Corporate watchdog to chase guilty for investigation costs

Corporate watchdog to chase guilty for investigation costs

Businesses and individuals that are found guilty of wrongdoing by the Australian Securities and Investments Commission will now be more frequently asked to cough up the costs of the investigation.

ASIC revealed its new approach to the recovery of investigation of expenses and costs on Wednesday, explaining that while it has had the power to recover such costs it rarely exercised it.

The new policy means from July 29, ASIC is likely to pursue the costs of an investigation if the investigation has led to a successful prosecution or civil proceeding against a person.

As well as litigation expenses, ASIC could attempt to recover salary and travel costs for ASIC staff involved in the investigation.

ASIC will not necessarily come down hard on everyone, however, with the watchdog saying it will give people who are subjected to these investigations the potential to negotiate so there is an appropriate outcome.

Rohan Harris, principal at law firm Russell Kennedy, told SmartCompany this morning ASIC’s powers to chase such costs have been around for years.

“It’s just that ASIC have flagged a new approach in applying those powers,” Harris says.

Harris says the new stance is “certainly aimed at the big end of town” in terms of recuperating the cost of large investigations, noting there are “lots of recent cases” regarding the misconduct of stockbroking firms and banks.

“But there is also the potential to be applied to small businesses,” he says.

Harris says any business engaged in the provision of financial services or advice, management of investment schemes or providers of consumer credit could fall into this category.

“There are lots of SMEs involved in those sorts of activities,” he says.

“So there is potential for this to apply for broad range of businesses.”

Harris believes the underlying motivation for the new approach comes down to ASIC’s “limited resources and funding”.

“It needs to look at ways to recover the costs of these types of investigations, which are often time consuming and expensive,” he says.

Harris says the new approach won’t necessarily deter illegal behaviour, but anyone who is investigated would need to factor the change of policy in when deciding how to defend their claim.

“It’s there as a disincentive for a business who does the wrong thing not to draw out a purely tactical defence of any claim,” he says.

Harris says another interesting aspect of the new policy is ASIC itself has the power to issue the order to pay the investigation cost and it didn’t have to come from a court.

This means while a business has the right to review that order, it would need to prove it was an improper investigation to get out of paying the costs.

“It’s definitely another string to its (ASIC’s) arsenal,” he says.


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