Introduction
By definition, the Corporations Law is a complex set of laws with respect to the incorporation of companies, their governance, corporate finance, transactions affecting control of corporations, corporate and corporate officers' liability, external administration of companies and the liability of auditors, liquidators and financial advisers. The ASIC Act provides for the appointment of ASIC as administrator of the Corporations Law, in addition to a range of other regulatory regimes (Helen Bird 2003). Subject to the ASIC Act, ASIC has the general administration of Corporations Act (Corporations Act, 2001).
“As at 30 June 1999, ASIC employed 1225 full-time equivalent staff, 209 of whom approximately 716 were employed in regulatory and enforcement operations. 210 Out of a total operating cost of $146 million, 211 approximately 65% ($95 million) was spent on enforcement.”(Helen Bird 2003) From the data, we can see enforcement is one of the important components.
What is ASIC?
From 15 Jul 2001, the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001 are Commonwealth corporations legislation in Australia. These two Acts are major components of the national framework of corporate regulation and the other include Corporations (Fees) Act 2001, the Corporations (National Guarantee Fund Levies) Act 2001, the Corporations (Futures Organisations Levies) Act 2001 and the Corporations (Securities Exchange Levies) Act 2001. ASIC’s corporate members appointed by Governor-General on the nomination of the Commonwealth Attorney-General. A chair is appointed among those members (National Corporations Legislation, 2001).
The role of ASIC is acting as regulator of corporate, markets and financial service. ASIC is under and administer ASIC Act and imply works under the Corporations Act (National Corporations Legislation, 2001). ASIC regulates 1.3 million Australian companies, Australian Stock Exchange and other financial markets, financial services businesses, superannuation funds, registered managed investments schemes, credit providers(Collier 2003). ASIC is such a regulator should be made publicly accountable for their actions (Hyland 2010).
The role of lawyer in the context of ASIC’s investigative and enforcement power is different from the general law rules. ASIC Act modified or overrode the normal rules to achieve more effective corporate regulation. It is suggestion that lawyer should be familiar with the provisions of the ASIC Act and the Corporations Act before representing clients in the context of ASIC’s investigative and enforcement powers(Middleton 2010).
In Corporate Affairs Commission (NSW) v Yuill (1991) 172 CLR 319 the High Court held that s 308 of the Companies Code 1981 (QLD) impliedly abrogated legal professional privilege and that an examinee (not being a lawyer) could not refuse to answer questions at an oral examination, or refuse to comply with a notice to produce books, on the ground of legal professional privilege (Middleton 2010).
The Enforcement Function of ASIC
Stated in ASIC Act, one of major function of ASIC is enforce and give effect to the law. In ASIC Act subs 1(2) (g) take whatever action it can take, and is necessary, in order to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it (National Corporations Legislation, 2001). ASIC can take necessary action to enforce and give effect to the laws that confer functions and powers on us by Parliament (Collier 2003).
Enforcement in simple terms means problematic (Helen Bird 2003). The objector of enforcement action is to achieve ASIC’s regulatory objective. Meanwhile ASIC is trying to achieve enhancing consumer protection and market integrity. Without enforcement actions, regulation of the business world would be frustrated (Assaf 2002).
In Australia, police are responsible for the criminal law engagement. The police include Australian Federal Police and ACT Policing. And there are some another Commonwealth agencies dealing with enforcement of white-collar crime. Among of them, ASIC is the agency dealing with the legislations relate to the Corporations Act and ASIC Act (National Corporations Legislation, 2001).
ASIC has investigative power. The Australian Federal Police should assist ASIC in the actions of investigation. ASIC has wide powers to make orders affecting the person fails to comply with securities or futures contract regulations (National Corporations Legislation, 2001). ASIC can conduct informal and formal investigations that is stated in ASIC Act sections 13, 14 and 15 (Collier 2003).
Enforcement action decided by an examination of ASIC’s jurisdiction in the matter, the level of evidence, whether an achievable or appropriate remedy exists for ASIC to pursue, whether the meter involves serious corporate wrongdoing or serious risk or detriment to consumers and the market, and whether the matter satisfies ASIC’s regulatory and enforcement priorities (Collier 2003).
The investigation includes inspection of books, require disclosure of information in relation to financial products, a search warrant, and an examination. Books mean a register, financial reports or records, a document, banker’s book and any other record of information. Notice to produce books is used in 90% of investigating matters. Warrants are the ability to search premises for books and records. ASIC may require a person to appear for examination. The National Insolvency Co-ordination Unit was established to surveillance companies as being in clear financial difficulties and at risk of insolvent trading (Collier 2003). ASIC can seek an injunction preventing from disposing of or transferring assets. The infringement notice regime can be applied to continuous disclosure breaches(Cooper 2005).
It is possible to influence ASIC’s enforcement decision. For example, the enforcement action may be influenced by the submissions of prospective respondents. There are some factors which will influence the enforcement decision. Those involve regulatory impact, chances of success, cost, significance of the contravention and the individuals involved. The most influence to ASIC’s enforcement approach is timing. The civil proceedings would be too slow and expensive (Assaf 2002).
