The Australian Securities and Investment Commission (ASIC) is the Government body appointed to regulate corporations, managed investment schemes and those involved in the financial services and credit industries.
The breadth of ASIC’s regulatory powers is evident in the Australian Securities and Investments Commission Act 2001 (the ASIC Act) which empowers it to ‘take whatever action it can take, and is necessary, in order to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it’.
The Corporations Act 2001 (Cth) provides for the registration of corporations, the financial and other reporting requirements of companies and the conduct of company directors and officers. Regulation and administration of this Act falls within ASIC’s broad powers.
In carrying out its regulatory powers, ASIC may commence prosecutions for breaches of the laws it administers, enforce civil and criminal financial penalties, order prison terms or take protective, corrective or compensation actions. In line with its deterrence policy and unless prohibited by law, ASIC will often make an enforcement outcome public.
This article addresses ASIC’s power to issue a compulsory examination order, explains the process of attending such an examination and provides guidelines for company directors receiving such an order.
The ASIC Act provides that if on reasonable grounds, ASIC suspects a person can give information relevant to a matter it is investigating or is to investigate it may require the person to give reasonable assistance in connection with the investigation. The person must appear before an investigator for examination. ASIC must have reasonable grounds to suspect that a contravention of the law has occurred.
The recipient of a notice may be the target of the investigation or an associate, employee, professional advisor or other person considered by ASIC to be useful for the purposes of its investigation. Essentially a request to meet with ASIC is not extended lightly or without good reason.
Failure to comply with an examination notice is an offence however the notice should give reasonable time to prepare for the examination and obtain legal advice.
If you have received an examination notice it is important to try to understand the purpose for which ASIC has issued the notice. Read the contents thoroughly – the notice should state the general nature of the matter to be investigated however ASIC is not required to set out the questions that will be asked in the examination.
You are entitled to have a lawyer present during the interview, and it is recommended that you obtain legal advice well beforehand. By discussing the subject of the notice, your role with the company and the events leading to the request, your lawyer may be able to identify key areas of concern and possible defences. Documents can be reviewed to assist your lawyer to understand the likely focus of the examination and help you prepare generally.
Whilst a lawyer is not able to take part excessively during questioning, he or she may assist in clarifying anything with ASIC and ensure that your rights are protected. The presence of a lawyer may also help to reduce stress levels. If ASIC requires certain documents to be produced after the interview, then having a lawyer present from the start may also be helpful.
It is important to consider carefully your responses during the interview, whether or not you are the target of the investigation. It is worthwhile spending time before the investigation ‘collecting your thoughts’ and clarifying timelines, events and other aspects surrounding the subject of the investigation.
The interview process usually takes several hours so it is best to assume a full day will be required.
The interview must take place privately and the ASIC investigator should take time to explain the process, set out your rights and give statutory warnings regarding confidentiality.
A record of the examination is generally arranged however ASIC must make a recording of the examination if you request.
The examination will be on oath or affirmation so questions must be answered honestly. A person is not able to refuse to answer a question in the event that it may lead to self-incrimination or the liability for the imposition of a penalty. Privilege against self-incrimination however may be claimed before answering certain questions in which case those answers cannot be used against you for criminal proceedings.
The intention to claim privilege must be stated before answering each question and you must be prepared to explain why you consider the privilege should apply. Your lawyer will clarify the basis of privilege with you before attending the investigation. He or she can assist you in determining when privilege should be claimed and is also able to remind you during the examination when to claim privilege.
Directors should listen carefully before giving honest and succinct answers to the questions being asked – you might assume that ASIC already has knowledge or possession of a fact or document given their far reaching investigatory and collection powers. You need not elaborate your answers but be truthful.
If you become tired, exasperated or lose focus you may ask for a recess.
Generally, a transcript of the interview will be provided in which case you should check and clarify any clerical errors. If you discover that your answers given in the examination are wrong, you should clarify the mistake with ASIC.
The contents of the examination are confidential, at least for the period during which ASIC conducts its investigation. Information must not be disclosed, or the interview discussed with anybody other than a lawyer present at the examination. If a lawyer was not present and, after receiving the transcript you decide to obtain legal advice, approval can be requested from ASIC to share the information with a lawyer.
ASIC may release details of the examination to a third party’s lawyer if it is established (in line with policy) that it will be used in good faith in proceedings to which the matter relates.
If you have been requested to attend a compulsory examination with ASIC or to provide information, we recommend you obtain legal advice and have a lawyer with you.
Examinations with ASIC should be taken seriously. Whether or not you are the target of the investigation it is important that you prepare well for the examination, understand your rights, and the circumstances under which privilege can be claimed.
If would like further information, please contact us on (02) 9274 8820 or email firstname.lastname@example.org