26 February 2021
What you need to know
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On 24 February 2021, ASIC published an immunity policy which applies to individuals who have been involved in misconduct which contravenes a provision in Part 7.10 of the Corporations Act (broadly, market misconduct such as market manipulation and insider trading).
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The immunity policy builds on various other reforms introduced by the Australian Government following the Banking Royal Commission, all aimed at strengthening ASIC's investigation powers and making the detection and securing of criminal and civil penalties easier.
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The immunity policy is modelled on the ACCC's immunity policy, which the ACCC has utilised in investigating and prosecuting cartel misconduct. However, unlike that policy, ASIC's immunity policy is not available to corporations.
Background
In the aftermath of the Banking Royal Commission, the Australian Government has made detecting and prosecuting serious financial crimes a high priority.
In aid of this task, the Australian Government has implemented a number of reforms, including:
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substantially increasing the size of the maximum civil and criminal penalties that attach to provisions in the Corporations Act (see our alert here).
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amending the definition of "dishonesty" in the Corporations Act to adopt the simpler (and easier to prosecute) "objective test" (see our alert here); and
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expanding ASIC's warrant and wire-tap powers (see our alert here).
However, ASIC's new immunity policy may prove to be the most significant reform of them all. Many have pointed to the effectiveness of the ACCC's immunity policy (on which the ASIC policy has been modelled) as central to the ACCC's pursuit of cartel misconduct.
ASIC's Immunity Policy – what is it?
On 24 February 2021, ASIC released an immunity policy, which provides individuals with an opportunity to seek "immunity" for their part in conduct that contravenes a penalty provision in Part 7.10 of the Corporations Act 2001.
The immunity applies only to civil and criminal proceedings, not administrative or compensatory proceedings.
Unlike the ACCC's immunity policy, immunity will only be available to individuals, not corporations.
What offences are covered?
The immunity policy applies to all civil and criminal penalty provisions in Part 7.10 of the Corporations Act (ss 1040A – 1045A).
This Part of Chapter 7 of the Corporations Act regulates market misconduct and other prohibited conduct relating to financial products and financial services. It contains some of the most complex, and difficult to detect, financial crimes, including market manipulation, false or misleading statements and conduct, and insider trading. Contraventions of the provisions in this Part can attract criminal penalties to a maximum of 15 years' imprisonment. They can also be enforced by way of civil penalty instead of criminal prosecution, potentially attracting substantial fines.
What are the immunity criteria?
To be eligible for immunity, the individual must:
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Have been involved in conduct that contravened (or is contravening) a provision in Part 7.10 of the Corporations Act;
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Be one of two or more persons involved in the contravening conduct;
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Not have been the instigator of the contravening conduct, or coerced any other person(s) to engage or participate in the contravening conduct;
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Provide the information before ASIC has already commenced an investigation into the contravening conduct;
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Admit his or her involvement in the contravening conduct;
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Be the first person to apply for immunity in respect of the contravening conduct;
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Provide full, frank and honest disclosure, and cooperate fully and expeditiously with ASIC's investigation.
An individual (or their legal representative) seeking immunity may approach ASIC for a "marker". A marker serves to preserve the individual's place in the 'queue' for immunity, pending the individual then providing relevant information about the misconduct in writing. If ASIC is satisfied that the immunity conditions are met, it will grant conditional immunity against civil proceedings by ASIC against the applicant. The CDPP will, where relevant, usually grant a 'letter of comfort' for criminal immunity at the same time.
ASIC will cancel a marker if the individual fails to provide sufficient information or fails to meet the above conditions. If that happens, other individuals involved in the contravening conduct may qualify for immunity by becoming the 'first to approach'.
If a marker is withdrawn by the applicant, ASIC and the CDPP will not use the information provided by the immunity applicant directly against the applicant or any other person involved in the contravening conduct. However, it may use the information indirectly to further its investigation, including to gather evidence that could be used against the individual who made the application and had the marker withdrawn.
What impact will it have?
The ACCC has repeatedly referred to its immunity policy as being pivotal to its success in detecting and prosecuting cartel misconduct.
The ACCC Commissioner, Rod Sims, remarked in October 2019 that:
the immunity policy is one of our key strategies for detecting and dismantling cartels. We have been able to undertake numerous in-depth cartel investigations as a result of immunity applications under our policy.
White-collar misconduct is notoriously difficult to detect and investigate. If the ACCC's experience with its immunity policy is any guide, ASIC's new policy will substantially increase its ability to successfully investigate and pursue criminal and civil contraventions of Part 7.10 of the Corporations Act.
For further information, please contact:
Rani John, Partner, Ashurst
rani.john@ashurst.com
