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Asic Investigation And Enforcement Powers Notes

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ASIC Investigation and Enforcement Powers The Basics ASIC's Information Gathering Powers

* ASIC collects information through both its general intelligence (complaints, economic research) and four other ways whereby persons are required to provide it with information: o

Lodgment by regulated entities and others of reports or documents

o

ASICs exercise of statutory powers requiring provision of information/books as part of 'surveillance'

o

The hearings power

o

The exercise of its powers icw investigations following the commencement of proceedings

*

[Confidentiality] ASIC is required to take all reasonable measures to protect information that is given to it in confidence or icw the performance of its functions under the corporations legislation from unauthorised use (s 127(1)

*

ASIC is also required to act consistently with the principles of natural justice and give an examinee an opportunity to be heard before making the confidential record available before public hearings. o

There may be exceptional situations where the principle doesn't require this - e.g. if it would frustrate an investigation

Mandatory reporting

* This includes requirements for AU market license and CS facility holders as well as duties on certain people such as trustees/debenture holders

*

More relevantly, the holder of an AFS license is required to notify ASIC of certain matters under s 912D and provide information to ASIC about its ARs under s 916F o

AFSL are also s.t. special financial reporting requirements in Pt 7.8 Div 6 and are required by the conditions placed on its AFSL to notify ASIC of matters like a material adverse change in its financial position (reg 7.6.04)

General information gathering powers

* Generally speaking a person is required to produce a relevant document even if it might incriminate them or make them liable to a penalty - but they aren't required to hand over a document to which LPP applies

*

ASIC's information gathering powers include:

o

ASICA s 29: A general power to inspect books kept in accordance with the corporations legislationo

*

This includes their financial records under s 286 CA

ASICA ss 30, 30A, 31, 32A and 33 confer power on ASIC to issue written notice requiring the production of booksThese powers can only be exercised ftpo specified in the ASICA s 28 which include the performance or exercise of any of ASIC"s functions or powers ftpo ensuring compliance with the corporations legislation, in relation to a suspected contravention of the relevant lawThis includes obtaining books and information for possible contempt proceedings against a person ASIC suspects of having contravened an order under s 1323 CAThese powers are reinforced by ss 35, 36, 36A to apply for and execute a warrant to search and take possession of the relevant booksSuch a notice of production may require a company to undertake investigation such as making enquiries of officers, employees and agents - the mere fact that the notice is inconvenient to provide an answer to and that it will require considerable resources and time will be insufficient to have it set aside (Melbourne Home of Ford v TPC)Where documents under the scope of a ASICA Pt 3 Div 3 notice it may be possible to mask that information

[Power to give notices]
o

ASIC's power to require production of books under notice include:S 30(1): Books relating to the affairs of a BCS 30(2): Books relating to the operation of an RMISS 31: Books relating to a range of specified matters to do with financial products - like business or affairs of a FM, dealing in financial products, advice given, analysis/report issued/published about FPs etc.

*The range of persons to whom the notice can be given include FM and CS facility operators and their board members, persons who cary on an FSB, their representative and nominees

S 32A applies ftpo consumer protection provisions in Pt 2 Div 2 ASICA and covers books relating to FS and their supply

o

*

*

s 33: ASIC's general power to require the production of books relating to these matters form anyone in possession of them.This encompasses people with no involvement in the relevant investigation - the only characteristic for validity is if the document has the necessary characteristic (e.g. relates to the affairs of the BC) (ASC v Zarro)'Possession' includes both custody and control (s 86) and includes the legal entitlement to require them to be produced, or those held by a person's solicitor (ASC V Dalleagles)

[Form and purpose of the notice]
o

See 72: Formal requirements, failure to substantially comply can invalidate

o

[Ulterior purpose]IF a person to whom a Pt 3 Div 3 notice is directed can demonstrate it was issued for an ulterior purpose like coercion or intimidation it may be set aside (ASC v Lucas) but the onus of doing this rests on the recipient of the notice who seeks to challenge it (Spargos Mining)It isn't improper for ASIC to use its notice powers to obtain information following the commencement of civil penalty proceedings even where the use of those powers might put it in a different position from other litigants

