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Enforcement agencies and corporate liability
What government agencies are principally responsible for the enforcement of civil and criminal laws and regulations applicable to businesses?
The primary federal government agencies responsible for enforcing civil and criminal laws and regulations applicable to corporations are:
- the Australian Competition and Consumer Commission (ACCC);
- the Australian Securities and Investments Commission (ASIC);
- the Commonwealth Director of Public Prosecutions (CDPP);
- the Australian Taxation Office (ATO);
- the Australian Federal Police (AFP); and
- the Australian Transaction Reports and Analysis Centre (AUSTRAC).
As Australia is a federal system, government agencies also exist at the state and territory level and these are responsible for enforcement of the laws and regulations in those jurisdictions.
Scope of agency authority
What is the scope of each agency’s enforcement authority? Can the agencies pursue actions against corporate employees as well as the company itself? Do they typically do this?
The agencies referred to in question 1 have wide-ranging investigative and enforcement powers in relation to the following:
- ACCC - antitrust, fair trading and consumer protection laws;
- ASIC - company, markets and financial services laws;
- AFP - all federal criminal offences including bribery, money laundering and other white-collar offences such as insider trading;
- ATO - tax and superannuation laws; and
- AUSTRAC - money laundering and counter-terrorism financing laws.
The CDPP is responsible for prosecuting violations of federal criminal laws. It has no investigative powers, and is referred matters by agencies such as the AFP, the ACCC and ASIC.
AUSTRAC oversees compliance with anti-money laundering and counter-terrorist financing laws, and the Department of Foreign Affairs and Trade administers Australia’s economic sanctions regime. However, they are not enforcement agencies per se. They support the AFP and the CDPP in investigating and prosecuting offences in those areas. AUSTRAC can, however, seek civil penalty orders against corporations.
Agencies can, and often do, pursue actions against employees as well as companies.
The responses to the remaining questions focus on the ACCC and ASIC.
Can multiple government entities simultaneously investigate the same target business? Must they coordinate their investigations? May they share information obtained from the target and on what terms?
Simultaneous investigations can, and do, occur as government agencies may investigate any conduct that falls within their regulatory ambit. While there is no legal requirement to coordinate investigations, cooperation and information sharing are common. Many agencies have entered into formal (although non-binding) memoranda of understanding to facilitate such cooperation. Ad hoc agreements can also exist in respect of particular investigations.
In what fora can civil charges be brought? In what fora can criminal charges be brought?
The ACCC and ASIC typically bring civil proceedings in the Federal Court of Australia.
The CDPP can bring criminal charges in various state and federal courts (often depending on where the offence was committed).
ASIC also has certain administrative powers, such as issuing infringement notices, banning orders and imposing licensing conditions. These can be imposed without commencing court proceedings.
Corporate criminal liability
Is there a legal concept of corporate criminal liability? How does the government prove that a corporation is criminally liable for the acts of its officers, directors or employees?
Companies can be charged and convicted of crimes. The Criminal Code Act 1995 (Cth) (the Code) dictates when the conduct and mental state of natural persons (ie, employees, agents, officers) will be attributed to a corporation in relation to offences that require both an act and an intent (also known as mens rea).
An action will be attributed to a corporation where an employee, agent or officer acted within the actual or apparent scope of his or her employment or authority.
Intention, knowledge or recklessness will be attributed to a corporation if:
- the company’s board carried out, authorised or permitted the conduct;
- a high managerial agent (such as a senior executive) carried out, permitted or authorised the conduct;
- a corporate culture existed that directed, encouraged or tolerated non-compliance with the relevant offence; or
- the company failed to maintain a corporate culture that required compliance with the relevant offence.
To date, there has been little judicial application of the Code’s corporate culture provisions.
Recently, a new foreign bribery offence has been proposed that would be an absolute liability offence for corporations unless the corporate can prove it had adequate procedures in place to try to prevent bribery. For more information on the new foreign bribery offence, see ‘Update and trends’.
