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Enforcement and sanctions

When can there be regulatory investigations?

Australia

Australia

ASIC is a key regulator of the financial services industry in Australia. ASIC has the power to conduct a formal investigation when it suspects that a breach of law is being committed or is likely to be committed by:

  • a corporation;
  • a financial services provider; or
  • individuals.

In conducting such an investigation, ASIC has various compulsory powers including powers to require the production of documents and information, and for individuals to be formally questioned by ASIC.

ASIC also has the power to institute proceedings or seek other remedies for breaches.

Other regulators relevant to financial services businesses include APRA, ATO and ACCC, while Austrac operates as an intelligence gathering agency. Each of these bodies (except Austrac) has similar investigative powers to ASIC; Austrac has slightly more limited powers. All of them can also institute proceedings for contraventions of relevant legislation.

Last modified 3 Dec 2019

Austria

Austria

If the Financial Market Authority considers that an authorized firm or regulated individual may have breached its ongoing compliance requirements under applicable regulations, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 6 Dec 2019

Belgium

Belgium

When the Financial Services and Markets Authority (Autorité des services et marchés financier/Autoriteit voor Financiële Diensten en Markten) (FSMA) or the National Bank of Belgium (Banque Nationale de Belgique/Nationale Bank van Belgie) (NBB) considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. This may result in administrative sanctions.

Last modified 18 Dec 2019

Brazil

Brazil

When the Central Bank considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

The Central Bank also carries out regular audits of authorized firms.

Furthermore, the Resolution No 4,595/2017 sets forth that the implementation of a Compliance Program is mandatory to all the financial institutions or other institutions regulated by the Central Bank.

There is no specific penalty prescribed in this Resolution on institutions that do not implement the Compliance Program. However, it establishes that the Central Bank is authorized to enact other rules and other measures in order to guarantee the enforcement of the mentioned Resolution No 4,595/2017.

The CVM is also entitled to investigate, by launching an administrative procedure, illicit acts and non-equitable practices of administrators, board members and shareholders of listed companies, intermediaries and other participants of the market, pursuant to Law 6,385/1976. This may also result in regulatory sanctions applied by CVM.

Last modified 4 Dec 2019 | Authored by Campos Mello Advogados

Canada

Canada

There is no single body that investigates regulatory non-compliance. Each regulatory statute generally establishes an enforcement body charged with enforcing the statute.

When the applicable regulatory authority considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch an investigation. This may result in regulatory sanctions or penalties.

Last modified 2 Jan 2020

Chile

Chile

Among others, there can be a regulatory investigation when:

  • entities engage in regulated activities without the relevant authorizations;
  • regulated entities publish misleading information regarding themselves or the securities they issue;
  • brokers engage activities they are not allowed to, or fail to pass the relevant knowledge tests of the CMF; or
  • financial institutions or banks issue financial promotions without the proper authorization from National Consumers Service or when they are misleading or false.

Last modified 6 Dec 2019 | Authored by BAZ|DLA Piper

Colombia

Colombia

Violations of the financial system rules and regulations are subject to administrative, and in some cases, criminal sanctions.

The Superintendency of Finance exerts its supervisory powers over the financial sector on a consolidated and comprehensive basis. The consolidated supervision extends to all financial institutions including banks operating in Colombia and their subsidiaries abroad, in the latter case to the extent permitted by the laws of the respective country of incorporation.

The Superintendency of Industry and Commerce is responsible for advancing administrative investigations of antitrust violations by financial and non-financial corporations, and has the power to impose corresponding sanctions.

Last modified 20 Oct 2017 | Authored by DLA Piper Martinez Beltrán

Czech Republic

Czech Republic

When the Czech National Bank considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 20 Oct 2017

Finland

Finland

The supervisory powers of the Finnish Financial Supervisory Authority are defined in the Act on the Financial Supervisory Authority. These powers include the right to perform inspections of supervised entities, or, when deemed necessary, other financial market participants and to obtain documents and other records necessary for the conduct of supervision. The powers also include the right to convene meetings of authorized supervised entities with decision-making and administrative powers and to attend these meetings.