[Reasonable excuse for non-compliance]
o

The recipient of a notice issued under Pt 3 Div 3 may not refuse or fail to comply with a notice unless they have a reasonable excuse (else they commit an offence - s 63(1))*

A reasonable excuse

*

Can include a sufficient practical difficulty in complying on time (CAC v Yuill)

*

Is not provided by a contractual duty of confidentiality (von Doussa v Owens)

*

Is not provided by the fact that the relevant book tends to incriminate the person or make them liable to a penalty (s 68(1))

[Legal Professional privilege]
o

[Scope of privilege] At general law a client may assert LPP to resist disclosure of a communication between a legal practitioner and his/her client which is confidential in character and which was created for the dominant

purpose of the lawyer giving, or the client obtaining, legal advice or for use in existing litigation or litigation within the reasonable contemplation of the client (s 118, 119 EA)In CAC v Yuill it was said that LPP doesn't apply to a Pt 3 Div 3 noticeBut in Daniels v ACCC the HC held that LPP is a fundamental CL immunity and thus didn't apply to the former s 155

*

*

Though they didn't overrule Yuill's Case it was distinguished on the basis that it was different legislation but the majority did say that Yuill may be decided differently today

[Warrant to seize books]
o

s 35 ASICA authorises ASIC to obtain a search warrant by applying to a magistrate, if a staff member has RG to suspect that books whose production could be required under Div 3 are or will be in 3 days, on particular premisesFurther formal requirements on 75

*

[Use to which books may be put] s 37 sets these out and includes taking possession, inspect, making copies of extracts, using or permitting their use in a proceedings etc

*

[Requirements to provide explanation of books]
o

A person who produces books in response to a 3/3 notice and any person a party to compiling those books may be required to provide an explanation of any matter about the compilation of those books (s 37(9)) and cannot refuse on the grounds that it might incriminate or expose them to a penalty (ASICA s 68(3))

o

The explanation or the fact that the person provided it isn't admissible in a criminal proceedings or proceedings for the imposition of a penalty if he/she claims that it might tend to incriminate the person or expose him or her to liability to a penalty, before making that explanation, and the explanation might in fact tend to incriminate that person or expose them to a penalty (s 68(2)-(3)BUT information provided under 3/3 subject to a claim for the statutory privilege under the ASICA s 68 is admissible in proceedings for disqualification or banning order, license suspension or cancellation within specified provisions (s 1349(4)-(5))

Disclosure of information

* [Information about dealing] ASICA 3/4 empowers ASIC to obtain certain information concerning dealings in financial products - these are especially important given the anonymity of stock markets etc.

*

o

ASICA S 43 - ASIC can obtain information about dealings in securities from the issuer or from certain other named persons, but only in the circumstances set out in s 43(3) which are where ASIC considers that certain circumstances may have occurred (e.g. contraventions of provisions)

o

s 47: The disclosure is to be made in private, s 48 a legal representative may be present

[Information regarding AFS Licensees]
o

S 912C provides that ASIC may, by written notice to an AFSLEE, direct them to give ASIC a written statement containing specified about the financial services provided by the licensee or its AR, ro the FSB carried on by the licenseeo

This provision doesn't abrogate the self-incrimination privilege

[Information under the consumer laws] s 12GY ASICA applies if a person has made a claim or representation promoting the supply of a financial service - ASIC can require that person give information or produce documents to ASIC to 'substantiate or support' that claimS 12GYB(3): An individual can refuse or fail to give information or produce documents on the grounds of self-incrimination

Assistance from licensees

* Licensees are required to assist ASIC in the discharge of its functions in the form or providing access to books or giving ASIC information,. o

s 912E requires a FSL and its representative to give such assistance to ASIC as it reasonably requests in relation to whether the licensee or its representatives are complying with the FS laws and irt the performance of ASIC's functions

