ASIC has recently released a new immunity policy for certain market misconduct offences. Much like other forms of immunity (i.e. for cartel conduct), the first person to approach ASIC to disclose the misconduct can obtain immunity from both civil penalties and criminal proceedings provided they comply with certain conditions.
The policy applies to contraventions of Part 7.10 of the Corporations Act 2001 (Cth) (Corporations Act), including insider trading, market manipulation, false trading and market rigging, and dishonest misleading and deceptive conduct. The underlying policy basis for the grant of immunity is that these offences are the most serious, complex and difficult to detect and accordingly, early voluntary and fulsome disclosure should be rewarded.
In order to be eligible for immunity, certain criteria must be satisfied, including that the relevant applicant:
- was involved in the misconduct;
- did not coerce any other person to engage, participate or be involved in the misconduct;
- was not the instigator of the misconduct;
- admits to their participation in the misconduct;
- ceased their involvement in the misconduct or are willing to immediately cease engaging in the misconduct; and
- have provided full, frank and truthful disclosure, have cooperated fully and expeditiously while making the application, and have undertaken to continue to do so throughout ASIC’s investigation and any ensuing court proceedings.
In addition to the above criteria, ASIC must not have already commenced an investigation into the misconduct when the disclosure is made. On its face, this appears to be a harsh condition, given a person seeking immunity will not normally know whether a covert investigation has already begun by ASIC. With that said, even where a person is not eligible for immunity under the policy, there are benefits in cooperating with ASIC more generally. Outside of the immunity regime, early notification of misconduct and/or a cooperative approach during an investigation will often be relevant to ASIC’s consideration of which type of action to pursue (for further information in this regard, refer to ASIC Info Sheet 172).
An important distinction in the policy is that corporate entities are not eligible for immunity.
If the conditions of ASIC’s policy are met, ASIC will grant the relevant person immunity from the civil penalty provisions in Part 7.10 of the Corporations Act. Where ASIC have formed the view that the conditions for immunity under their policy have been satisfied, they will also make a recommendation to the Commonwealth Director of Public Prosecutions (DPP). However, the DPP is the only entity that can grant immunity from prosecution for alleged criminal offences against the laws of the Commonwealth, and will do so at its own discretion and in accordance with its own policies. No immunity is provided by ASIC under the policy in respect of administrative actions (i.e. disqualification from managing corporations or the revocation of an AFSL) or compensation actions.
To apply for immunity, a written or oral application must be made to ASIC, disclosing sufficient details of the misconduct and requesting the issue of a “marker”. If a marker is issued (and only one marker can be issued at any one time for the same misconduct), it will preserve the person’s status as the first party to apply for immunity in respect of the relevant misconduct. The person in possession of the marker then has a limited time period to gather the necessary information to demonstrate to ASIC that they satisfy the conditions of the immunity.
After obtaining a marker from ASIC, to proceed with an immunity application, it is necessary to provide ASIC with:
- a detailed description of the misconduct, including the parties involved;
- the relevant financial product;
- the time period; and
- a description of records that may be available (this is known as a “proffer” and can only be made in writing).
In order to obtain final civil penalty immunity, in addition to continuing to satisfy the eligibility conditions for immunity noted above:
- full, frank and truthful disclosure and cooperation must be provided throughout ASIC’s investigation and any subsequent proceedings;
- confidentiality must be maintained (including as to a person’s status as an immunity applicant);
- the profits of any wrongdoing must be forfeited; and
- restitution must be made to the victims of any wrongdoing (where considered appropriate by ASIC).
In order to obtain final immunity from criminal proceedings (which is provided by way of a written undertaking by the DPP), certain conditions must be satisfied by the applicant for immunity, including:
- providing ongoing and full cooperation during the investigations;
- appearing as a witness for the prosecution as and when requested in any proceedings against the other participants; and
- giving evidence truthfully, accurately and without withholding anything of relevance.
If you would like any further information regarding ASIC’s immunity policy please contact our Corporate Advisory and Governance team.