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Corporate Regulation The Role Of Asic Notes

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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: (c) in good faith in the best interests of the corporation; or (d) for a proper purpose. Note: Section 187 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 (c) otherwise contravenes a provision of this Act; 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: Chapter 2 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 Schedule 3 for that provision, or for a provision or provisions in which that provision is included: (a) Chapters 2A, 2B and 2C; (b) Parts 2F.2 and 2F.3; (c) Chapters 2G, 2H, 2J, 2M (other than Part 2M.4), 2N, 2P and 5A; (d) Parts 5B.1 and 5B.3; (daa) Chapter 5D; (da) Chapter 6CA; (db) Chapter 7; (dc) Chapter 8; (e) Chapter 10. (2) Subject to section 1312, 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 Schedule 3 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 section 6.1 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); (c) subsections 254L(2), 256D(3), 259F(2) and 260D(2) (share capital transactions); (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) section 985L (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) section 1041A (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) section 1041D (dissemination of information about illegal transactions); (jf) subsection 1043A(1) (insider trading); (jg) subsection 1043A(2) (insider trading); (k) subclause 29(6) of Schedule 4. These provisions are the civil penalty provisions . Note: Once a declaration has been made ASIC can then seek a pecuniary penalty order (section 1317G) or (in the case of a corporation/scheme civil penalty provision) a disqualification order (section 206C). (2) A declaration of contravention must specify the following: (a) the Court that made the declaration; (b) the civil penalty provision that was contravened; (c) the person who contravened the provision; (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 section 1317E; 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 section 1317E; and (b) the contravention is of a financial services civil penalty provision; and (c) the contravention: (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 1317E; and (b) the contravention is of subsection 798H(1) (complying with market integrity rules). (1D) The maximum amount that the court may order the person to pay for contravening a market integrity rule is the penalty amount set out in the market integrity rules for the rule. Penalty a civil debt etc. (2) The penalty is a civil debt payable to ASIC on the Commonwealth's behalf. ASIC or the Commonwealth may enforce the order as if it were an order made in civil proceedings against the person to recover a debt due by the person. The debt arising from the order is taken to be a judgment debt. 1317H. Compensation orders--corporation/scheme civil penalty provisions Compensation orders--corporation/scheme civil penalty provisions Compensation for damage suffered (1) A Court may order a person to compensate a corporation or registered scheme for damage suffered by the corporation or scheme if: (a) the person has contravened a corporation/scheme civil penalty provision in relation to the corporation or scheme; and (b) the damage resulted from the contravention. The order must specify the amount of the compensation. Note: An order may be made under this subsection whether or not a declaration of contravention has been made under section 1317E. Damage includes profits (2) In determining the damage suffered by the corporation or scheme for the purposes of making a compensation order, include profits made by any person resulting from the contravention or the offence. Damage includes diminution of value of scheme property (3) In determining the damage suffered by the scheme for the purposes of making a compensation order, include any diminution in the value of the property of the scheme. (4) If the responsible entity for a registered scheme is ordered to compensate the scheme, the responsible entity must transfer the amount of the compensation to scheme property. If anyone else is ordered to compensate the scheme, the responsible entity may recover the compensation on behalf of the scheme. Recovery of damage (5) A compensation order may be enforced as if it were a judgment of the Court. 1317HA. Compensation orders--financial services civil penalty provisions Compensation orders--financial services civil penalty provisions Compensation for damage suffered

(1) A Court may order a person (the liable person ) to compensate another person (including a corporation), or a registered scheme, for damage suffered by the person or scheme if: (a) the liable person has contravened a financial services civil penalty provision; and (b) the damage resulted from the contravention. The order must specify the amount of compensation. Note: An order may be made under this subsection whether or not a declaration of contravention has been made under section 1317E. Damage includes profits (2) In determining the damage suffered by a person or scheme for the purposes of making a compensation order, include profits made by any person resulting from the contravention. Damage to scheme includes diminution of value of scheme property (3) In determining the damage suffered by a registered scheme for the purposes of making a compensation order, include any diminution in the value of the property of the scheme. (4) If the responsible entity for a registered scheme is ordered to compensate the scheme, the responsible entity must transfer the amount of the compensation to the scheme property. If anyone else is ordered to compensate the scheme, the responsible entity may recover the compensation on behalf of the scheme. Recovery of damage (5) A compensation order may be enforced as if it were a judgment of the Court. 1317HB. Compensation orders--market integrity rules Compensation orders--market integrity rules Compensation for damage suffered (1) A Court may order a person (the liable person ) to compensate another person (including a corporation), or a registered scheme, for damage suffered by the person or scheme if: (a) the liable person has contravened subsection 798H(1) (complying with market integrity rules); and (b) the damage resulted from the contravention. The order must specify the amount of compensation. Note: An order may be made under this subsection whether or not a declaration of contravention has been made under section 1317E. (2) Subsection (1) does not apply in relation to a contravention by the operator of a licensed market acting in that capacity. Damage includes profits (3) In determining the damage suffered by a person or scheme for the purposes of making a compensation order, include profits made by any person resulting from the contravention. Damage to scheme includes diminution of value of scheme property (4) In determining the damage suffered by a registered scheme for the purposes of making a compensation order, include any diminution in the value of the property of the scheme. Recovery of damage (5) A compensation order may be enforced as if it were a judgment of the Court. 1317J. Who may apply for a declaration or order Who may apply for a declaration or order Application by ASIC (1) ASIC may apply for a declaration of contravention, a pecuniary penalty order or a compensation order. Application by corporation (2) The corporation, or the responsible entity for the registered scheme, may apply for a compensation order. Note: An application for a compensation order may be made whether or not a declaration of contravention has been made under section 1317E. (3) The corporation, or the responsible entity for the registered scheme, may intervene in an application for a declaration of contravention or a pecuniary penalty order in relation to the corporation or scheme. The corporation or responsible entity is entitled to be heard on all matters other than whether the declaration or order should be made. Compensation order relating to financial services civil penalty provision--any other person who suffers damage may apply (3A) Any other person who suffers damage in relation to a contravention, or alleged contravention, of a financial services civil penalty provision may apply for a compensation order under section 1317HA. Note: An application for a compensation order may be made whether or not a declaration of contravention has been made under section 1317E. No one else may apply (4) No person may apply for a declaration of contravention, a pecuniary penalty order or a compensation order unless permitted by this section. (5) Subsection (4) does not exclude the operation of the Director of Public Prosecutions Act 1983 . 1317K. Time limit for application for a declaration or order

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