ASIC warns cooperation pays for small business

The corporate watchdog has released a report today in which it argues new statistics show a growing number of targets are cooperating as part of the organisation’s new approach to prosecutions among liquidators, company directors and accountants.

But one industry figure, insolvency advisory firm Dissolve chief executive Cliff Sanderson, says smaller businesses have very little choice when it comes to cooperating with the Australian Securities and Investments Commission.

“Most of the enforceable undertakings for liquidators would be called ‘undeniable breaches’, and are to do with specific provable things, like failure to lodge accounts or payments,” he says.

“These are factual things, and if you didn’t do them, it’s clear.”

The ASIC report details the organisation’s emphasis on cooperation, suggesting there are benefits for individuals who contribute more while being investigated or targeted.

“Altogether this information increases the public’s understanding of how ASIC uses its enforcement powers to achieve its objective of penalising those who breach and deterring others from breaching, and what to expect if we knock on your door,” said ASIC deputy chairman Belinda Gibson, in a statement.

The report shows during the six months between July and December 2012, 44 of the 88 enforcement outcomes achieved in market integrity, corporate governance and financial services involved cooperation between the people concerned.

These included early guilty pleas, in the case of executives accused of insider trading, which resulted in reduced sentences.

Companies such as GE Money, RHG and AMP Horizons also contributed to negotiations, and several companies ended up with enforceable undertakings.

In one instance, a company director accepted an enforceable undertaking (EU) after ASIC brought concerns he may have performed management duties during a period when he was disqualified as working as a director.

“ASIC considers an EU can sometimes offer a more flexible and effective regulatory outcome than could otherwise be achieved through other available enforcement remedies,” it said in a statement.

“Importantly, we see enforceable undertakings as influencing behaviour and encouraging a culture of compliance for the benefit of all participants in the markets we regulate.”

But Sanderson says while the effort to increase cooperation is welcome, ASIC is only more likely to propose negotiating if the company is larger.

Smaller businesses or individuals, he says, don’t have much sway in how they are targeted.

“If you’re a director and ASIC is coming for you, then it really depends on what they’re saying you’ve done wrong.”

“In quite a lot of the director targets, it’s something factual like, were you the director of two or more companies, or so on.”

“So it’s hard to give general advice in this respect. When they’re coming after you a as a small business, there may not be a lot of room to move.”

 

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