Last modified 26 Nov 2019

France

France

When the Prudential and Resolution Supervisory Authority (Autorité de contrôle prudentiel et de résolution) (ACPR) or the Financial Markets Authority (Autorité des Marchés Financiers) (AMF) considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 4 Dec 2019

Ghana

Ghana

In addition to the regulatory investigations specified in this section, there are a number of provisions in the Companies Act, Anti-Money-laundering Act and Data Protection Act which vest authorities named in the legislation with powers to investigate breaches of those laws together with accompanying sanctions which may affect persons regulated in the financial sector.  

Bank of Ghana 

The Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) authorizes the Bank of Ghana to carry out an investigation where there is sufficient reason to believe that a person is taking deposits or carrying out a deposit taking business without a license. 

In addition to its general powers of routine inspection, the Bank of Ghana may also carry out unannounced examinations of specific activities or matters relating to the affairs of a bank, specialized deposit-taking institution, financial holding company, electronic money issuer or payment service provider. 

Securities and Exchange Commission 

The Securities Industry Act, 2016 (Act 929) authorizes the Securities and Exchange Commission to carry out an investigation where there is sufficient reason to suspect that a person has committed an offense under that Act or the Companies Act, or has been guilty of fraud or dishonesty in relation to securities dealings and the issue of securities. It may also carry out an investigation in circumstances where a person is assisting other domestic and foreign regulatory authorities in an investigation. 

National Insurance Commission 

Where the National Insurance Commission is of the opinion that it may take enforcement action against an insurer on any of the grounds set out in the Insurance Act, 2006 (Act 724), it may appoint a competent person to carry out an investigation into the nature, conduct or state of the insurer’s business or any particular aspect of it, or the ownership and control of the insurer. 

The National Insurance Commission may also at any time authorize an actuary to investigate the financial condition of an insurer. 

National Pensions Regulatory Authority 

The Board of the National Pensions Regulatory Authority may examine the activities of a trustee, pension fund manager or custodian at least once in a year to determine whether or not the provisions of the National Pensions Act or any regulations made under it are being complied with. It may also order a special examination of the books and affairs of a trustee, pension fund manager or custodian where it is satisfied that it is in the public interest to do so or on any of the other grounds set out in the Pensions Act.

Last modified 15 Jan 2020 | Authored by Reindorf Chambers

Hungary

Hungary

When the National Bank of Hungary considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 20 Oct 2017

Italy

Italy

To safeguard the integrity of the financial system and to combat illegal practices, both the Bank of Italy and the CONSOB carry out specific controls, aimed at preventing unauthorized activities, as well as any activity involving mis-selling, money-laundering, usury, market abuse.

The investigations are carried out through the evaluation of documents and on-site inspections at intermediaries' premises aimed at checking the quality and accuracy of the data submitted and at gaining a better understanding of their organization and operations.

Moreover, regulators may require the drafting or transmission of documents, records and any other useful information.

Last modified 22 Jan 2020

Japan

Japan

The Securities and Exchange Surveillance Commission (SESC) may investigate breaches of relevant law and regulations, market misconduct and criminal violations. Following an investigation by the SESC, administrative disciplinary actions may be recommended to the Financial Service Agency or criminal charges may be filed by public prosecutors.

Last modified 5 Dec 2019

Luxembourg

Luxembourg

When the Commission de Surveillance du Secteur Financier considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 10 Dec 2019

Mauritius

Mauritius

The Financial Services Commission (FSC) is tasked as the regulator to monitor, regulate and supervise Mauritius’ non-banking financial activities. 

The FSC will intervene when there are illegal, dishonorable and improper practices, market abuse and financial fraud in relation to any activity in the financial services and global business sectors.

Last modified 6 Dec 2019 | Authored by Juristconsult Chambers

Mexico

Mexico

When the National Banking and Securities Commission (CNBV) or the National Commission for the Protection and Defense of Users of Financial Services (CONDUSEF), considers that an authorized firm or regulated individual may have breached ongoing compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 5 Dec 2019

Morocco

Morocco

Bank Al Maghrib is responsible for (i) monitoring credit institutions' compliance with the legal provisions applicable to them, (ii) verifying the adequacy of the administrative and accounting organisation and the internal control system of those institutions and (iii) to ensure the quality of their financial situation.

In the course of its duties, BAM is authorized to carry out on-the-spot and documentary inspections of the above-mentioned establishments by its agents or by any person commissioned for this purpose by the Governor.

In addition, BAM may ask the bodies under its control to communication of all documents and information necessary to the performance of its control mission.