Must the government evaluate any particular factors in deciding whether to bring criminal charges against a corporation?
All prosecution decisions by the CDPP are underpinned by the Prosecution Policy of the Commonwealth of Australia (the Prosecution Policy). The Prosecution Policy requires a two-stage test to be satisfied before a prosecution is commenced: first, there must be sufficient evidence to prosecute the case; and second, the prosecution must be in the public interest.
The factors relevant to the public interest test are not exhaustively defined, but include consideration of the following:
- the seriousness of the alleged offence;
- the need to give effect to regulatory or punitive imperatives;
- the company’s level of cooperation with the investigation;
- whether the offence is of considerable public concern;
- the prevalence of the alleged offence and the need for deterrence; and
- any other mitigating or aggravating circumstances.
In addition, ASIC and the ACCC each follow their own guidelines in deciding when to refer a matter to the CDPP for possible criminal prosecution.
Initiation of an investigation
What requirements must be met before a government entity can commence a civil or criminal investigation?
Legislation generally requires agencies to suspect that there has been a relevant contravention of the law before they can use their investigative powers. Informal investigative steps may be taken prior to developing this suspicion.
Each agency sets its own strategic priorities and guidelines on when an investigation should be commenced. Common considerations for all agencies include:
- a reasonable suspicion that a contravention of the law has occurred;
- the seriousness of the offence;
- whether a matter will test or clarify an important legal question;
- whether a legal determination will deter future conduct by others;
- general public interest in a legal determination; and
- the cost and time to bring the enforcement action.
What events commonly trigger a government investigation? Do different enforcement entities have different triggering events?
Investigations may be triggered by a variety of events, including self-reporting, complaints by market participants or consumers, whistle-blowers, referrals from other agencies, media coverage of a particular issue and the agency’s own identification of suspected misconduct.
For information about the key corporate risk areas identified by ASIC for 2017-2018, see ‘Update and trends’.
What protections are whistle-blowers entitled to?
Various protections exist for whistle-blowers in different circumstances. For example, whistle-blowers providing ‘protected information’ to ASIC have the following protections under the Corporations Act 2001 (Cth) (the Corporations Act) and the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act):
- ASIC must keep confidential the identity and information provided by the whistle-blower unless disclosure is specifically authorised by law;
- the whistle-blower has immunity from civil and criminal proceedings related to his or her disclosure of the protected information;
- the whistle-blower may seek a court order to be reinstated to his or her original position or another comparable position if his or her contract is terminated because of his or her disclosure of protected information; and
- the whistle-blower may seek compensation if he or she suffers damage, such as victimisation.
Public officials wishing to report alleged wrongdoing within the public sector are protected in the following ways by the Public Interest Disclosure Act 2013 (Cth):
- the identity of the whistle-blower must be kept confidential as far as practicable;
- the whistle-blower is granted immunity from civil, criminal and administrative liability for making the disclosure; and
- the whistle-blower cannot be discriminated against or terminated from his or her employment because of the whistle-blowing disclosure.
Reforms to whistle-blower laws that seek to improve protections available to corporate whistle-blowers and consolidate whistle-blower protections in the Corporations Act have been proposed by the government. For more information on the proposed reforms, see ‘Update and trends’.
At what stage will a government entity typically publicly acknowledge an investigation? How may a business under investigation seek anonymity or otherwise protect its reputation?
Government agencies will generally not comment substantively on an investigation until civil proceedings or a criminal prosecution have concluded.
A company under investigation has few formal protections of its anonymity and reputation. Companies that are listed on a stock exchange may also have relevant market disclosure obligations (see question 20) that could require disclosure of an investigation.
Evidence gathering and investigative techniques
Is there a covert phase of the investigation, before the target business is approached by the government? Approximately how long does that phase last?
Covert investigations can, and do, occur. There is no standard duration for the covert phase of an investigation. It will depend on the matter being investigated.
What investigative techniques are used during the covert phase?
