On 19 February, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 (the Bill) was passed by both the upper and lower house in Parliament. Significantly, the Bill will amend the Corporations Act 2001 to consolidate and broaden the existing protections and remedies for corporate and financial sector whistleblowers and will create a whistleblower protection regime for disclosures of information by individuals regarding breaches of the tax laws or misconduct relating to an entity’s tax affairs under the Taxation Administration Act 1953.
The Bill aims to create a single statutory regime with a strong compliance framework in order to more effectively combat corporate crime, which is estimated to cost Australia over $8.5 billion each year.
The new amendments at a glance
- Removing the requirement for whistleblowers to identify themselves when making a disclosure, increasing whistleblower confidentiality.
- Making the information whistleblowers disclose inadmissible in evidence against them in a prosecution, increasing whistleblower immunity.
- Lowering the threshold to prove victimisation by the broader inclusive definition of “detriment” and adding a civil penalty option for prosecution for victimisation.
- Providing that generally a court cannot make a cost order against a whistleblower or other individual seeking remedies for victimisation, to ensure that such individuals are not deterred from bringing proceedings by potential adverse cost orders.
- Requiring public companies, large proprietary companies and registrable superannuation entities to have whistleblower policies, and to make the policies available to their offices and employees.
What conduct can be reported
- Conduct which may be the subject of a disclosure that qualifies for whistleblower protection now includes actual or suspected conduct by a regulated entity that amounts to “misconduct or an improper state of affairs” being conduct that illustrates;
- contravention of any law administered by ASIC and/or APRA;
- a danger to the public or the financial system; or
- an offence against any other law of the Commonwealth that is punishable by imprisonment for a period of 12 months or more.
- Notably the conduct that can be reported does not include “personal work-related grievances” from the category of protected disclosures.
- Entities that can be the subject of such a disclosure have been extended to include all companies, banks, life insurers, general insurers, superannuation entities and trustees of superannuation entities (“regulated entities”).
Who can make a disclosure
- The definition of Individuals who can make a qualifying disclosure has been broadened to include individuals who are or have been in a relationship with the regulated entity about which the disclosure is made; including employees, contractors, and even spouses or relatives (in addition to officers and associates).
- The Bill removes the requirement for a whistleblower to make a disclosure in “good faith”, instead requiring that the whistleblower has reasonable ground to suspect that “misconduct or an improper state of affairs” exists.
Who can receive a disclosure
- The category of persons to whom a qualifying disclosure can be made has not significantly changed, still including prescribed Commonwealth bodies (e.g ASIC and APRA), an officer or auditor of the entity, or a person prescribed by the entity to receive disclosures. However, the Bill does protect disclosures to lawyers (legal professional privilege) and provides for emergency and public interest disclosures.
Compliance in the wake of the Royal Commission
The passage of the Bill comes at a time following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, in which regulators were heavily scrutinised for their lack of enforcement and for their effectiveness and ability to identify and address misconduct (see our previous article here). In light of this, ASIC has confirmed that they will oversee the implementation of the Bill’s reforms when they are likely to commence on 1 July 2019, with ASIC’s Executive Director, Warren Day, stating:
“These reforms will help ASIC to perform our important regulatory role by encouraging people who have observed misconduct to come forward…They complement the measures we have put in place since 2014 to improve our processes for assessing whistleblower reports and communicating with whistleblowers during inquiries.”
With the impending Royal Assent of the Bill by the Governor-General, companies and directors should ensure over the next 3-6 months that they have compliant whistleblowing policies in place in accordance with the new reforms. The Bill now requires public companies and large proprietary companies to have internal policies and systems catering to whistleblower disclosures and a failure to comply by the current 1 January 2020 deadline will amount to a strict liability offence.