Last modified 6 Jan 2020

Netherlands

Netherlands

If the Authority for the Financial Market (de Autoriteit Financiële Markten) or the Dutch Central Bank (de Nederlandsche Bank) considers that an authorized firm or regulated individual may have breached ongoing compliance requirements, it can launch a formal investigation. This may result in criminal or administrative sanctions.

Last modified 6 Dec 2019

New Zealand

New Zealand

The Reserve Bank of New Zealand has the power to appoint any person to carry out an investigation of the affairs of a registered bank or an associated person of that registered bank when it is satisfied that it is:

  • necessary or desirable to give directions when it has reasonable ground to believe that the registered bank or associated person is insolvent, likely to be insolvent, is about to suspend payment or is unable to meet obligations;
  • the business of the bank is not being carried out in a prudent manner;
  • the affairs or circumstances surrounding the bank or associated person are such as to be prejudicial to the soundness of the financial system; and
  • the bank or associated person fails to comply with a requirement under the Financial Markets Conduct Act 2013 (FMCA) or has been convicted of an offence under the Reserve Bank of New Zealand Act 1989.

Similar powers exist under the Corporation (Investigation and Management) Act 1989 in relation to the statutory management of companies and other entities. Enforcement of a security may be suspended while a company or other entity is subject to statutory management.

The Financial Markets Authority (FMA) has extensive powers under the Financial Markets Authority Act 2011 to:

  • obtain information, documents and evidence where FMA considers it necessary or desirable for the purposes of performing its functions, powers or duties under that Act or any financial markets legislation (including the FMCA);
  • enter and search places, vehicles and other things for the purpose of ascertaining whether a person has engaged in or is engaging in conduct that constitutes or may constitute a contravention of any provision of financial markets legislation where there are reasonable grounds to suspect that there is a contravention and that the search will find evidential material; and
  • share information and documents with other law enforcement agencies, regulators or overseas regulators that the FMA considers may assist those agencies' performance or exercise of their functions, powers or duties under an enactment or foreign law (but only where the overseas regulator can provide appropriate protections for the purpose of maintaining the confidentiality of anything provided).

FMA may also use any information, or copy of any documents, provided to it by a law enforcement or regulatory agency under any enactment, or by an overseas regulator, in the FMA's performance of its functions, powers or duties.

The FMA also has powers under the FMCA to intervene in debt securities offered under a regulated offer and in registered managed investment schemes. Auditors and other parties such as investment managers and custodians have a duty to report serious problems in respect of debt securities or managed investment schemes to the FMA (or the supervisor of a managed investment scheme). The FMA can direct the supervisor, issuer or manager to take action in respect of serious problems reported to it, or apply for court orders to remedy problems. There is a wide range of civil liability provisions in the FMCA relating to contraventions of the FMCA by issuers and managers. Criminal liability only applies where there has been a deliberate breach.

Last modified 13 Dec 2019

Norway

Norway

When the authorities consider that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 20 Oct 2017

Peru

Peru

When the Superintendence of Banking, Insurance and Private Pension Fund Management Companies (SBS) or the Superintendence of Securities Market (SMV) as applicable, considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation.

This may result in regulatory and monetary sanctions, in addition to criminal liability for the individuals involved if any criminal offence was committed.

Last modified 5 Dec 2019 | Authored by DLA Piper Pizarro Botto Escobar

Poland

Poland

When the Polish Financial Supervision Authority considers that an authorized firm or regulated individual may have breached compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 6 Dec 2019

Portugal

Portugal

Under their respective supervision powers, the Bank of Portugal, the Portuguese Securities Market Commission or the Portuguese Insurance and Pensions Funds Supervising Authority may perform the necessary inspections and investigations to the entities subject to their supervision. Such investigations may result in regulatory sanctions.

Last modified 6 Dec 2019

Puerto Rico

Puerto Rico

When the Office of the Commissioner of Financial Institutions considers that a regulated company or individual may have breached the ongoing compliance requirements or that an unregulated person carries out regulated activities, it can launch an investigation which may result in fines or penalties.

Last modified 11 Dec 2019

Romania

Romania

The National Bank of Romania, in exercising its supervisory competences, is entitled by law to control and to check, on the basis of various reporting it receives and by investigations at the premises of the controlled entities, the accounts and any documents of the regulated entities that it authorized. Breaches of the applicable regulations may result in various measures and sanctions being applied by the National Bank of Romania, in accordance with the law.

