Class 20 Corporate regulation: the role of ASIC

Corporations Act ss 184; 1311; Part 9.4B; s 1318; s 206C, s1317H

CORPORATIONS ACT 2001 - SECT 184

Good faith, use of position and use of information--criminal offences

Good faith--directors and other officers

(1) A director or other officer of a corporation commits an offence if they:

(a) are reckless; or

(b) are intentionally dishonest;

and fail to exercise their powers and discharge their duties:

(d) for a proper purpose.

Note: Section187 deals with the situation of directors of wholly-owned subsidiaries.

Use of position--directors, other officers and employees

(2) A director, other officer or employee of a corporation commits an offence if they use their position dishonestly:

(a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or

(b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.

Use of information--directors, other officers and employees

(3) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation commits an offence if they use the information dishonestly:

(a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or

(b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.

CORPORATIONS ACT 2001 - SECT 1311

General penalty provisions

(1) A person who:

(a) does an act or thing that the person is forbidden to do by or under a provision of this Act; or

(b) does not do an act or thing that the person is required or directed to do by or under a provision of this Act; or

is guilty of an offence by virtue of this subsection, unless that or another provision of this Act provides that the person:

(d) is guilty of an offence; or

(e) is not guilty of an offence.

Note: Chapter2 of the Criminal Code sets out the general principles of criminal responsibility.

(1A) Paragraphs(1)(a), (b) and (c) only apply to a provision in the following list if a penalty, pecuniary or otherwise, is set out in Schedule3 for that provision, or for a provision or provisions in which that provision is included:

(a) Chapters2A, 2B and 2C;

(b) Parts2F.2 and 2F.3;

(d) Parts5B.1 and 5B.3;

(daa) Chapter5D;

(da) Chapter6CA;

(db) Chapter7;

(dc) Chapter8;

(e) Chapter10.

(2) Subject to section1312, a person who is guilty of an offence against this Act, whether by virtue of subsection(1) or otherwise, is punishable, on conviction, by a penalty not exceeding the penalty applicable to the offence.

(3) Where:

(a) subsection(1) operates in relation to a provision of this Act so as to make a person guilty of an offence; or

(b) a provision of this Act (other than this section) provides that a person is, in circumstances referred to in the provision, guilty of an offence;

and a penalty, pecuniary or otherwise, is set out in Schedule3 for that provision, or for a provision or provisions in which that provision is included, the penalty applicable to the offence is the penalty so set out.

(4) Where a provision of this Act (other than this section) provides that the penalty applicable to a contravention of a particular provision of this Act is a specified penalty, pecuniary or otherwise, the penalty applicable to an offence constituted by a contravention of the particular provision is the specified penalty.

(5) Except as provided in subsection(3) or (4) or in a provision of this Act (other than this section), the penalty applicable to the offence is a fine of 5 penalty units.

(6) An offence based on subsection(1) for which the penalty is set out in subsection(5) is an offence of strict liability.

Note: For strict liability , see section6.1 of the Criminal Code .

PART 9.4B----CIVIL CONSEQUENCES OF CONTRAVENING CIVIL PENALTY PROVISIONS

1317DA. Definitions

Definitions

In this Act:

"corporation/scheme civil penalty provision" means a provision referred to in subsection 1317E(1), other than in paragraphs 1317E(1)(ja) to (jg).

"financial services civil penalty provision " means a provision referred to in any of paragraphs 1317E(1)(ja) and (jaa) to (jg).