A variety of covert investigative techniques might be used depending on what is being investigated and by which agency. The techniques include the following:
- undercover operatives; and
- monitoring phone calls and electronic communications.
A warrant may be required in order to use some of these techniques. Generally, warrants are obtained by the AFP. The ACCC and ASIC may only obtain stored telecommunications data from service providers. They cannot intercept and monitor live telecommunications.
After a target business becomes aware of the government’s investigation, what steps should it take to develop its own understanding of the facts?
A company may choose to conduct a prompt and targeted internal investigation. This will give the company more information on its potential legal and reputational exposure and so enable it to make more informed decisions on its dealings with the investigating agency, including as to cooperation.
An effective investigation typically involves preserving, collecting and reviewing relevant documents, and potentially interviewing key employees. Important questions about privilege should be considered prior to commencing, and during, any such investigation.
Evidence and materials
Must the target business preserve documents, recorded communications and any other materials in connection with a government investigation? At what stage of the investigation does that duty arise?
In all Australian jurisdictions there is an obligation to preserve evidence that is or may be relevant to current or anticipated legal proceedings. Criminal sanctions can apply where this obligation is breached with an intention to mislead a judicial tribunal.
The point at which legal proceedings are anticipated is a question of fact, and might arise before a government agency begins an investigation.
To minimise the risk of breaching this obligation, companies should consider preserving all potentially relevant materials as soon as allegations arise that might lead to a government investigation (ie, receiving an internal complaint regarding corruption by a company employee).
During the course of an investigation, what materials - for example, documents, records, recorded communications - can the government entity require the target business to provide? What limitations do data protection and privacy laws impose and how are those limitations addressed?
The ACCC and ASIC have broad powers to compel businesses to produce information, documents or other materials in accordance with relevant legislation. Failure to comply with a statutory notice without reasonable excuse is an offence. They can also require employees to attend compulsory examinations where questions must be answered (see question 17). Data privacy laws in Australia generally do not provide an excuse for failing to produce such materials.
The AFP can execute search warrants in accordance with the terms of those warrants.
Agencies must protect the confidentiality and privacy of the information they gather or receive. However, they might be required to disclose information pursuant to a court order requiring production of certain documents, or in response to a request under the Freedom of Information Act 1982 (Cth).
On what legal grounds can the target business oppose the government’s demand for materials? Can corporate documents be privileged? Can advice from an in-house attorney be privileged?
The target business may refuse to hand over privileged materials.
Corporate documents and advice from in-house counsel can be privileged if they meet the requirements of Australian privilege law and that privilege has not been waived. Advice from in-house counsel will be examined closely to ensure privilege vested in the communications in the first place.
Requests for information might also be challenged if the subject matter of the inquiry is outside the scope of authority of the requesting agency, the search warrant or request has not been properly issued, or the requested materials are not reasonably relevant to the inquiry, or too vaguely defined.
May the government compel testimony of employees of the target business? What rights against incrimination, if any, do employees have? If testimony cannot be compelled, what other means does the government typically use to obtain information from corporate employees?
ASIC and the ACCC can require an employee to attend a compulsory interview under oath. Failure to comply with that requirement without a reasonable excuse is an offence. At that interview, the employee must answer all questions unless answering that question would disclose information covered by a valid claim of legal privilege. The right to claim the privilege against self-incrimination is not a valid basis to refuse to answer a question; however, if the privilege is claimed, the responses cannot be used in subsequent criminal or civil penalty proceedings against the employee. To claim the privilege, individuals should say the word ‘privilege’ before answering each question.
The AFP cannot compel someone to answer questions, or arrest or detain someone merely for failure to answer questions.
In relation to the ability of these agencies to obtain documents and information, see also question 15.
Under what circumstances should employees obtain their own legal counsel? Under what circumstances can they be represented by counsel for the target business?
It is advisable for employees implicated in an investigation to obtain separate legal counsel if their interests are inconsistent with, or may later diverge from, those of the corporation.