As part of its supervisory competences, the Financial Supervisory Authority is entitled by law to perform on site verifications and, if the case, to order measures and impose sanctions.

Last modified 20 Oct 2017

Russia

Russia

The Central Bank of the Russian Federation may launch an audit if it considers that an authorized person may have breached the ongoing compliance requirements. This may result in regulatory sanctions.

Last modified 5 Dec 2019

Singapore

Singapore

When the Monetary Authority of Singapore considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 20 Oct 2017

Slovak Republic

Slovak Republic

When the National Bank of Slovakia considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 6 Dec 2019

South Africa

South Africa

Companies Act

The Companies Act makes provision for any person to initiate a complaint in terms of which it is alleged that a person has acted in contravention of the provisions of the Companies Act. Upon receipt of a complaint the Companies and Intellectual Property Commission (CIPC) may elect:

  • not to investigate the complaint if it appears vexatious or frivolous;
  • refer the complaint to the Companies Tribunal for resolution; or
  • appoint an investigator to investigate the complaint.

Competition Act

The Competition Commission is a statutory body constituted in terms of the Competition Act. The Competition Commission is empowered by the Competition Act to investigate, control and evaluate restrictive business practices, abuse of dominant positions and mergers in order to achieve equity and efficiency in the South African economy. One of the Competition Commission's stated objectives is to investigate and evaluate alleged anti-competitive conduct. As such the Competition Commission has wide-ranging powers to investigate any alleged or suspected anti-competitive conduct.

FICA

In terms of the Financial Intelligence Centre Act (FICA), an inspector may at any reasonable time and on reasonable notice enter and inspect any premises at which an ‘accountable institution’ (eg banks, lawyers, estate agents, insurers, casinos and forex traders) conducts its business, in order to investigate any possible non-compliance.

Inspection of Financial Institutions Act

Inspectors, appointed in terms of the Inspection of Financial Institutions Act (including the Registrar of Banks) have the power to investigate the affairs, or part of the affairs, of any financial institution (including registered medical schemes). Inspectors have the power to (i) summon any person and any document relating to the affairs of the financial institution and (ii) administer an oath or affirmation in order to examine any person referred to in (i). On the authority of a warrant issued by a judge or magistrate with jurisdiction, the inspector has wide ranging powers to search premises and seize documents and other evidence.

Last modified 5 Dec 2019

Spain

Spain

When the Comisión Nacional del Mercado de Valores (Spanish Securities and Exchange Commission, CNMV) or the Bank of Spain considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. They may also launch a formal investigation for alleged breach of any laws and regulations applicable to entities operating in the banking and securities sector, including investigations of entities providing regulated activities without authorization or license. This may result in regulatory sanctions.

Last modified 5 Dec 2019

Sweden

Sweden

When the Swedish Financial Supervisory Authority (Finansinspektionen) considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 22 Jan 2020

Thailand

Thailand

When the Securities and Exchange Commission, the Stock Exchange of Thailand, the Bank of Thailand or the Ministry of Finance considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation run by its committee and to the extent permissible under the laws concerning duties of those authorities. This may result in regulatory sanctions. 

Last modified 4 Apr 2020

Ukraine

Ukraine

Where an authorized or regulated individual has breached an ongoing compliance requirement, the Regulator solely or jointly with the other respective authority is entitled to launch a formal investigation. If criminal liability is applicable, the Regulator will submit the documentation to the law enforcement bodies.

Last modified 24 Jan 2020

UK - England and Wales

UK - England and Wales

When the Financial Conduct Authority or the Prudential Regulatory Authority considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 6 Dec 2019

UK - Scotland

UK - Scotland

When the Financial Conduct Authority or the Prudential Regulatory Authority considers that an authorized firm or regulated individual may have breached the ongoing compliance requirements, it will launch a formal investigation. This may result in regulatory sanctions.

Last modified 20 Oct 2017

United Arab Emirates

United Arab Emirates

This question needs to be considered from two main perspectives:

  • firstly, is the activity itself regulated; and
  • secondly, if regulated, by which body or bodies?

