If you and your business understand the ASIC investigation process, you will be able to better manage the investigation with as little disruption as possible to your business.

The Australian Securities & Investments Commission is Australia’s company regulator.  ASIC is responsible for investigating company misconduct and enforcing company law.

A complaint is taken

ASIC may be informed of company misconduct from a number of different sources. These sources may include a member of the public reporting misconduct. This may occur when a client or customer of the business is dissatisfied with an aspect of the company’s handling of a particular matter.

There are a number of referrals made by other agencies and regulators who may report misconduct to ASIC. This is the case where there may be an occupational regulator whose ambit does not extend to addressing a particular part of the complaint which would be dealt with by ASIC.

There are also a number of reports which ASIC receives as required by law which may prompt an investigation. For example, through statutory reports from auditors, insolvency practitioners and licensees.

Scope is assessed

Once a complaint is taken, ASIC will assess whether or not the complaint falls within the scope of their regulatory responsibility.  If it does not, it will be referred to another entity or regulator as appropriate.

In order to assess whether or not the complaint falls within the scope of ASIC’s regulatory powers the following is considered:

  • The extent of the harm or loss;
  • The benefits of pursuing the misconduct relative to the cost of public monies;
  • The type and seriousness of the misconduct alleged and the strength of evidence supporting the complaint;
  • Alternative courses of action other than formal investigation.

The seriousness of the alleged misconduct includes a particular impact on market integrity or the confidence of investors and financial consumers will guide the course of an investigation by ASIC.  The regulator will look to the impact and consequences of the misconduct in order to assess whether or not it is worth pursuing.

The regulator will also consider the extent of the misconduct and whether or not it is a widespread concern or part of a growing trend.

Perhaps one of the most pressing considerations for businesses is to see whether or not ASIC would consider alternatives to formal investigation through other regulatory tools. Other regulatory tools may include engagement with stakeholders, surveillance, guidance, education and policy advice instead of enforcement action.

Evidence gathering methods

Once ASIC decides whether or not a formal investigation will be pursued, it has a number of information gathering tools which it is able to use.  These tools include:

  • Requiring the production of documents;
  • Inspecting company documents;
  • Requiring disclosure of information;
  • Requiring company officers or employees to attend compulsory examinations;
  • Compelling assistance with an investigation; and
  • Applying for a search warrant.

The information gathering tools that ASIC have are powers that compel information and documentary evidence from individuals and the company.  In relation to each of these powers, it is important that company officers and employees are aware of their rights and responsibilities in relation to that compliance.  Before you provide any documents to ASIC or any other regulator, it is important that you obtain advice.

It may be that while ASIC makes a request from you for documents, there may be no basis upon which you might be compelled to provide that material at that time.  If you are given a notice by ASIC which sets out a requirement to produce documents or information you may be compelled to produce documents or information. Before you comply with such a notice, you should seek advice from a lawyer. Documents may tend to incriminate you or the company in relation to certain aspects of your operations.  This can have significant consequences for you and the company if not handled appropriately.

You will not be required to produce documents which are the subject of legal professional privilege.  If you are unsure about how to comply with a notice given to you by ASIC, you should seek advice at your earliest opportunity.

Penalties for misconduct

If an alternative course of action is not available, ASIC will assess appropriate remedies and enforcement tools.  These may include:

  • Punitive criminal penalties
  • Protective action

Punitive criminal penalties can include terms of imprisonment, community service orders, financial penalties under criminal law and the possibility of convictions.  If you are facing a criminal proceeding for company misconduct, the penalties may include very serious consequences for you and the company.

Protective actions are actions which are designed to deter the conduct in a way that does not involve criminal penalties.  These actions may include disqualification from managing operations or revocation, suspension or variation of licenses and public warning notices. Although not personally punitive in the way that a jail sentence would be, these protective actions can have devastating effects on companies and businesses.

Preventative action

There are a number of proactive governance, risk and compliance practice that you can engage in to ensure that your practice limits the risk associated with ASIC investigations or to avoid ASIC investigations altogether.

It is important that you review your current compliance, risk and governance documentation, policies and structure to assist you to develop more effective frameworks.  You may undertake systematic file reviews or peer reviews in order to ensure compliance across your company.  You may undertake a legal risk assessment or engage an external advisor to review your operations.  Taking these steps may assist you to ensure that, in the event of ASIC receiving a complaint, you are able to demonstrate the proactive steps you have taken and minimize the risk to your overall operations.

How can Robertson O’Gorman Solicitors help you?

If you are concerned about a complaint of misconduct being made against you or your company, it is important that you immediately seek legal advice. Delays in obtaining advice can lead to significant consequences for your company and you as a company officer or employee.

At Robertson O’Gorman Solicitors we pride ourselves on protecting your interests in the face of an investigation by the regulator so that your business can get back on track.