ASIC wants laws to lock more bankers in jail

Penalties legislation that passed Parliament last week mean corporate executives now face maximum jail terms of 15 years for criminal offences and companies are liable for fines of up to $525 million per civil violation.

The laws were a step in ASIC's quest to deter rogue conduct by executives. But the laws do not necessarily allow prosecutors to directly go after financiers for certain bad behaviour.

Rogue misconduct

Instead, ASIC may be forced to pursue rogue actions indirectly through the criminal code for breaches, a more complex prosecution task.

Expanding corporate law to cover more areas of misconduct by individuals, not just by financial institutions, would remove obstacles that bankers sometimes hide behind.

Directors duties are a potential current avenue, but can sometimes be difficult to successfully prosecute.

Before the passage of the recent white-collar penalties legislation, ASIC could legally pursue rogue misconduct in financial markets but was more constrained in going after office holders of financial services firms.

"For example, there's been a long-standing provision in the Corporations Act that if a company fails to comply with its continuous disclosure obligations it can be liable for civil penalties and there is also a section that applies civil penalties to individuals who are involved in those contraventions ," Mr Crennan said.

"But until recently a lot of the financial licensee law did not have that individual civil penalty. If it's criminal, we have to go for the criminal code."

Mr Crennan said this month's passing of the penalty bill was a "great achievement", because toughening criminal penalties to up to 15 years in jail was "very significant."

He said the laws made it less likely ASIC would engage in negotiated outcomes because it had a broader range of penalties. The laws, however, are not retrospective, so they won't be applied to misconduct uncovered by the royal commission.

ASIC has also endorsed introducing a criminal division of the Federal Court.

Quicker response

Separately, the Australian Prudential Regulation Authority has signalled it will not become a "police force" like ASIC, but will crack down harder when financial institutions are slow to report problems or do not co-operate with the prudential regulator, according to the APRA executive leading an enforcement review.

APRA chairman Wayne Byres drew a distinction between the approach of ASIC and APRA, which will be the chief enforcer against misconduct. Dominic Lorrimer

"The centrepiece of it is moving from an enforcement appetite that is last resort to one that is more constructively tough," APRA deputy chairman John Lonsdale told a Senate hearing last week.

"What that means is where an entity is being uncooperative, we will move much earlier. And we will be operating on a broader range of issues, not just solvency issues but also some of these culture issues that have been identified by the royal commission."

The prudential regulator will seek to keep lines of communication open with banks, insurers and superannuation funds by encouraging transparency and not deterring banks being proactive in confessing problems.

APRA chairman Wayne Byres drew a distinction between the approach of ASIC and APRA, which will be the chief enforcer against misconduct.

"We will still be, at out heart, a prudential regulator" Mr Byres said told the Senate committee.

"We will not, all of a sudden, be a police force. But I think we can do more, particularly if we are well-equipped to do so, to use those powers and tackle issues quicker than we have been able to do so in the past."