ASIC announced yesterday that it will now use its power to recover expenses and costs of its investigations. ASIC's approach is detailed in INFO 204 Recovery of investigation expenses and costs.
This approach is a significant change to ASIC's approach but is broadly consistent with the 'user pays' model increasingly being adopted by Australian regulators. In the long run, it may mean that ASIC has additional resources to pursue investigations through the recoveries it makes from successful enforcement action.
It is important to note that ASIC's new approach will only apply to formal investigations which result in a court order against the person. It will not therefore apply to other enforcement action taken by ASIC such as enforceable undertakings, licence conditions, suspensions, cancellations or banning orders.
ASIC has the power under s91 of the ASIC Act to make an order to recover the expenses and costs it incurs when undertaking an investigation if it succeeds in obtaining a prosecution or other judgement against a person. Investigation expenses and costs are not the same as litigation costs that may be awarded by a court. They include expenses and costs of the investigation, including the remuneration of ASIC staff concerned in the investigation. ASIC has a similar power to recover the expenses and costs of its investigations under section 319 of the National Consumer Credit Protection Act 2009 (Cth). To date, ASIC has rarely used this power.
Orders made by ASIC under this power are enforceable as a debt due to ASIC. These orders may be the subject of an application for review to the Federal Court of Australia under the Administrative Decisions (Judicial Review) Act 1977 (Cth).
ASIC has reviewed its approach and will consider making an order for the recovery of its investigation expenses and costs in each case. ASIC will consider all the circumstances of the case in deciding whether to make such an order, including, the financial position of the person, whether there would be exceptional hardship to the person, the amount recoverable under an order, the extent of ASIC's success in the proceedings, the likely effect on the victims, the degree of culpability, the degree of cooperation and the scope of the investigation.
ASIC will not usually seek to recover investigation expenses and costs where the only bases for exercising their powers are judgments, declarations or orders:
- which are interlocutory in nature;
- which are in the nature of asset preservation or travel restraint orders; or
- made in proceedings which solely concern legal challenges to the exercise of its powers (e.g. challenges to information gathering notices).
Where there are multiple defendants, ASIC will consider whether the time and cost of the investigation can be attributed to particular defendants as well as the factors listed above.
When the new approach will start
The new approach will apply to all investigations from 29 July 2015. It will also apply to investigations commenced before this date, unless:
- ASIC has already commenced proceedings in a court, or charges have been laid, against that person; or
- an agreement has been reached with that person to resolve the subject matter of the investigation.
ASIC may also decide not to apply its new approach to a person the subject of an investigation commenced before this date where to do so would, in all of the circumstances and having regard to their past approach, be unfair to the person concerned.