ASIC brings criminal charges for failing to comply with its compulsory examination and production powers

ASIC has brought criminal charges against a number of individuals and companies for failing to comply with various notices issued pursuant to its information gathering and investigative powers under the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). 

In one case, ASIC are prosecuting Perth man Hazeem Hajinoor for allegedly failing to comply with section 19 notice to attend a compulsory examination and to give reasonable assistance to ASIC. 

Mr Hajinoor was compelled to appear at two examinations. He is alleged to have failed to appear at all at the first examination and to provide reasonable assistance or answer questions during the second examination. 

Under section 19 of the ASIC Act, ASIC has the power to compel a person to answer questions under oath (examination) and/or provide ‘reasonable assistance’ with its investigation.  Failing to do so is a criminal offence.

See the full media release regarding Mr Hajinoor here: https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-232mr-perth-man-charged-with-failing-to-assist-asic-investigation/

In another case, ASIC are prosecuting two companies for failing to produce books and records to ASIC pursuant to a notice to produce documents, and are additionally charging the companies’ director, Mr McClelland of NSW, with aiding and abetting the companies’ alleged contraventions. 

See the full media release here: https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-233mr-companies-and-director-charged-with-failing-to-comply-with-asic-notices/

ASIC has a wide range of information gathering powers under the ASIC Act including:

  • To compel people to attend and be examined under oath (ss 19 & 23);
  • To issue notices to produce books, records and other information relating to an examination (ss  section 30, 30A, 30B, 31, 32A, 33 and 34);
  • To explain matters relating to books, records and information produced under the above sections (s 37(9)); 
  • Where books are not produced, to compel a person to explain their whereabouts, or who is in possession of them (s 38); and 
  • To identify the property of the body corporate (s 39).

A person who deliberately or recklessly fails to comply with any of the above provisions (notices or directions issued under them) commits an offence that is punishable by up to two years imprisonment. A company that fails to comply with a notice can be issued a fine of up to $504,000 (s 63(1)).

This is precisely what is alleged to have occurred in each of the above cases, with ASIC bringing criminal charges with the case being prosecuted by the Commonwealth Director of Public Prosecutions.

These cases reinforce the fact that any notice or direction from ASIC is a serious matter. Mr McClelland’s case serves as a particular reminder to company directors that attempting to deflect responsibility to the company is not a way to avoid your obligation to provide reasonable assistance in response to an ASIC notice. In fact, it may make things worse for the company, and for you personally. 

Any recipient of a notice or direction should get expert advice on the notice’s validity, scope and what you are required to do. 

The last thing you should do it ignore them.  

While ASIC appears to have softened its enforcement rhetoric in recent weeks with recent changes to leadership and a mixture of messages (more about that soon), the fundamentals around compliance with compulsorily notices won’t change.

If you get one, take it seriously, get expert advice.

Dan Mackay and Charles Haszler, Mackay Chapman

Published by Dan Mackay