If there is no conflict of interest, an employee may be represented by the same counsel as his or her employer. However, any risk of a divergence of this interest should be closely monitored throughout the investigation.
Where the government is investigating multiple target businesses, may the targets share information to assist in their defence? Can shared materials remain privileged? What are the potential negative consequences of sharing information?
Unless expressly precluded from doing so (for example, by a court order), and so long as the information sharing does not interfere with the agency’s investigation, target entities can share information to assist in their respective defences. The content of a compulsory ASIC or ACCC interview (see question 17) is strictly confidential and only in rare instances will the ACCC or ASIC permit disclosure to a third party. In such circumstances, disclosure must be in accordance with any directions given by the relevant agency.
It is possible to share privileged information in certain circumstances without waiving that privilege. However, any decision to disclose should be approached with caution, and is never risk-free.
One risk of information sharing is that the recipient might use the information to seek a better settlement outcome. For example, the ACCC has a leniency programme under which it provides immunity to the first member of a cartel that reports to the ACCC (see question 22). As such, the sharing entity might become further implicated in the suspected wrongful conduct.
At what stage must the target notify investors about the investigation? What should be considered in developing the content of those disclosures?
Companies listed on a stock exchange may have market disclosure obligations that require disclosure of an investigation. For example, companies listed on the Australian Securities Exchange must immediately notify the market of any information of which they are aware that a reasonable person might expect to have a material effect on the value of the company’s securities (subject to certain prescribed exceptions). Whether or not a regulatory investigation would have a material effect is a question of fact, with relevant considerations including the likely legal, financial and reputational consequences of the investigation.
Notification before investigation
Is there a mechanism by which a target business can cooperate with the investigation? Can a target notify the government of potential wrongdoing before a government investigation has started?
Each agency handles cooperation in its own way. Generally, it is a matter of contacting the relevant agency and discussing how cooperation ought to proceed. Certain agencies have written policies (see question 22).
Companies can self-report potential wrongdoing at any time (ie, both before and once an investigation is on foot).
Businesses that hold an Australian financial services licence or similar licence issued by ASIC are also subject to self-reporting obligations to relevant government agencies in relation to certain breaches of the law.
Voluntary disclosure programmes
Do the principal government enforcement entities have formal voluntary disclosure programmes that can qualify a business for amnesty or reduced sanctions?
The ACCC has a formal disclosure programme for cartel conduct. The programme provides immunity from ACCC action to the first cartel participant that reports involvement in a cartel. However, immunity is not available to cartel ringleaders, and is subject to certain conditions, such as full disclosure and ongoing cooperation with the investigation.
The ACCC also has a non-binding cooperation policy for non-cartel conduct whereby partial or complete immunity might be given to companies that provide valuable information regarding contraventions of which the ACCC either is unaware of or has insufficient evidence to initiate proceedings.
The CDPP and the AFP have released joint best practice guidelines indicating how they will approach self-reporting by companies of suspected foreign bribery and related offences. For more information on the guidelines, see ‘Update and trends’.
ASIC does not have a formal voluntary disclosure programme. However, self-disclosure and cooperation may still lead to more favourable enforcement outcomes, including amnesty or reduced sanctions.
Timing of cooperation
Can a target business commence cooperation at any stage of the investigation?
Yes, although cooperation at an earlier stage is more likely to be valued and so factor into discussions regarding settlement outcomes.
What is a target business generally required to do to fulfil its obligation to cooperate?
This will vary depending on the agency and the matter being investigated. However, cooperation might include:
- self-reporting misconduct;
- disclosing all relevant information and documents;
- conducting a parallel internal investigation, and sharing its findings;
- implementing remedial measures, such as improved compliance protocols and training;
- terminating implicated employees;
- responding promptly to any requests from the investigating agency;
- being prepared to make restitution (where appropriate);
- providing evidence that is admissible in court proceedings; and
- pleading guilty or admitting to misconduct.
