Our correspondent Andreas Frank reports; The Australian Securities & Investments Commission released a 79-page report on “penalties for corporate wrongdoing” that examined penalties in Australia and compared them with those in the US, Britain, Hong Kong and Canada.
ASIC said the white paper would form a significant part of a submission to the government regarding financial wrongdoing penalties, which chairman Greg Medcraft has raised with the government repeatedly in recent months.
A key concern of Mr Medcraft, echoed by the report, is that penalties are often not as large as the proceeds of financial wrongdoing, meaning crooks have an incentive to do the wrong thing.
“The maximum fine that may be imposed may be substantially lower than the financial benefit obtained as a result of the wrongdoing,” the report said.
The maximum civil penalty for individuals involved in financial wrongdoing — including all of insider trading, market manipulation, disclosure and inappropriate advice — was just $200,000.
By contrast, the maximum in Canada was $1.05 million, unlimited in Britain, three times the benefit gained in the US, and the greater of $1.4m or three times the benefit gained in Hong Kong.
The $200,000 maximum had not changed since 1992 when they were enacted under the Corporations Act as they were not adjusted for inflation.
In Australia there are no non-criminal laws relating to “disgorgement” – or the removal of gains made by a person involved in financial wrongdoing – while each of comparison jurisdictions had such laws.
ASIC said disgorgement orders could offer “significant deterrent value” by reducing the likelihood wrongdoers “can consider penalties to be merely a business cost”.
The corporate regulator also highlighted the discrepancies between the maximum civil penalties that could be delivered by different Australian regulatory and enforcement bodies.
The highest civil penalty ASIC could impose under the ASIC Act on an individual was just $340,000, one-tenth of the $3.4m that could be handed down under the Anti-Money Laundering and Counter-Terrorism Financing Act.
The maximum penalty for a company, group or “body corporate” was $1.7m under the ASIC Act and $17m under anti-terrorism and money-laundering provisions.
Under the Competition and Consumer Act an individual could be fined a civil penalty as high as $500,000 and corporations could be fined the greater of the three: $10m, three times the value of the benefits obtained by the wrongdoing or 10 per cent of the company’s annual turnover.
ASIC also noted there were different penalties for the same wrongdoing under different acts.
“If we pursue an individual for providing unlicensed financial services under the Corporations Act, we could obtain at most a criminal fine of $34,000,” the corporate regulator said.
By contrast, a person pursued under the National Credit Act for engaging in “unlicensed credit activity” could be forced to pay up to $340,000 in fines.
ASIC Report
