ASIC treatment of confidential information - financial crime investigations

Combating corporate misconduct forms an important part of the Government’s work in ensuring a strong and effective financial system for all Australians.

The Australian Securities and Investments Commission (ASIC) is the Australian government body that acts as Australia’s corporate, markets, financial services and consumer credit regulator.

ASIC’s powers include the investigation and prosecution of corporate crimes. These investigations typically require people to produce documents or answer questions at an examination.

We look at how ASIC treats this often confidential and sensitive information, as outlined in its regulatory guide on confidentiality and release of information.

 

What are ASIC’s confidentiality obligations?

ASIC’s confidentiality obligations are outlined to a large extent in Section 127 of the ASIC Act 2001 and have been examined in the Johns v ASC  [1993] HCA 56; 178 CLR 408; 116 ALR 567; 11 ACSR 467; 31 ALD 417

Under s127, information must be treated as confidential if it is not widely available, and if it has been received under circumstances which allowed its use and disclosure for limited purposes only. Whilst ASIC is generally obliged to prevent unauthorised use and disclosure of confidential information, there are various instances in which it can disclose confidential information.

There appears to be some ambiguity in the interpretation of this provision (further insight is provided in the guide) however ASIC provides one example situation:

“If ASIC learns some sensitive business information about a company in the course of an examination, and the liquidator of the company wants access to that information, ASIC owes the company no duty to withhold the information from the liquidator, as the company itself has no right to withhold any of its confidences from the liquidator.”

In Johns v ASC (1993), the High Court held that if ASIC obtains information with a view to instituting criminal, civil or administrative proceedings, the use or disclosure of the information in those proceedings is authorised, even if it is confidential information.

Section 127 does not restrain ASIC from making authorised use and disclosure of information.

 

ASIC’s disclosure powers

ASIC has express power under s25, 37 and 127 of the ASIC Act to disclose certain information for certain purposes, and these powers are exercised in accordance with the decision of the High Court in Johns v ASC.

For example, ASIC may release transcripts of examinations conducted by it and related documents to a person’s lawyer if the lawyer satisfies ASIC that the person is carrying on, or is contemplating in good faith, a proceeding in respect of a matter to which the examination is related.

ASIC will also consider whether any of its enforcement requirements (e.g. an ongoing investigation or prosecution) would be jeopardised by the release of these documents, as well as whether other people may be adversely affected.

Other instances in which ASIC may disclose otherwise confidential information include:

  • Where the information has been obtained under warrant, and is required for the purposes of a proceeding
  • Where disclosure is permitted or required by other laws
  • Disclosure of the information is necessary for the purposes of performing the functions of ASIC
  • Disclosure to other agencies – ASIC can disclose information to Australian and overseas governments and their agencies, to enable or assist them to perform their functions and exercise their powers
  • Disclosure to securities or futures exchanges – disclosure is permitted where the information will enable or assist an exchange to monitor compliance with or perform functions under the Corporations Law

ASIC may impose conditions on the release of information, such as the ways in which it may or may not be used, with contravention of an imposed condition constituting an offence.

 

Procedural fairness

ASIC states that a person whose reputation or other interests would be directly adversely affected by the use or disclosure of information is entitled to procedural fairness.

There are various matters which affect ASIC’s procedural fairness obligations, including the nature of the decision, any imposed conditions, and considerations around the publication of information affecting the person.

There are various situations where ASIC does not believe that a person will be adversely affected and does not believe that it is obliged to accord procedural fairness. These include internal use by ASIC or for use as evidence in civil proceedings, internal use by other agencies and for use in criminal prosecutions.

 

Conclusion

The Australian Securities and Investments Commission (ASIC) regularly receives and deals with confidential information as part of the investigation and prosecution of corporate crime. Although ASIC does have general confidentiality obligations, it also has a wealth of disclosure powers which allow it to use and disclose confidential information in countless scenarios.

Nyman Gibson Miralis provides expert advice and representation in corporate crime cases investigated and prosecuted by ASIC.

Contact us if you require assistance.