When a target business is cooperating, what can it require of its employees? Can it pay attorneys’ fees for its employees? Can the government entity consider whether a business is paying employees’ (or former employees’) attorneys’ fees in evaluating a target’s cooperation?
The required level of cooperation will generally depend on the employee’s contract and any applicable company policies. Companies should consider including a provision in all employment contracts that employees are required to cooperate with any internal or government investigations.
There are statutory restrictions that limit a company’s ability to pay the legal costs of its past and present officers (ie, directors and senior management). Generally, these restrictions prohibit paying the legal expenses of an officer in defending or resisting proceedings in which he or she is found guilty of a criminal offence or incurs liability for a civil penalty in relation to his or her conduct as an officer.
Agencies are not prohibited from considering whether a business pays its employees’ legal fees when evaluating cooperation.
What considerations are relevant to an individual employee’s decision whether to cooperate with a government investigation in this context? What legal protections, if any, does an employee have?
As with companies, cooperation might secure an individual a more lenient resolution to a government investigation in which he or she is implicated.
It will depend on the circumstances whether or not cooperation is advisable in a particular case. The individual ought to obtain independent legal advice before making a decision. Factors that will be relevant include the following:
- the employee’s degree of culpability;
- the information within the employee’s possession; and
- where relevant, the whistle-blower regime under which he or she would be protected.
As described in question 17, an employee might also be compelled to cooperate with a government investigation in certain circumstances.
An employee cannot be ‘unfairly dismissed’. Whether or not terminating an employee for refusing to cooperate with an investigation or participate in an interview constitutes unfair dismissal will depend on the circumstances of each case, including the employee’s contract and any applicable company policies.
How does cooperation affect the target business’s ability to assert that certain documents and communications are privileged in other contexts, such as related civil litigation?
Disclosure of privileged material is always a risk. Some businesses enter into agreements with agencies with the intention of disclosing privileged documents without waiving privilege.
These agreements have not been subjected to detailed judicial scrutiny. There is considerable risk that they would not be effective.
What mechanisms are available to resolve a government investigation?
Australia does not have a structured procedure for settling serious corporate crime investigations. For civil regulatory investigations, the main type of negotiated resolution is an enforceable undertaking provided by the target business. The obligations imposed by an undertaking vary, but at a minimum will require the company to cease any problematic conduct. They might also require compensation payments to damaged parties, corrective disclosures and improved compliance procedures.
The ACCC and ASIC can issue infringement notices to the target business. These impose a pecuniary penalty, although less than what is available in court proceedings. If the notice is complied with, no further regulatory action can be taken.
Court proceedings might also be used to resolve a government investigation. The potential consequences of a court proceeding are discussed in questions 30 and 31.
Whether admitting wrongdoing will lead to a negotiated resolution, or a reduced sanction in court proceedings, will depend on the investigation.
Admission of wrongdoing
Is an admission of wrongdoing by the target business required? Can that admission be used against the target in other contexts, such as related civil litigation?
There is no formal requirement that a business admit wrongdoing to enter into an enforceable undertaking. However, it is at an agency’s discretion to accept or reject an enforceable undertaking, and it may make this a requirement.
Most Australian courts have a statutory discretion to exclude evidence where the prejudicial effect would outweigh its probative value. In criminal proceedings, there is also a discretion to exclude evidence of an admission where, having regard to the circumstances of the admission, it would be unfair to the defendant for it to be included. Whether an admission of wrongdoing during a government investigation would be excluded on these bases will depend on the facts, and there has been little judicial guidance on this issue.
What civil penalties can be imposed on businesses?
The main civil penalty imposed on businesses is a pecuniary penalty. Penalty amounts (which vary according to the violation) are generally capped, or calculated in accordance with a statutory formula.
For example, the maximum civil penalty for violating an antitrust provision is the greater of:
- A$10 million;
- three times the value of the benefit obtained from the violating conduct; or
- if the benefit value cannot be determined, 10 per cent of the company’s (and related entities’) turnover in the preceding 12 months.
