In the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the Federal Government has announced it will crack down on penalties for corporate misconduct. In doing so, it has accepted the majority of recommendations made by the Senate Economics References Committee and the Australian Securities and Investments Commission (ASIC) Enforcement Review Taskforce reports, with harsher penalties to apply to both directors and corporations who have breached their duties.
Relevantly, ASIC infringement notices will also be expanded to cover a broader range of financial services and managed investments infringement.
The amendments will also introduce new maximum penalties.
For Individuals:
- the greater of 5,000 penalty units (currently $1.05 million);or
- three times the value of the benefits obtained or losses avoided; and
For Corporations:
- greater of 50,000 penalty units (currently $10.5 million); or
- three times the value of the benefits obtained; or
- Losses avoided, or 10% of annual turnover in the 12 months before the misconduct, up to a total of one million penalty units ($210 million).
The proposed changes signal a significant reform of current legislation, in which the maximum civil penalty for individuals is $200 000, and $1million for corporations.
Whilst individuals and corporations who are found to have breached their duties must be held accountable, in upholding the rule of law, it is equally important that individuals and corporations are made aware of the impending amendments.
