ASIC compares penalties for corporate crime

 ASIC, Corporate Insolvency, Offences, Regulation, White collar crime  Comments Off on ASIC compares penalties for corporate crime
Mar 212014
 

The Australian Securities and Investments Commission (ASIC) has completed a review of penalties in Australia for corporate wrongdoing to assess whether they are proportionate and consistent.  The review compared ASIC’s penalties with those in other countries; those of other Australian regulators; and across ASIC’s regime.white-collar-cartoon-01

 

Results of this review were released yesterday (20 March 2014) in Report 387 – “Penalties for corporate wrongdoing”.

Key findings

ASIC says the key findings show that:

  • on the international comparison —
    • while our maximum criminal penalties—jail and fines—are broadly consistent with those available in other countries, there are significantly higher prison terms in the US, and higher fines in some overseas countries for certain offences;
    • there is a broader range of civil and administrative penalties in other countries, they are higher, and they include the ability to remove financial benefit from wrongdoing (i.e. disgorgement);
  • on the comparison with other Australian regulators—
    • the maximum civil penalties available to ASIC are lower than those available to other regulators and are fixed amounts, not multiples of the financial benefits obtained from wrongdoing; and
  • on the comparison across ASIC’s regime—
    • there are differences between the types and size of penalties for similar wrongdoing. For example, providing credit without a licence can attract a civil penalty up to ten times greater than the criminal fine for those who provide financial services without a licence.

ASIC media release

In releasing the report ASIC Chairman Greg Medcraft said:

“Effective enforcement is critical for ASIC in pursuing our strategic priorities of promoting fair and efficient financial markets and ensuring confident and informed investors and financial consumers. It depends on outcomes that genuinely deter corporate wrongdoing. The public expects ASIC to take strong action against serious corporate wrongdoers. Those who break the law and cause severe damage should face tough penalties. This will make them and others think twice about breaking the law. Tough penalties have a powerful deterrent effect.”

jailfree

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NOTE by author: Report 387 does not appear to review penalties for summary insolvency offences.  To read my paper on this subject, “Convictions for summary insolvency offences committed by company directors”, regarding the Australian scene, CLICK HERE. 

Most reports of director misconduct are shelved

 ASIC, Insolvency Laws, Offences, Regulation, White collar crime  Comments Off on Most reports of director misconduct are shelved
Nov 042010
 

89% of the initial offence referral reports sent to Australia’s corporate regulator by liquidators and other external administrators end up consigned to oblivion.  Of the remaining 11%, approximately 66% receive a similar fate.

This data is revealed in the latest annual report by the Australian Securities and Investments Commission (ASIC), tabled in Parliament on 28 October 2010. 

Unfortunately ASIC’s annual report does not offer any explanation for the result, which is that the vast majority of offence allegations are dropped or rejected.

It would be instructive to know, for example, whether a lot of statutory reports of “misconduct and suspicious activity” are badly prepared, inadequate or unjustified; and/or whether ASIC regards a lot of the alleged misconduct and offences as minor or trivial.

The official ASIC analysis chart – “Statutory reports 2009-10” – is shown below, after my own description of what the chart means.  (This is my second post on this subject.)

What the ASIC chart means 

In the 2009/10 financial year ASIC received 9,074 reports from liquidators, administrators and receivers (external administrators).  Of these 6,509 (71.7%) contained allegations of “misconduct or suspicious activity”.

Normally ASIC does not act upon an external administrator’s allegations of misconduct or suspicious activity unless the allegations are supported by a detailed report by the external administrator.

ASIC refers to this detailed report as a supplementary report, since typically it supplements or expands upon an initial report by the external administrator.

Usually a supplementary report is put together at the request of ASIC.

In 2009/10 ASIC received 5,748 initial reports alleging misconduct or suspicious activity.  Presumably all of these were “analysed and assessed”.  Out of these 5,748 reports ASIC selected 11% (632) as worthy of further attention by way of a supplementary report. 

The end result for the other 89% of initial reports (5,116) was to be “recorded”.  This probably means that nothing worth mentioning was done about them.

The same fate befell 66% of the 761 supplementary reports alleging misconduct or suspicious activity.  Of the other 34%, ASIC referred 23% (175) “for compliance, investigation or surveillance” and referred 10% (76) “to assist existing investigation or surveillance”.  ASIC concluded that 1% of the reports (8) did not actually identify offences.

There is no data in the chart on how many reports by external administrators led to prosecutions for offences.

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The ASIC chart

ASIC’s notes to chart

“Initial reports are electronic reports lodged under Schedule B of Regulatory Guide 16.  Generally, ASIC will determine whether to request a supplementary report on the basis of the initial report.  Supplementary reports are typically detailed free-format reports, which detail the results of the external administrator’s inquiries and the evidence to support the alleged offences.  Generally, ASIC can determine whether to commence a formal investigation on the basis of a supplementary report. “

 ASIC ‘s official summary

“Liquidators, administrators and receivers (external administrators) are required to report to ASIC if they suspect that company officers have been guilty of an offence or, in the case of liquidators, if the return to unsecured creditors may be less than 50 cents in the dollar. As part of our response to the GFC (Global Financial Crisis), ASIC committed to increasing action on reports alleging misconduct from insolvency practitioners, following a 25% increase in insolvency appointments in 2008-09.  This year, a significantly increased proportion of supplementary reports (33% compared with 24% in 2008-09) were referred for compliance, investigation or surveillance.  Fewer reports failed to identify any offence.”

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The comments and materials contained on this blog are for general information purposes only and are subject to the disclaimer.