Cooperating with ASIC

This is Information Sheet 172 (INFO 172). It explains the benefits of cooperating with our investigations, and the factors we take into account when assessing cooperation.

It is ASIC policy to encourage and fully recognise cooperation.

This information sheet is for:

• people and entities who think they may be or may have been involved in, or have knowledge of, misconduct that ASIC investigates
• people and entities who are being investigated by ASIC
• people and entities who are the subject of ASIC enforcement actions
• the general public.

It covers the following topics:

• the benefits of cooperating with us
• how to cooperate with us
• what we can do if you cooperate
• our public comments on cooperation
• the approaches we may take when you cooperate, including immunity,  letters of comfort, enforceable undertakings and indemnities
• factors relevant to your cooperation in a criminal matter or a civil penalty matter
• the factors we may take into account when seeking remedies – for an individual and an entity
• where you can get more information.

If you have information about misconduct that ASIC investigates, but you were not involved in the misconduct, see Information Sheet 153 How ASIC deals with reports of misconduct (INFO 153), Information Sheet 238 Whistleblower rights and protections (INFO 238) and Information Sheet 239 How ASIC handles whistleblower reports (INFO 239).

Benefits of cooperating with us

ASIC is empowered to take a range of administrative, civil and criminal actions in relation to alleged misconduct within our jurisdiction.

A cooperative approach to dealings with ASIC may benefit a person or entity in many ways. For example:

• early notification of misconduct and/or a cooperative approach during an investigation will often be relevant to our consideration of which type of action to pursue and what remedy or combination of remedies to seek
• in any proceedings commenced by ASIC we will give due credit for any cooperation we have received from the person or entity against whom the proceedings are brought.

How to cooperate with us

You can cooperate with us by:

• voluntarily self-reporting any misconduct to ASIC
• honestly and completely disclosing all information relevant to the misconduct
• providing voluntary assistance during the investigation
• providing evidence in a form that can be used in court
• pleading guilty to or admitting any misconduct you committed or were involved in committing.

Merely fulfilling your legal obligations (e.g. by complying with reporting obligations under the Corporations Act 2001 (Corporations Act), or by producing documents in response to statutory notices issued by ASIC) does not constitute cooperation for the purposes of this information sheet.

You can self-report or report misconduct to ASIC by filling in our online form.

Lodging your report online will ensure the quickest response from ASIC to your concerns.

If you are unable to self-report or report misconduct to ASIC online, you can contact us on 1300 300 630.

What we can do if you cooperate

If you cooperate with us we can:

• fully recognise your cooperation (taking into account whether you have a self-reporting obligation)
• negotiate alternative resolutions to the matter
• take into account the degree of cooperation provided during the investigation when determining the type of remedy or remedies sought, depending on all the circumstances of the case
• in administrative and civil matters (other than civil penalty matters), make particular submissions to the tribunal or court as to what the outcome should be
• in civil penalty matters, take your cooperation into account as set out in Cooperation in civil penalties matters below
• in criminal matters, take your cooperation into account as set out in Cooperation in criminal matters below.

Our public comments on cooperation

To enhance our approach to enforcement we provide information to the public about the nature of our cooperation policy and the benefits associated with cooperating.

In addition, we retain a discretion regarding whether and how to disclose the fact, manner and extent of an individual’s or entity’s cooperation in documents filed or issued by ASIC in connection with an enforcement action.

For more information on our policy on public comment, see Information Sheet 152 Public comment on ASIC's regulatory activities (INFO 152).

The approaches we may take when you cooperate

If you cooperate with us we may take one or more of the following approaches, depending on the particular factors and circumstances of your case.

Immunity

ASIC can grant immunity from civil penalty or criminal proceedings to an individual who:

• thinks they may have contravened, with at least one other person, a provision in Part 7.10 of the Corporations Act
• wishes to apply for immunity from civil penalty or criminal proceedings
• intends to cooperate with ASIC in relation to our investigation and any court proceedings regarding the contravention.

Note: Part 7.10 includes provisions relating to insider trading, market manipulation and engaging in dishonest conduct when operating a financial services business.

What you need to consider

We will only grant immunity to individuals (not corporations) who satisfy certain conditions and we will not grant immunity from administrative or compensation proceedings. The circumstances in which ASIC will grant immunity from civil penalty proceedings are set out in ASIC’s immunity policy.

Letters of comfort

We may give you a letter of comfort, which informs you that you are not the subject of an investigation and/or that you will not be the subject of civil or administrative action as a result of a specific investigation.

What you need to consider

A letter of comfort will not have effect if it is later found that you have been untruthful and/or have not fully disclosed your involvement in the relevant conduct. Further, a letter of comfort does not prevent parties other than ASIC taking action against you.

Enforceable undertakings

We may accept an enforceable undertaking from you to settle a matter as an alternative to civil court action or administrative action. We will accept an enforceable undertaking if we believe it is the most effective and appropriate outcome, taking into account other factors. When drafting an enforceable undertaking we will negotiate the terms of the undertaking with you to achieve an appropriate outcome.

