News & Articles
Articles | August 2024
Litigation Explained: ASIC’s powers to make banning orders
By: Rosemary Kanan
ASIC’s Powers to Impose Banning Orders: What You Need to Know
After conducting a section 19 examination, the Australian Securities and Investments Commission (ASIC) will typically assess the evidence presented and notify the individual or entity involved about the proposed orders.
ASIC holds significant authority in imposing both criminal and civil sanctions for violations of regulatory obligations. In addition to these measures, ASIC has the power to issue banning orders.
Under sections 920A and 920B of the Corporations Act 2001 (Cth), ASIC can take administrative action, including issuing a banning order. This order prohibits an individual from engaging in specific activities, such as providing financial services, controlling a financial services entity, or being involved in any financial services operations.
Banning orders are usually considered when a person’s conduct is deemed to involve serious incompetence or misconduct. ASIC’s Regulatory Guide 98: ASIC’s powers to suspend, cancel, and vary AFS licences and make banning orders outlines the factors ASIC may evaluate when determining whether to impose a banning order. These factors include:
- The nature and severity of the misconduct: This includes evidence of dishonesty, the impact of the contravention, and any previous history of non-compliance.
- Compliance with internal processes: Whether the person adhered to internal controls and procedures.
- Post-contravention conduct: The individual’s level of cooperation and any corrective actions taken after the alleged breach.
- Public benefit: The expected protection for investors and consumers, and the reinforcement of the financial services sector’s integrity and reputation.
- Deterrence effect: The potential for the banning order to influence the person’s future behaviour and serve as a general deterrent.
- Mitigating circumstances: Factors such as whether the incident was isolated, inadvertent, or due to negligence.
Banning orders and their duration
The main goal of banning orders is to protect investors and consumers while deterring misconduct, not just from the individual involved, but from others in the financial services sector. Longer banning periods are typically imposed on individuals who present a higher risk to investors and consumers. For instance, those involved in dishonest actions or conduct that could harm others are considered to pose a higher risk than those who acted with carelessness or who may not have foreseen potential harm. Similarly, individuals who wilfully ignore compliance requirements are considered a higher risk than those who may have failed due to incompetence.
For more information contact Rosemary Kanan
This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice and should not be relied upon as legal advice. Formal legal advice should be sought in relation to particular transactions or on matters of interest arising from this communication.