While it sounds simple it needs to be established which authority or authorities may regulate a given activity. From a lender's point of view, the UAE Central Bank has published numerous regulations and produced circulars that inform banks as to the necessary capital adequacy ratios and also provided many circulars on internal regulatory controls. Breach of these by the banks could see preventative and punitive action taken against them by the UAE Central Bank.

If a lender, or in a syndicated loan situation, lenders are based in Dubai International Financial Centre (DIFC), then breaches by them of the Dubai Financial Services Authority (DFSA) regulations could see sanctions imposed, or if they exceed the terms of their licenses this can lead also to regulatory problems. The same can be said for lenders based in Abu Dhabi Global Markets (ADGM).

If the lenders have not done sufficient due diligence on their clients and performed their obligations under the Anti-Loney Launderung Law, then this may also constitute a regulatory breach. For instance, they may have been in receipt of funds from either sanctioned countries or blacklisted people and entities.

As well as initial breaches such as those set out above, as the term of infrastructure projects tends to be long and financing arrangements commensurate with the term, the lenders need to ensure that they maintain all regulatory controls throughout the term of the financing. What this looks like in practice will depend on the financing structure and will be different for term credit facilities opposed to revolving credit facilities. In addition to regulatory issues there could be contractual problems for example for failure to be able to make ‘repeated warranties’ or satisfy conditions subsequent.

Last modified 23 Jan 2020

United States

United States

Authority to commence an investigation

The following outlines the various circumstances in which regulators have the authority to commence an investigation.

US Securities and Exchange Commission (SEC)

The SEC can issue subpoenas in connection with any investigation of violations of the Securities Act of 1933 or the Securities Exchange Act of 1934 (SEA).

The SEC conducts investigations in connection with violations of SEC Rule 10b-5, which broadly makes it unlawful for any person to commit fraud in connection with the sale or purchase of any security.

Criminal enforcement of the federal securities laws is done through the US Department of Justice and individual US Attorney's offices throughout the US.

Financial Industry Regulatory Authority (FINRA)

FINRA may, in connection with an investigation, complaint, examination, or proceeding under the FINRA By-Laws or rules, require testimony under oath or inspect the books and records of any FINRA member or person associated with a FINRA member.

Federal Reserve

If the Federal Reserve determines that a supervised institution — state member banks, bank holding companies, savings and loan holding companies, non-bank subsidiaries of bank holding companies and of savings and loan holding companies, edge and agreement corporations, branches and agencies of foreign banking organizations operating in the US and their parent banks, officers, directors, employees, and certain other categories of individuals associated with the above banks, companies, and organizations (referred to as 'institution-affiliated parties') —has problems that affect its safety and soundness, or that the institution is not in compliance with applicable laws and regulations, the Federal Reserve may, by law, take action to ensure that the institution undertakes corrective measures.

The Federal Reserve may also pursue informal enforcement action through board resolutions or Memorandums of Understanding.

Federal Deposit Insurance Corporation (FDIC)

The FDIC pursues formal enforcement actions against FDIC-insured state chartered banks that are not members of the Federal Reserve System, including FDIC-insured branches of foreign banks, officers, directors, employees, controlling shareholders, agents and other institution-affiliated parties associated with such institutions for violations of laws, rules, or regulations, unsafe or unsound banking practices, breaches of fiduciary duty, and violations of final orders, conditions imposed in writing or written agreements.

The FDIC may also pursue informal enforcement action through board resolutions or Memorandums of Understanding.

Office of Foreign Assets Control (OFAC)

The Department of Treasury’s OFAC may issue subpoenas in connection with any apparent violation of US economic sanctions laws, including the International Emergency Economic Powers Act, the Trading with the Enemy Act, the Foreign Narcotics Kingpin Designation Act, and other statutes administered or enforced by OFAC, as well as related executive orders, regulations, orders, directives, or licenses.

Office of the Comptroller of the Currency (OCC)

The Department of the Treasury’s OCC uses informal and formal enforcement actions to ensure national banks, federal savings associations, federal branches, and agencies of foreign banks comply with the program, recordkeeping, and reporting requirements of the Bank Secrecy Act, its implementing regulations, and related anti-money laundering laws.

Federal Trade Commission (FTC)

The FTC has authority to subpoena witnesses for testimony and require the production of documents if it has 'reason to believe' the law is being violated through unfair or deceptive acts affecting commerce.

