The past few months haven’t been kind to the corporate cop, the Australian Securities and Investments Commission: it’s lost a trio of high profile cases and only won one.
That sole win was a biggie: the long running civil case against directors of James Hardie. Not all the charges stuck, but there were enough for ASIC to claim this (under appeal) decision a win.
But the loss rate was much more telling: OneTel, AWB and Fortescue Metals/Andrew Forrest.
All high profile and all expensive failures.
Despite these defeats, the Commission this month launched legal action against three directors of the failed Opes Prime margin lending business which collapsed in 2008.
ASIC laid criminal charges against three directors of Opes Prime for breaching their directors’ duties earlier this month.
Criminal charges could result in jail time for the accused but they have a higher burden of proof than civil charges.
That didn’t stop the Commission from laying criminal charges against Lirim (Laurie) Emini, Julian Smith and Anthony Blumberg who were directors of Opes Prime Stockbroking and Opes Prime Group.
Now the federal government plans to make it easier for ASIC to pursue allegations of market misconduct, such as insider trading and other high level offences.
Financial Services, Superannuation and Corporate Law Minister Chris Bowen yesterday revealed proposed changes aimed at strengthening the investigative powers of the Australian Securities and Investments Commission (ASIC) and increasing penalties for market-related offences.
The proposals will have to go through public submission and comment and then further discussion before legislation is introduced into Federal Parliament.
It’s hoped the changes will become law towards the end of the year.
The proposals increase the maximum criminal penalties that can be imposed when individuals and corporations breach market misconduct provisions.
More importantly they will allow the regulator to use the Federal Police to do phone taps and other electronic surveillance for the first time.
"These changes will ensure that ASIC is properly equipped to investigate and prosecute serious corporate misconduct which has the potential to cause significant harm to the economy and investors," Mr Bowen said.
"The increased penalty provisions send a clear message to those who seek to profit from these types of market offences that behaviour that undermines the proper functioning of our financial markets will not be tolerated."
The changes will increase the pecuniary penalties for individuals to $500,000 or three times the profit made or loss avoided, whichever is greater.
For corporations, the penalty will be the greater of – $5 million, three times the profit made or loss avoided or 10% of the corporation’s annual turnover during the period the breach occurred.
To ensure compliance and increase deterrence, the maximum term of imprisonment for these offences will be increased from five years to 10 years.
Mr Bowen told reporters in Sydney the changes were prompted in part by "ASIC’s advice to me that they find one hand tied behind their backs" when investigating some cases.
He said that as part of the proposals, ASIC will be able to access telecommunications interception material collected by the Australian Federal Police under a court-issued warrant.
ASIC’s search warrant powers will also be improved to dispense with the need to issue a notice to produce before a warrant is enforced.
"Importantly, these reforms will bring ASIC’s investigative powers into line with other regulators, such as the Australian Competition and Consumer Commission," Minister Bowen said.
"The proposed change to ASIC’s search warrant power will significantly reduce the potential for evidence to be destroyed before a warrant is executed," Minister Bowen said.
"Currently, the penalties in the Corporations Act 2001 (Corporations Act) for the offences of insider trading, market manipulation, false trading, market rigging and making false and misleading statements provide insufficient deterrence, as the gain from engaging in market misconduct often far outweighs the penalties imposed for a breach.
"The Telecommunications (Interception and Access) Act 1979 (the TIA Act) currently limits the offences for which interception can be used as an investigative tool. Interception may only be conducted under a warrant obtained by an interception agency in relation to the investigation of a serious offence.
"It is proposed that the law will be amended so that a serious offence for these purposes includes market and insider trading offences investigated by ASIC.
"A telecommunications interception agency, such as the AFP, would execute the warrant, then ASIC and the agency would work together on the investigation.
"This will enable ASIC to obtain direct evidence of inside information, such as the content of conversations, rather than simply relying on circumstantial evidence, such as the mere existence of suspect telephone calls.
"Telephone interception would only be available where a Court is satisfied that appropriate evidentiary and procedural requirements have been satisfied and would be subject to stringent record keeping and reporting obligations.
"The TIA Act also regulates what can be done with any intercepted information that is collected and prohibits its use in evidence except in prescribed circumstances.
"Further, all interception agencies are subject to stringent record keeping and reporting obligations, which are independently inspected by, in the case
