On 12 March 2019, the Treasury Laws Amendment (Strengthening Corporate And Financial Sector Penalties) Act 2019 received assent after passing both houses of Parliament. Commencement of most provisions has occurred. Treasury stated that its intention is to arm our financial services regulators with the powers needed to take strong action to protect consumers and to deter and prosecute corporate and financial sector misconduct. It also follows on the heels of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal commission) which made clear that conduct of institutions within the sector fell well short of 'community expectations'. Commissioner Hayne also observed that increased penalties for misconduct will have only limited effect unless there is a greater willingness by ASIC to apply them.
The Act includes new and increased civil penalties and criminal sanctions against banks and other financial sector institutions, their executives and others across the full spectrum of financial services laws administered by ASIC. These include the:
- National Consumer Credit Protection Act 2009 (including National Credit Code) (Credit Act);
- Corporations Act 2001 (Corporations Act);
- Australian Securities and Investments Commission Act 2001 (ASIC Act);
- Insurance Contracts Act 1984 (Insurance Act); and
- Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 (which we assume enacted).
Features of the Act include:
- Increase in maximum prison penalties (5 years increased to 15 years). Serious offences includes intentional or reckless breaches of director's and officers duties, false or misleading disclosure, client monies and dishonest conduct (amongst others - see table 1).
- Increase in civil penalties for individuals and companies (maximum of $1.05m and $525 million or up to 10% of profits). Such offences will now include a licensee's failure to act efficiently, honestly and fairly or failure to report breaches (amongst others - further detail below).
- All strict and absolute liability offences no longer carry imprisonment as a possible penalty however increased financial penalties (4-5 times existing penalties) and new infringement notice regime applicable.
Further detail around the categories of laws to which the new penalties and offence provisions apply is set out in the full report.