The maximum penalty for breaches of the civil prohibitions in the Corporations Act (for example, market disclosure obligations, market manipulation or insider trading) is A$1 million.
Breaches of the ASIC Act (for example, unconscionable conduct or false and misleading representations in financial services) are capped at A$2.1 million.
Companies can also be required to pay compensation to harmed parties.
The Australian government has announced that it will be increasing civil penalties for contraventions of the Corporations Act and the ASIC Act. A time frame for the proposed amendments has not yet been announced. For more information about the proposed changes, see ‘Update and trends’.
What criminal penalties can be imposed on businesses?
Companies guilty of an offence are liable for financial penalties. Penalty amounts (which vary according to the offence) are generally capped, or calculated in accordance with a statutory formula.
For example, the maximum penalty for bribery is the greater of:
- A$21 million;
- three times the value of the benefit obtained from the conduct constituting the offence; or
- if the benefit value cannot be determined, 10 per cent of the company’s (and related entities’) turnover in the preceding 12 months.
Cartel offences apply the same formula; however, the specified figure is A$10 million rather than A$21 million.
Whether or not a company receives the maximum penalty will depend on a variety of factors, including but not limited to the company’s culpability and level of cooperation with the investigation.
Increases to the criminal penalty provisions in the Corporations Act have also been announced. For more information about the proposed changes to criminal penalties, see ‘Update and trends’.
What is the applicable sentencing regime for businesses?
Australia does not have a uniform sentencing policy for businesses. Sentencing is a matter of judicial discretion, although a maximum penalty will normally be specified in the legislation establishing the offence. Mandatory sentences for corporate crimes are uncommon.
What does an admission of wrongdoing mean for the business’s future participation in particular ventures or industries?
Although the introduction of a debarment regime has been recommended by a Senate Committee inquiry into Australia’s foreign bribery laws, there is currently no formal debarment regime in Australia that would prohibit companies convicted of wrongdoing from participating in public procurements. However, a previous criminal conviction or other misconduct may weigh heavily against a business in a government agency’s bidder evaluation. This could particularly be the case if the offence or misconduct was high-profile or flagrant. It should also be noted that a criminal conviction in Australia may affect a company’s ability to participate in public procurement in other countries that have a formal debarment regime.
Some private companies have internal policies that prevent them from working with entities convicted of certain wrongs.
For companies providing financial services, ASIC may revoke or impose conditions on their Australian financial services licence.
Individuals can be disqualified from managing a corporation.
The reputational consequences of an admission of wrongdoing should also be considered.
UPDATES & TRENDS
Updates & Trends
Updates and trends
Proposed new foreign bribery offence
On 6 December 2017, the government introduced the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 (the Bill) into the Senate. The Bill provides for a number of key amendments to the Criminal Code that include the introduction of a new corporate offence of failing to prevent foreign bribery. Under the reform proposals, companies will be automatically liable for foreign bribery committed by employees, contractors and agents (including those operating overseas), except where the company can prove it had adequate procedures in place to prevent foreign bribery. The Bill could pass into legislation in 2018.
Proposed introduction of deferred prosecution agreements
In parallel with the proposed new foreign bribery offence, the draft bill also proposes the adoption of a deferred prosecution agreement (DPA) scheme (akin to that implemented in the US and the UK). DPAs are negotiated resolutions between a prosecutor (in this case, the CDPP) and a company, in which the prosecutor agrees that the company will only be prosecuted for certain serious corporate crimes if it does not fulfil its obligations under the agreement. In the current draft legislation, DPAs will be available to companies (not individuals) and will cover serious corporate crime, such as bribery, fraud and money laundering.
Increased civil and criminal penalties for corporations
The government has announced that it will increase and harmonise corporate penalties for criminal offences and civil contraventions for corporations. The announcement stated that the penalties for the most serious criminal offences under the Corporations Act will increase to a maximum of the greater of:
- A$9.45 million;
- three times the benefit gained or loss avoided; or
- 10 per cent of the annual turnover of the company.
