ASIC Investigations

21 February 2022 in Business Law, Civil and Commercial Litigation and Law

The Australian Securities and Investments Commission (ASIC) is the Federal body responsible for the regulation of Australia’s companies and financial services, products and markets.

ASIC can initiate investigations into companies in Australia and have various powers which they can exercise when conducting these investigations. These powers enable ASIC to uphold and enforce the laws which govern companies in Australia such as the Corporations Act 2001 (Cth). Further, ASIC in conducting these investigations can exercise various powers for the purpose of gathering information in connection with their investigation.

ASIC has a broad discretion to initiate investigations into companies for the purpose of enforcing and administering corporations legislation.

Important powers and processes relevant to ASIC investigations are outlined in the Australian Securities and Investments Commission Act 2001 (Cth).

Initiating Investigations

ASIC investigations may be initiated in a number of circumstances.

Generally, ASIC can commence investigations for the purpose of administering corporations legislation. Investigations may also be initiated where ASIC reasonably suspects the contravention of a relevant piece of legislation relating to corporations.

In certain situations ASIC may also be directed to commence an investigation on the basis that the investigation is in the public’s interest.

Additionally, ASIC investigations may also commence for the purpose of investigating matters raised in a receiver or liquidator report “for the purpose of determining whether or not a person ought to be prosecuted for an offence against the corporation’s legislation”(see section 15 Australian Securities and Investments Commission Act 2001 (Cth)).

Information Gathering Powers

The Australian Securities and Investments Commission Act 2001 (Cth) grants ASIC a number of information gathering powers which may be exercised in the course of their investigations. Some key information gathering powers are:

Examination of Persons

Throughout an investigation, ASIC may conduct an examination of individuals relevant to their investigation.  ASIC is required to have reasonable grounds to suspect or believe that the individual can provide relevant information. ASICs examination of a person may require the person to answer questions or provide reasonable assistance to ASIC’s investigation.  When examining persons, ASIC must provide individuals with written notice. In addition, examinations are required to be conducted in private.

An individual being examined by ASIC during an investigation may choose to have a lawyer present during the examination.  Brander Smith McKnight business lawyers can assist

Inspection of Books

ASIC are authorised to conduct inspections of a relevant body’s books during their investigations.  In the context of ASIC investigations, books refer to registers, financial reports, financial records, documents, banker’s books, and any other record of information (see section 5 Australian Securities and Investments Commission Act 2001 (Cth)).  ASIC can upon providing written notice compel the production of specific books relating to the affairs of the body being investigated.

There are certain books that may be inspected purely on the basis that they legally must be open for inspection.

ASIC has limited access to some other books held by a body they investigate. Where ASICs access to books is limited, they will only be able to inspect them if it is for an appropriate purpose prescribed in section 28 of the Australian Securities and Investments Commission Act 2001 (Cth).

Information about Financial products

ASIC may compel the disclosure of information in relation to financial products.  Financial products include facilities through which a person “makes a financial investment, manages financial risks and or makes non-cash payments” (section 12BAA Australian Securities and Investments Commission Act 2001 (Cth)).

The disclosure of information to ASIC in relation to financial products must take place privately.

A person may also have a lawyer present when making a disclosure of information about a financial product to ASIC.

Investigation offences

There are various offences which are associated with obstructing ASIC investigations.  There are offences in relation to the non-compliance of a person with an ASIC investigation or powers exercised in relation to one.  People will be guilty of an offence where they “engage in conduct that results in the obstruction or hindering of a person in the exercise of the power” in relation to an investigation.

Offences also apply to circumstances where a person provides false and misleading information in relation to an investigation. Further offences apply in situations where a person conceals, destroys, mutilates, or alters books to which the ASICs investigation relates.  Additionally, offences apply in circumstances where people engage in conduct that obstructs or hinders ASIC’s investigation.

Penalties for these offences include fines and imprisonment.

Investigation Outcomes

There are various potential consequences for an ASIC investigation:

1. At the conclusion of an investigation, ASIC may prepare a report outlining findings of the investigation, evidence and materials which substantiate those findings and other relevant matters in the investigation.
2. Following an investigation, ASIC may also initiate civil proceedings in order to recover property or pursue damages for actions such as fraud, negligence, default and or breach of duty that are related to the investigation.
3. Generally, ASIC may also apply for an injunction to restrain conduct that relates to a contravention of the Corporations Act 2001 (Cth).
4. Criminal proceedings may also be commenced following an ASIC investigation where “it appears to ASIC that a person may have committed an offence against the corporations legislation and ought to be prosecuted for the offence” (see section 49 Australian Securities and Investments Commission Act 2001 (Cth)).
5. ASIC investigations may also lead to the winding up of a company in circumstances where the investigation has revealed that winding up the company is the most appropriate course of action.

BSM Lawyers can help

Our highly experienced business lawyers, who have over 40 combined years experience are able t0 advise and assist you with any matter relating to ASIC.  We are powerful advocates and can represent you through what can be a stressful process.

We are conveniently located in Sutherland, Parramatta, Wollongong and Sydney CBD.