The government has been mulling stronger penalties for misconduct in the financial sector against the backdrop of an ongoing royal commission, launching a public consultation on Wednesday (26 September) on the proposed changes outlined in the Treasury Laws Amendment (ASIC Enforcement) 2018 Bill.
A joint announcement by federal Treasurer Josh Frydenberg and Assistant Treasurer Stuart Robert has now revealed that the government is considering hiking the maximum prison time and “significantly” increasing fines for the most serious offences “in closer alignment with leading international jurisdictions”.
The change aims to align the prison term with "the seriousness of the misconduct".
If approved, this could mean that some jail times could more than double. For example, if a person operating under the Credit Act engages in credit conduct despite a banning order being in place, the maximum prison term would be five years, rather than the current 24 month maximum.
Under the proposed bill, the maximum penalty for Corporations Act contraventions — in cases where the current maximum term is less than 10 years — will be calculated by multiplying the maximum term of imprisonment in months by 10 for individuals and a further 10 for bodies corporate.
Meanwhile, the maximum prison sentence for a person providing false information will rise from two years to five and the most serious offences in the Corporations Act will have their maximum term of imprisonment increased from five years to 10 years.
Further, the new bill proposes that the financial penalties for individuals be increased by 4,500 penalty units or triple “the benefit derived or detriment avoided” as a result of the contravention.
This means that penalties would increase more than five‑fold, from $200,000 to $1.05 million, or three times the benefit gained from the breach, whichever amount is greater.
For corporates, the government is seeking to raise the financial penalties by 45,000 penalty units, triple the gains made or prevented due to the infraction, or 10 per cent of the corporation’s annual turnover, whichever amount is greatest.
They “may” also be stripped of the earnings gained from illegal activities, according to the government’s announcement.
Further, government is consulting on a proposal to introduce ordinary criminal offences that sit alongside and complement a number of strict and absolute liability offences.
The new proposed law also includes the introduction of a new objective-only test to all dishonesty offences under the Corporations Act — which means that it is not necessary for ASIC to prove that the defendant knew that the conduct was dishonest, just that the conduct was dishonest — as well as the expansion of the infringement notice regime to all strict and absolute liability offences.
“These proposed changes seek to implement key recommendations of the ASIC Enforcement Review Taskforce, and complement action the government has already taken, including providing $70.1 million in additional funding to ASIC to bolster its enforcement capabilities and establishing a new one-stop shop for consumer complaints,” the Treasury’s announcement reads.
“The government is committed to ensuring ASIC is properly armed to effectively deter, prosecute and punish those who do the wrong thing to improve community confidence and outcomes for consumers and investors in the financial services and corporate sectors.”
The Department of Treasury is accepting online submissions by the close of 23 October 2018.
Earlier this year, chair of the Australian Competition and Consumer Commission (ACCC) Rod Sims said that raising the cost of “bad behaviour” for companies is key to deterring it, and urged the Parliament to pass a bill to increase penalties for breach of the Australian Consumer Law and the Competition and Consumer Act 2010. Specifically, the ACCC would like the $1.1 million fine for breaching the Australian Consumer Law to be increased to either $10 million, three times the gains generated from misconduct or 10 per cent of a company’s annual revenues.
“Just imagine if the penalties we have achieved recently were 10 to 20 times higher. Then perhaps some companies would not be behaving so badly. And then, when they say they put their customers first, it might have more validity than it does today,” Mr Sims said.
Tas Bindi is the features editor on the mortgage titles and writes about the mortgage industry, macroeconomics, fintech, financial regulation, and market trends.
Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business.