1317E. Declarations of contravention

Declarations of contravention

(1) If a Court is satisfied that a person has contravened 1 of the following provisions, it must make a declaration of contravention:

(a) subsections 180(1) and 181(1) and (2), 182(1) and (2), 183(1) and (2) (officers' duties);

(b) subsection 209(2) (related parties rules);

(d) subsection 344(1) (requirements for financial reports);

(e) subsection 588G(2) (insolvent trading);

(f) subsection 601FC(5) (duties of responsible entity)

(g) subsection 601FD(3) (duties of officers of responsible entity)

(h) subsection 601FE(3) (duties of employees of responsible entity)

(i) subsection 601FG(2) (acquisition of interest in scheme by responsible entity)

(j) subsection 601JD(3) (duties of members)

(jaaa) subsection 601UAA(2) (duties of officers of licensed trustee company);

(jaab) subsection 601UAB(2) (duties of employees of licensed trustee company);

(ja) subsection 674(2), 674(2A), 675(2) or 675(2A) (continuous disclosure);

(jaaa) subsection 798H(1) (complying with market integrity rules);

(jaa) subsection 985E(1) (issuing or increasing limit of margin lending facility without having made assessment etc.);

(jab) subsection 985H(1) (failure to assess a margin lending facility as unsuitable);

(jac) subsection 985J(1) (failure to give assessment to retail client if requested before issue of facility or increase in limit);

(jad) subsection 985J(2) (failure to give assessment to retail client if requested after issue of facility or increase in limit);

(jae) subsection 985J(4) (demanding payment to give assessment to retail client);

(jaf) subsection 985K(1) (issuing or increasing limit of margin lending facility if unsuitable);

(jag) section985L (making issue of margin lending facility conditional on retail client agreeing to receive communications through agent);

(jah) subsection 985M(1) (failure to notify of margin call where there is no agent);

(jai) subsection 985M(2) (failure to notify of margin call where there is an agent);

(jb) section1041A (market manipulation);

(jc) subsection 1041B(1) (false trading and market rigging--creating a false or misleading appearance of active trading etc.);

(jd) subsection 1041C(1) (false trading and market rigging--artificially maintaining etc. market price);

(je) section1041D (dissemination of information about illegal transactions);

(jf) subsection 1043A(1) (insider trading);

(jg) subsection 1043A(2) (insider trading);

(k) subclause 29(6) of Schedule4.

These provisions are the civil penalty provisions .

Note: Once a declaration has been made ASIC can then seek a pecuniary penalty order (section1317G) or (in the case of a corporation/scheme civil penalty provision) a disqualification order (section206C).

(2) A declaration of contravention must specify the following:

(a) the Court that made the declaration;

(b) the civil penalty provision that was contravened;

(d) the conduct that constituted the contravention;

(e) if the contravention is of a corporation/scheme civil penalty provision--the corporation or registered scheme to which the conduct related.

1317F. Declaration of contravention is conclusive evidence

Declaration of contravention is conclusive evidence

A declaration of contravention is conclusive evidence of the matters referred to in subsection 1317E(2).

1317G. Pecuniary penalty orders

Pecuniary penalty orders

Corporation/scheme civil penalty provisions

(1) A Court may order a person to pay the Commonwealth a pecuniary penalty of up to $200,000 if:

(a) a declaration of contravention by the person has been made under section1317E; and

(aa) the contravention is of a corporation/scheme civil penalty provision; and

(b) the contravention:

(i) materially prejudices the interests of the corporation or scheme, or its members; or

(ii) materially prejudices the corporation's ability to pay its creditors; or

(iii) is serious.

Financial services civil penalty provisions

(1A) A Court may order a person to pay the Commonwealth a pecuniary penalty of the relevant maximum amount if:

(a) a declaration of contravention by the person has been made under section1317E; and

(b) the contravention is of a financial services civil penalty provision; and

(i) materially prejudices the interests of acquirers or disposers of the relevant financial products; or

(ii) materially prejudices the issuer of the relevant financial products or, if the issuer is a corporation or scheme, the members of that corporation or scheme; or

(iii) is serious.

(1B) The relevant maximum amount is:

(a) $200,000 for an individual; or

(b) $1 million for a body corporate.

Market integrity rules

(1C) A Court may order a person to pay the Commonwealth a pecuniary penalty if:

(a) a declaration of contravention by the person has been made under section...

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