ASIC Hearings

* ASICA s 51 gives ASIC power to hold hearings ftpo of the performance or exercise of any of its functions and powers under the corporations legislation (other than its investigation powers) o

Various provisions of the CA direct ASIC to give particular persons an opportunity to appear at a hearing before it makes a decision affecting that person - e.g. a person affected by a decision of ASIC to refuse/suspend/cancel an AFS license is entitled to a hearing under s 913B(5) or if ASIC issues a stop order under s 739(2)

o

During a hearing witnesses can be required to answer questions or produce documents (s 58)The privilege against self-incrimination is abrogated but answers are admissible only in penal proceedings iro falsity of an answer (s 68).

This protection is only where the witness claims that compliance with ASIC's requirement might tend to incriminate the witness and compliance might in fact tend to incriminate them (usually they just say 'privilege' before each answer)There is no immunity in respect of other information that ASIC may obtain as a consequence of the person making the self-incriminating statement (EPA v Caltex)Legal practitioners are entitled to refuse to give information or produce a book where compliance involves a breach of LPP

*

[Rules of evidence] ASIC are not bound by the rules of evidence

*

[Natural Justice] ASIC are bound to observe the rules of natural justice when conducting a hearing (s 59(2)) and this embodies two broad concepts: o

A fair hearing concept and;o

An absence of biaso

Consider ASC v News Corporation - the claim that News Corp ought to be allowed to have its legal representatives present, to intervene in proceedings, XE witnesses and call witnesses in reply and make submissions were rejected by the HC

These content of these requirements vary depending on context

ASIC RG 8 deals with how it satisfies the requirements of natural justice (p7879)

ASIC Investigations

* ASIC has the power to make various inquiries icw the performance of its regulatory functions and require the production of books and other information

*

A formal investigation instigated under 3/3 allows ASIC to conduct oral examinations and require assistance from any persons. ASIC has the power to make such a formal investigation as it thinks expedient in four cases?
o

Where it has reason to suspect a contravention of the corporations legislation (other than unconscionable conduct and consumer protection provisions of the ASICA) or of any other law where the contravention concerns the management or affairs of a BC or MIS, involves fraud or dishonesty and relates to a BC, MIS or FP (ASICA s 13(1))

o

Where it has reason to suspect that UNAC have occurred

o

Misconduct by a liquidator

o

*

Once entitled to conduct an investigation, the ambit of the investigation isn't confined to determining whether the particular suspected contravention occurred o

*

*

Where it has reason to suspect that a contravention of the unconscionable conduct or consumer protection provisions of the ASICA may have occurred (s 13(6))

The investigation, once triggered, lets ASIC conduct it at least wide enough to perform any of its functions under ASICA (ASIC v Lucas)

[Conducting an investigation]
o

Commencement (see page 80) on how formally it is commence

o

Procedural fairness - it is arguable that they have to but the content of it is limited by the fact that it is an 'investigative process'

o

ASIC's power to conduct oral investigation - includes the requirement that notices state the 'general nature of the matter'; also includes ASIC's power to require reasonable assistance (s 19(2)(a))

o

Conduct of an examination (requirements for the examinees)

o

Examinee's right to legal representation

o

Use of transcript of examination - confidentiality requirements etc.

[ASIC's power to require reasonable assistance]
o

o

Assistance icw and investigation - When an investigation is underway, ASIC may require any person to 'give ASIC all reasonable assistance icw the investigation' (s 19(2))This can include conducting diligent searches and inquiries for documents relating to a particular matter or information held on a computer, signing a POA, giving authority to a TP to release info (ASIC v Kutzner)It isn't clear whether s 68(1) abrogates the privilege against selfincrimination iro assistance going beyond giving information, signing a record or producing a book but in ASIC v Sigalla White J was willing to assume the privilege isn't abrogated iro giving assistance

Assistance icw a prosecution - If ASIC, on RG, suspects or believes that a person can give information relevant to a prosecution for an offence arising out of an investigation or examination, it can require that person to give ASIC all reasonable assistance icw the prosecution (s 49(3))

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