ASIC examinations – Section 19 examinations and banning orders
Written by Kristina Kothrakis. Accredited Criminal Law Specialist, Doogue + George Defence Lawyers.
If you work in the financial services sector, there would be nothing more daunting than being hauled in by the Australian Securities and Investments Commission (ASIC), to take part in an examination, where they are investigating your conduct.
ASIC have wide reaching powers, conferred to them under the Australian Securities and Investments Commission Act 2001 (ASIC Act), which works in conjunction with the Corporations Act 2001(Cth).
ASIC can conduct any investigation it considers appropriate, to investigate conduct they think has breached a law under the Corporations Act, or any law of a Commonwealth , State or Territory which primarily involves fraud, or dishonesty, or relating to financial services.
As part of their investigative powers, they can direct you to attend for a Private Examination (section 19 ASIC Act).
If you receive a notice directing you to attend for an examination, you should get legal advice immediately.
It’s important to understand what your rights and obligations are and what you need to do to best protect your interests.
Some important aspects you need to know are:
- Failure to comply with the requirements to attend for examination may lead to a penalty of up to 100 penalty units (approximately $18,000), or imprisonment, or both.
- Section 19 examinations are held in private, so you will probably be directed not to discuss any aspect of the examination with anyone (except for the purpose of getting legal advice), for the period they select. Breach of this carries severe penalties.
- You must answer their questions either on oath, or by giving an affirmation.
- You must answer ALL of the questions asked of you.
- It is not reasonable to refuse to answer a question on the basis that it may tend to incriminate you. Before providing any answer, or signing any document that may incriminate you, you must claim privilege. You do this by saying the word ‘privilege’ before providing that answer. If you do this, then the answer you gave can not be used against you in any criminal proceeding, or other proceedings for the imposition of a penalty. They can use it against you in a case of perjury, so it’s important to tell the truth. Serious penalties apply for providing false or misleading information. You should work on the assumption that ASIC already know the answers to most of the questions they are asking you, so don’t try and bend the truth to make it look more favourable to you.
- It is reasonable for you to not answer a question, if that answer is protected by Legal Professional Privilege. Limitations apply, so you will need to seek advice from your lawyer about when you could evoke this privilege.
- You are entitled to take a lawyer with you to the examination.
After the examination
After the examination, ASIC will take into account all the evidence they heard on the issue, and will give you Notice of what orders they propose to make.
One of the things they can do is impose a Banning Order. Banning Orders are dealt with in sections 920A-F of the Corporations Act.
A banning order prohibits a person from providing financial services, and can be permanent, or for a specified period of time.
The devastating effects of an order like this are obvious.
Before they decide if a banning order should be made, ASIC are required under section 920A(2) of the Act to give you written notice of their concerns, and give you an opportunity to appear, or be represented at a hearing before ASIC, and to make submissions. Those submissions can be oral, or in writing.
Given the serious consequences of the banning order, it is imperative that you contact a lawyer for advice, and representation.
Once submissions have been considered by a Delegate, the decision will be made.
Decision of the ASIC Delegate
If the decision of the Delegate is to make a banning order, they will serve that decision on you personally.
Under section 920E of the Corporations Act, once a banning order is made, they MUST publish a notice in the Gazette outlining the banning order that was made, and the reason for it.
This could cause irrevocable damage to your reputation.
Your rights for review
You have the right to seek a review of the decision to ban you from the Administrative Appeals Tribunal (AAT) (Part IV- Administrative Appeals Tribunal Act 1975 (AAT Act)).
You must apply for review within 28 days of being told about the decision (there is a fee associated).
You must be aware that applying for a review does not stay the decision that was made, and it does not stop ASIC from publishing the decision.
If you want to stop ASIC from publishing the banning order, then upon receiving the notice of decision, you need to apply to the AAT for:
- A review of the decision by ASIC (section 25 AAT Act)
- A stay of the operation and implementation of the order which you are seeking to review (section 41 AAT Act )
- Confidentiality- where you seek orders prohibiting publication of the banning order, and orders which restrict publication of details which could lead to identify some or all of the parties.
It is important that you engage a lawyer to assist you with preparing the applications, as there is generally strong opposition from ASIC and they will normally rely upon the presumption for hearings to be held in public, and for protection of the public to be the paramount consideration.