The penalties for civil contraventions, imposed by the courts, will also increase to a maximum of the greater of:
- A$10.5 million;
- three times the benefit gained or loss avoided; or
- 10 per cent of the annual turnover.
In addition to increasing civil penalties, ASIC will be able to seek disgorgement remedies (removal of benefits illegally obtained or losses avoided) in civil penalty proceedings brought under the Corporations Act, the National Consumer Credit Protection Act and the ASIC Act. The government will also increase the number of sections in these acts liable to civil penalties when breached, and increase the number of sections for which ASIC will be permitted to issue infringement notices. As yet, no time frame has been indicated for the introduction of these amendments.
Enhanced whistle-blower protections
The government has proposed reforms to harmonise private sector whistle-blowing laws and grant increased protections to corporate whistle-blowers. The reforms propose to expand the class of potential whistle-blowers (including former employees, contractors, officers, and relatives and dependants of these persons) and allow disclosures to be protected even if made anonymously. Notably, the reforms also seek to implement new requirements for large companies to have in place a clear and accessible internal whistle-blower policy, and increase protections and penalties, including by introducing civil penalties of up to A$1 million for companies contravening confidentiality and anti-victimisation protections.
The CDPP and AFP have released joint best practice guidelines that indicate how they will approach self-reporting by companies voluntarily seeking to disclose suspected foreign bribery and related offences (the Guidelines). The Guidelines, which are designed to operate within the existing framework of the Prosecution Policy, provide greater clarity on the expectations of the AFP and the CDPP when companies self-report misconduct, including when and to which agency a self-report should be made, the conduct of an internal investigation giving rise to a self-report and any post-report cooperation required of the disclosing company.
New financial benchmark laws
The government and ASIC have enacted a number of benchmark reforms and regulations, designed to protect against possible abuse and manipulation of financial benchmarks. The new laws impose a licensing regime for financial benchmarks that requires administrators of ‘significant’ benchmarks to obtain a ‘benchmark administrator’ licence and comply with a number of new regulatory requirements. These legislative reforms also make manipulation of any financial benchmark, or products used to determine such a benchmark, a specific offence and subject to civil and criminal penalties.
Risk areas in ASIC’s Corporate Plan
In its Corporate Plan for 2017-2018, ASIC has outlined the key risk areas faced by corporates seeking to comply with ASIC’s rules and regulations. According to ASIC, the focus areas include non-compliant culture and misconduct in financial services and markets, the financial vulnerability of consumers, digital disruption, inadequate risk management of technological change, cyber threats and cross-border business.
Class action reforms
The Australian Law Reform Commission has initiated an inquiry into class action proceedings and third-party litigation funders. One of the areas of the inquiry looks into whether solicitors should be permitted to enter into contingency fee arrangements (something that is currently prohibited) and is scrutinising the fees and charges of litigation funders.
Banking Executive Accountability Regime
By an amendment to the Banking Act 1959 that received royal assent on 20 February 2018, the government has introduced the Banking Executive Accountability Regime (BEAR), which applies to authorised deposit-taking institutions (ADIs), their subsidiaries and Australian branches of foreign ADIs. BEAR introduces new obligations in relation to accountability, key personnel and notifications, as well as imposing restrictions on the remuneration of ‘accountable persons’ (as defined under the Act). The obligations will come into force on 1 July 2018 for large ADIs, which are defined as ‘an ADI whose total resident assets value for a financial year is or exceeds . . . $100 billion’, and on 1 July 2019 for medium-sized and small ADIs. BEAR will be administered by the Australian Prudential Regulatory Authority. The maximum pecuniary penalties for non-compliance with the accountability, key personnel and notification obligations and the remuneration restrictions are A$210 million (for large ADIs), A$52.5 million (for medium ADIs) and A$10.5 million (for small ADIs).