Financial sector penalties to be increased

The Federal Government has introduced the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018 into the House of Representatives. The bill proposes to amend the Corporations Act, ASIC Act, National Consumer Credit Protection Act and Insurance Contracts Act to introduce a stronger penalty framework in response to a number of recommendations from the ASIC Enforcement Review Taskforce report. Background.

As a consequence, a breach of the conditions for an Australian Financial Service Licence or Australian Credit Licence (such as to act efficiently, honestly and fairly) could result in substantial financial penalties.

The amendments made by the Bill:
• update the penalties for certain criminal offences in ASIC administered legislation, including:
– increasing the maximum imprisonment penalties for certain criminal offences to 10 years;
– introducing a formula to calculate financial penalties for criminal offences;
– removing imprisonment as a penalty and increasing the financial penalties for all strict and absolute liability offences;
• introduce ordinary criminal offences that sit alongside strict and absolute liability offences;
• expand the civil penalty regime by increasing financial penalties for contraventions and making a wider range of offences subject to civil penalties;
• harmonise and expand the infringement notice regime;
• introduce a new test that applies to all dishonesty offences under the Corporations Act. ‘Dishonest’ will be specifically defined in the Corporations Act as “dishonest according to the standards of ordinary people”.;
• introduce relinquishment as a remedy available in civil penalty proceedings;
• clarify that the courts are to give priority to compensating victims over ordering the payment of financial penalties; and
• clarify that contraventions of section 184 of the Corporations Act can occur even when the relevant corporation gains an advantage from the contravention.

The maximum financial penalty for a contravention of a civil penalty provision in the Corporations, ASIC, Credit and Insurance Contracts Acts, and Credit Code, will be:
• for individuals, the greater of:
– 5,000 penalty units (currently $210 each); or
– if the court can determine – the benefit derived or detriment avoided because of the contravention, multiplied by three;
• for bodies corporate, the greater of the following:
– 50,000 penalty units;
– if the court can determine – the benefit derived or detriment avoided by the body corporate because of the contravention, multiplied by three;
– 10 per cent of the annual turnover of the body corporate, but to a maximum monetary value of 1 million penalty units (ie $210 million).

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