ASIC divides civil enforcement outcome into several categories: civil enforcement actions completed, summary prosecutions completed, orders made banning people from giving investment advice, compensation ordered or arranged, assets frozen and money saved from stopping illegal schemes or inadequate disclosure. Those outcomes reflect the ASIC’s regulatory objectives(Assaf 2002).
Civil and Criminal Penalty
The offence against the Corporations Act is treated as an offence against a law of the Commonwealth. That is deemed in Criminal Code c1 1.1. ASIC or any of its delegates may lay an information, charge or complaint for an offence against the Corporations Act. However, the Director of Public Prosecutions (DPP) retains all its rights including the powers to give directions on, take over or terminate the proceedings (National Corporations Legislation, 2001). ASIC’s criminal action is to prosecute serious offence primarily through the Commonwealth Director of Public Prosecutions(Collier 2003). Imprisonment is an option within the criminal context that is the major difference between civil and criminal regulatory penalties (Hyland 2010).
Ayres and Braithwaite’s model of regulation illustrates ASIC enforcement pattern from the lowest level which is education and intervention through up to the highest level which is license revocation depending on the regulatee’s behaviour (Helen Bird 2003).
ASIC may start civil proceeding for the recovery of damages for fraud, negligence, default, breach of duty or other misconduct, or the recovery of (National Corporations Legislation, 2001). ACIS’s civil action includes civil penalties, injunctive relief, correction action and compensatory action(Collier 2003). The types of civil remedies available for ASIC include preservative actions, recovery actions, intervention in proceedings, remedial and protective actions, civil penalty actions and enforceable undertakings (Assaf 2002). At the beginning, ASIC only commenced few civil penalty actions on director’s duties. So on 1998 a number of additional statutory provisions were added into the Corporations Law (George Gilligan 1999).
Administrative sanctions are considered as supplement to civil action or speedy alternative. ASIC can enforce compliance without engaging court proceedings to avoid the lengthy timing and expensive cost. ACIS can make a banning order to prevent the person breaching a financial services law or its statutory obligations under the corporations’ legislation. Corporations Act allows ASIC to make disqualification order to cease a person managing a corporation for up to five years. The alternative tool to disclosure requirements without bringing court proceedings is infringement notices(Hyland 2010).
Criminal matters are more than civil matters. There are 5 civil matters meanwhile there are 20 criminal matters and7 administrative matters during 1999-2000. Because in ASIC’s enforcement policy, no civil proceedings in substitution for criminal proceedings will be brought into matters involving serious corporate crime. But heavily civil penalty proceeds by ASIC in recent years(Collier 2003). During 2003 ASIC also prosecute about 800 less serious breaches without referring them to the CDPP (Cooper 2005). During 2009 to 2010, ASIC completed 23 criminal proceedings and 30 civil proceeding. 22 criminals convicted and 287 million recovered. 90 directors are banned for a total of 320 in 2009 to 2010(ASIC Annual Report, 2010).
In HIH case, ASIC can commence criminal proceedings notwithstanding that a civil outcome has already been achieved(Cooper 2005).
Also in ASIC v Craig McKim and Pegasus Leveraged Options Group Pty Ltd (2002) NSWSC 310 case, ASIC took civil action to ban McKim from being a company director and to shut down an unlawful scheme promoted by him and his company. And criminal charges were laid by the CDPP and Mr Mckim was convicted and jailed for 8 years (Cooper 2005).
Review ASIC’s Decision
With the enforcement power which given by Commonwealth government appearing to expand rapidly, a question has been risen. Is the ASIC should be carefully monitored to guard against the abuse of powers? Their decisions needed to be review via internal and external (Hyland 2010).
Merits review can be generated internally by the agency itself and/or by and external tribunal. Sometime, the appeal and review are interchangeable. This will encourage more lawful decision making and better administration. Merits is a way used to evaluate ASIC’s accountability and transparency.
Internal merits review is conducted by a different and more senior person. This person can make a new decision or affirm or vary the original decision. Regulators prefer internal review to external review because it is more time and cost effective. But the criticalness is its objectives less formal and expensive than external procedures.
External review is conducted by either the courts or tribunals. Review by tribunals is cheaper, faster and less formal than review by courts. External review could be the only way of review after imposing administrative sanctions (Hyland 2010).
In Visnic v Australian Securities and Investments Commission (2007) 231 CLR 381 at 386 held disqualification orders imposed by ASIC to be constitutionally valid, as their main purpose was to maintain professional standards, which served the public’s interest (Hyland 2010). This case is a typical external review progress via court. The court held support the ASIC’s decision.
Conclusion
ASIC’s enforcement function is crucial for the implement of the Corporations Act. Though ASIC enforcements the regulator has tools to protect the customers and investors. With the dramatically changing business environment ASIC also needs to adopt those changes in globalized business world in order to protect Australian investors’ interests in multinational organizations (Middleton 2004).