Investigations may be originated upon the request of the President, Congress, governmental agencies, the Attorney General, upon referrals by the courts, upon complaint by members of the public, or by the FTC upon its own initiative.

Consumer Financial Protection Bureau (CFPB)

The CFPB may issue a 'civil investigative demand' (CID) to any person believed to be in possession, custody, or control of documents or testimony relevant to a violation of federal consumer protection laws.

Standard for commencing an investigation and issuing an administrative subpoena

In general, the standard for commencing an investigation or issuing an administrative subpoena is relatively low. Generally, the standard is met by having a good-faith basis for believing that an investigation may address conduct that falls within the jurisdiction of the relevant regulatory agency. By way of example, the SEC Division of Enforcement's Operating Manual notes that the relevant SEC staff 'should determine whether the known facts show that an enforcement investigation would have the potential to address conduct that violates the federal securities laws. The SEC Division of Enforcement receives information from a variety of sources that may warrant the opening of a new Matter Under Inquiry (MUI), including newspaper articles, complaints from the public, whistleblowers, and referrals from other agencies or self-regulatory organizations (SROs).' The manual emphasizes that these sources are 'suggestions only and should not discourage the opening of an MUI based on partial information.'

It is not uncommon for regulators, and even prosecutors, to commence investigations simply because of allegations of misconduct in press reports.

Last modified 24 Jan 2020

When can there be regulatory investigations?

ASIC is a key regulator of the financial services industry in Australia. ASIC has the power to conduct a formal investigation when it suspects that a breach of law is being committed or is likely to be committed by:

  • a corporation;
  • a financial services provider; or
  • individuals.

In conducting such an investigation, ASIC has various compulsory powers including powers to require the production of documents and information, and for individuals to be formally questioned by ASIC.

ASIC also has the power to institute proceedings or seek other remedies for breaches.

Other regulators relevant to financial services businesses include APRA, ATO and ACCC, while Austrac operates as an intelligence gathering agency. Each of these bodies (except Austrac) has similar investigative powers to ASIC; Austrac has slightly more limited powers. All of them can also institute proceedings for contraventions of relevant legislation.

What regulatory penalties may apply?

Where a breach of law has occurred, ASIC may take various steps, including obtaining an enforceable undertaking from, or issuing an infringement notice on, the offending party.

An enforceable undertaking may include providing compensation, or outlining a process for independent monitoring of an organization's continuing compliance with the law, while an infringement notice will impose financial penalties on an offending party.

If an infringement notice is not complied with or an enforceable undertaking is breached, ASIC can bring a civil penalty action against the recipient seeking payment of the fine and/or compliance with the terms of the enforceable undertaking. ASIC can also pursue civil penalties and other remedies (e.g. banning individuals from operating in the industry or serving as directors) even without first seeking enforceable undertakings or issuing infringement notices. For serious breaches which involve criminal conduct, it can (working with the Commonwealth Director of Public Prosecutions (CDPP)) pursue criminal charges.

ASIC will always assert the right to make an enforcement outcome public, unless the law requires otherwise.

The other regulators listed above (APRA, ATO, ACCC and Austrac) also have the ability to pursue various types of penalties for breaches of the legislation and rules that they respectively regulate.

What criminal penalties may apply?

ASIC can and does pursue criminal charges (working with the CDPP) when it considers the conduct involved warrants it. ASIC will generally only consider criminal action for offences involving serious conduct that is dishonest, intentional or highly reckless, even if a civil remedy is available for the same breach. Such offences include:

  • insider trading;
  • a breach of statutory duty by a director; and
  • market manipulation.

The same is also true for some of the other regulators listed, for example for cartel conduct (the ACCC), or failure to withhold withholding tax or committing a tax fraud or evasion (the ATO), or breaches of reporting requirements under Australia's AML/CTAF legislation (Austrac).

Current regulatory enforcement outlook

A major judicial inquiry into the Australian financial services sector held in 2018/2019 has resulted in Australian regulators switching to a 'why not litigate?' stance. This has resulted in regulators proceeding with court proceedings in circumstances where, in the past, they may have sought to reach a negotiated outcome on penalties to be imposed for breaches of non-criminal contraventions of legislation.

Onno Bakker

Onno Bakker

Partner
DLA Piper Australia
[email protected]
T +61 2 9286 8260
View bio

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