Financial Services Misconduct and the Corporations Act 2001
Social Science Research Network
This working paper is the second published output of an eighteen-month (December 2014 -June 2016) research project conducted by staff at the Melbourne Law School that examines enforcement and penalties regimes under legislation administered by the Australian Securities and Investments Commission (ASIC). The paper follows Working Paper 1's scoping of penalties under ASIC administered legislation by discussing enforcement under the Corporations Act 2 through the lens of a study of court-based
... rcement by ASIC of financial services misconduct. The paper is in three parts. Part I considers current debates about penalties regimes available to ASIC. Part II discusses the provisions and penalties presently operating under the Corporations Act for financial services misconduct. Part III examines the actual penalties handed down for corporate wrongdoing for financial services misconduct in Australian Courts by way of a small case study of ASIC court based enforcement cases from 2011-2013. Part IV concludes. INDEX I Corporations Act 2001 (Cth) ("Corporations Act"). 9 See ASIC, Review of retail life insurance advice, Report 413 (October 2014), http://asic.gov.au/aboutasic/media-centre/find-a-media-release/2014-releases/14-263mr-higher-standards-needed-for-lifeinsurance-industry/. Report 413 reveals many problems in Australia's life insurance industry, especially surrounding high policy lapse rates, inappropriate incentive structures and quality of financial advice given to consumers. For example, of the 202 advice files reviewed for the report, ASIC found that 37% of consumers received advice that failed to meet the relevant legal standard that applied when the advice was given. This is a disturbingly high figure pointing to deep-seated cultural and structural problems in the industry. 10 G. Medcraft, ASIC explained: Who is the corporate watchdog, what does it do and why should Australians care? Speech delivered at the National Press Club of Australia, Canberra, 3 December 2014, http://asic.gov.au/about-asic/media-centre/speeches/asic-explained-who-is-the-corporatewatchdog-what-does-it-do-and-why-should-australians-care. 11 There is an enormous literature on the theory and practice of punishment. See for example: A.