per cent of the annual turnover of the corporation in the relevant period.

To ensure compliance and increase deterrence, the maximum term of imprisonment for these offences will be increased from five years to 10 years. 

Expanded ASIC investiagtive powers

The Telecommunications (Interception and Access) Act 1979 currently limits the offences for which interception can be used as an investigative tool.  Interception may only be conducted under a warrant obtained by an interception agency in relation to the investigation of a serious offence.

It is proposed that the law will be amended so that a serious offence for these purposes includes market and insider trading offences investigated by ASIC.

ASIC will be able to access telecommunications interception material collected by the Australian Federal Police under a court-issued warrant. Its search warrant powers will also be improved to dispense with the need to issue a notice to produce before a warrant is enforced.

This will enable ASIC to obtain direct evidence of inside information, such as the content of conversations, rather than simply relying on circumstantial evidence, such as the mere existence of suspect telephone calls.

Telephone interception would only be available where a Court is satisfied that appropriate evidentiary and procedural requirements have been satisfied and would be subject to stringent record keeping and reporting obligations.

The TIA Act also regulates what can be done with any intercepted information that is collected and prohibits its use in evidence except in prescribed circumstances. All interception agencies are subject to stringent record keeping and reporting obligations, which are independently inspected by, in the case of Commonwealth interception agencies, the Commonwealth Ombudsman.

The Government notes that these reforms will bring ASIC's investigative powers into line with other regulators, such as the Australian Competition and Consumer Commission.

An exposure draft of the proposed changes will be released later this year.

For more information, please contact:

David Williams | Partner
Mullins Lawyers
t +61 7 3224 0270
f +61 7 3224 0230
dwilliams@mullinslaw.com.au