As well as increasing the penalties for certain civil and criminal offences in the Corporations Act the Treasury Laws Amendment (Strengthening Corporate And Financial Sector Penalties) Act 2018 (See new penalties here), also amends the Corporations Act to:
- apply new civil penalties to existing Corporations Act provisions;
- 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”;
- clarify that contraventions of section 184 of the Corporations Act can occur even when the relevant corporation gains an advantage from the contravention.
Importantly, the Act also introduces, for the first time, a civil penalty (capped at $525 million) for breach of the general licence obligations of financial services licensees including ‘to do all things necessary to ensure the financial services covered by the licence are provided efficiently, honestly and fairly’.
UPDATE: The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Regulations 2019 commenced on 26/03/2019
Existing provisions that have been introduced into the civil penalty regime include:
Section 912A: General obligations for a financial services licensee.
Section 912D: A financial services licensee must notify ASIC of certain matters
Section 941A: A person who holds an AFSL must give a financial services guide if they provide a financial service to a retail client.
Section 941B: An authorised representative of an AFSL holder that holds an AFSL must give a financial services guide if they provide financial services to a retail client.
Section 946A: A person is required to give their clients a statement of advice if personal financial advice is provided to a retail client.
Section 952E: A person must not give a defective disclosure document or statement.
Section 952H: A financial services licensee must ensure disclosure documents or statements be issued by the authorised representative as required.
Section 1021E: A person must not prepare and give out a defective disclosure statement or document.
Section 1021G: An Australian financial services licensee must ensure their representatives give out a product disclosure document or statement.
Section 1309(2): A person must not give out false information relating to a corporation.
Currently a person who is, or has been, an officer or employee of a corporation, commits an offence against subsections 184(2) and 184(3) of the Corporations Act if they dishonestly or recklessly use their position, or information known to them, with the intention of gaining an advantage for themselves or someone else, or causing detriment to the corporation. There is ambiguity in the current operation of those offences around whether conduct that benefits the corporation would amount to an offence.Section 184 of the Corporations Act has been amended to clarify that it is not a defence to an offence against subsections 184(2) or 184(3) that the person uses their position or information with the result of, or with the intention of, gaining an advantage for the corporation. The amendment ensures that those who use their position or information dishonestly or recklessly, but gain an advantage for the corporation, still commit the offence.
There is no consistent definition of dishonesty in the Corporations Act. Dishonesty takes its ordinary meaning for the purposes of many provisions in the Corporations Act, while it has been defined as a two limbed test for the purposes of sections 1041F and 1041G. The amendments insert a definition of ‘dishonest’ into section 9 of the Corporations Act that applies across the Act.
As the definition is an objective only test, it is not necessary to prove that a defendant knew that the relevant conduct was dishonest. Instead, to establish dishonesty, it is only necessary to prove that the conduct is dishonest according to the standards of ordinary people.
This test will differ to the tests for dishonesty in the Criminal Code. To ensure the new definition operates as intended, ‘intention’ has been omitted from section 184(1)(b) of the Corporations Act.