Individuals who are found guilty of breaching the Corporations Act could face up to 10 years in prison and/or significant fines as a result of the “most significant increases to the maximum civil penalties in more than 20 years”.
The federal government has announced plans to reform the Corporations Act to increase criminal penalties for misconduct as damning evidence continues to be revealed before the royal commission.
The Turnbull government has said that it is “strengthening” criminal and civil penalties for corporate misconduct and boosting the powers of the Australian Securities and Investments Commission (ASIC) to protect Australian consumers from corporate and financial misconduct.
The crackdown comes after Mr Morrison has slammed AMP for misleading ASIC amid revelations of “deeply disturbing” misconduct by its staff, highlighting that such behaviour could attract jail time.
Likewise, the Minister for Revenue and Financial Services, Kelly O’Dwyer, told ABC AM on Thursday (19 April) that the government was “very disturbed by a number of the revelations that have been revealed recently at the royal commission” and the “false and misleading statements that have been made to ASIC”.
Following these statements, the government has now announced that it will “increase and harmonise” penalties for the most serious criminal offences under the Corporations Act to a maximum of:
- For individuals: (i) 10 years’ imprisonment; and/or (ii) the larger of $945,000 OR three times the benefits;
- For corporations: (i) the larger of $9.45 million OR (ii) three times benefits OR 10 per cent of annual turnover.
Previously, the maximum prison term for individuals was five years.
The government will expand the range of contraventions subject to civil penalties and will also increase the civil penalty amounts that can be imposed by courts to the maximum of:
- the greater of $1.05 million (for individuals, from $200,000) and $10.5 million (for corporations, from $1 million); or
- three times the benefit gained or loss avoided; or
- 10 per cent of the annual turnover (for corporations).
In addition, ASIC will be able to seek additional remedies to strip wrongdoers of profits illegally obtained or losses avoided from contraventions resulting in civil penalty proceedings.
ASIC’s powers will also be significantly increased through:
- expanding its ability to ban individuals from performing any role in a financial services company where they are found to be unfit, improper or incompetent;
- strengthening its power to refuse, revoke or cancel financial services and credit licences where the licensee is not fit or proper; and
- boosting ASIC’s tools to investigate and prosecute serious offences by harmonising their search warrant powers to provide them with greater flexibility to use seized materials, and granting ASIC access to telecommunications intercept material.
“A credible deterrent to unacceptable misconduct”
According to the government, these stronger new penalties will “ensure that those who do the wrong thing will receive appropriate punishment”.
In a joint release between Treasurer Scott Morrison and the Minister for Revenue and Financial Services, Kelly O’Dwyer, it was stated that the changes “represent the most significant increases to the maximum civil penalties, in some instances, in more than 20 years”.
The statement reads: “They bring Australia’s penalties into closer alignment with leading international jurisdictions, and ensure our penalties are a credible deterrent to unacceptable misconduct.
“The Turnbull government is committed to ensuring ASIC is armed with greater powers to effectively deter, prosecute and punish those who do the wrong thing, to improve community confidence and outcomes for consumers and investors in the financial services and corporate sector.”
The Financial Services Council has welcomed the changes, with CEO Sally Loane saying: “There is no place for criminality in the financial services industry and wrongdoing should be met with the full force of the law.
“It is entirely appropriate that penalties for civil and criminal misconduct are as strong as possible.
“Consumers must have confidence that the individuals and organisations they entrust with their savings will act in the right way. Both effective enforcement of the law as well as severe punishments for wrongdoing are central to promoting better trust and confidence,” she added.
These reforms follow on from a raft of changes brought in recently to strengthen consumer protections.
The government has recently:
- provided $127 million in additional funding to ASIC to bolster its investigative and surveillance capabilities;
- implemented an industry funding model for ASIC to give it secure funding;
- announced a new second deputy commissioner with an enforcement focus, Mr Daniel Crennan QC;
- established a new standards setting body for financial advisers; and
- established a new one-stop shop for consumer complaints.
[Related: CEO of AMP resigns with immediate effect]