What you need to consider

The circumstances in which we will not accept an enforceable undertaking and what happens if you don’t comply with an undertaking given to ASIC are set out in Regulatory Guide 100 Enforceable undertakings (RG 100).

Indemnities

The Commonwealth Director of Public Prosecutions (CDPP) may give you an undertaking (sometimes referred to as an indemnity) that prevents you from being prosecuted in specified circumstances. Such undertakings are usually only offered in the later stages of an investigation. The circumstances in which the CDPP might consider providing such an undertaking are set out in the Prosecution Policy of the Commonwealth at paragraphs 6.1–6.9.

Cooperation in criminal matters

We conduct some prosecutions of minor criminal matters and refer more serious matters to the CDPP, which conducts those prosecutions in close cooperation with ASIC.

If you cooperate in a criminal matter, we will take into consideration any cooperation when determining whether to commence a criminal prosecution or refer the matter to the CDPP.

If we are prosecuting a minor criminal matter, we will take your cooperation into account when determining:

• what alleged offences to prosecute
• the content of any submissions made to the court about penalties.

We will also provide information about the nature, extent and timeliness of your cooperation to the court.

Similarly, when referring more serious matters to the CDPP, we will liaise with the CDPP about our assessment of your cooperation and also about the nature and extent of the information about your cooperation that will be provided to the court.

The CDPP also considers cooperation offered or provided by you when making its own prosecution decisions in accordance with the Prosecution Policy of the Commonwealth.

In addition, the law recognises in a number of ways that a person who cooperates in the prosecution process, including by admitting criminal offences, is entitled to benefit from that cooperative approach. For example:

• in sentencing a person for an offence against Commonwealth law, a court must take into account ‘the degree to which the person has cooperated with law enforcement agencies in the investigation of the offence or of other offences’ (see section 16A(2)(h) of the Crimes Act 1914)
• the law relating to sentencing provides for significant ‘discounts’ in cases where there is an early guilty plea and/or where an offender cooperates with authorities and/or promises future assistance such as giving evidence at the trial of the co-accused (see also Prosecution Policy of the Commonwealth at paragraph 6.4).

Charge negotiation

Charge negotiations are conducted by the CDPP in consultation with ASIC after charges have been laid. Such negotiations can be consistent with the requirements of justice, provided certain conditions are met: see Prosecution Policy of the Commonwealth at paragraphs 6.14–6.21. Such negotiations may result in the defendant pleading guilty to fewer than all of the charges they are facing, or to a lesser charge or charges, with the remaining charges either not being proceeded with or being taken into account without proceeding to conviction.

Cooperation in civil penalty matters

Settlement of civil penalty proceedings may result in fewer declarations of contravention being made against a defendant, and/or a reduction in the amount of any pecuniary penalty order, or the length of any disqualification order, sought by ASIC.

What does settlement of civil penalty proceedings entail?

Settlement of a civil penalty proceeding usually requires the approval of the court, because only the court can make declarations of contravention and consequential orders for pecuniary penalties and disqualification of defendants.

In most instances, parties wishing to settle a civil penalty proceeding will need to provide the court with:

1. one or more agreed declarations of contravention
2. an agreed set of orders, including orders relating to pecuniary penalty, disqualification and costs
3. an agreed statement of facts supporting the contravention(s) and orders
4. joint or agreed submissions in support of the agreed set of orders
5. a summary of the pecuniary penalty and disqualification orders made by courts in analogous civil penalty proceedings.

In some instances it may be possible for the parties to seek to resolve the liability aspect of a proceeding by agreed declarations and an agreed statement of facts (points 1 and 3 above) and for matters such as pecuniary penalty and disqualification to be contested in submissions to the court.

Content of agreed statement of facts

The agreed statement of facts must provide sufficient information to permit the court to be satisfied that it is warranted in making the declarations of contravention and other orders proposed by the parties (or such other orders as the court may, in its discretion, choose to make).

In general, in settling civil penalty proceedings we expect a defendant to agree to a full and frank statement of agreed facts that:

• contains all background facts necessary for the court to understand the circumstances of the defendant’s conduct in relation to the agreed contraventions
• sets out all of the facts necessary to establish the requisite elements of the agreed contraventions
• properly reflects the defendant’s role in matters the subject of the agreed contraventions
• where relevant to the court’s understanding of the matter, identifies other persons or entities involved in the misconduct
• does not contain any mitigating facts or circumstances that you are not able to substantiate to our satisfaction.

Is the court required to give effect to agreed settlements?

The court is never obliged to ‘rubber stamp’ the agreed declarations and orders put forward by the parties.

The court will always consider whether it is appropriate to make the declarations and orders proposed – on the basis of materials provided by the parties and, in particular, the contents of the agreed statement of facts.

Relevant factors when seeking remedies: Individuals and entities

When considering what remedy or combination of remedies to seek for individuals (see Table 1), we may take into account different factors to those relevant to entities (see Table 2). We evaluate individual cooperation on the facts and circumstances of each particular case. The factors in Table 1 and Table 2 are not listed in order of importance, nor are they intended to be exhaustive.

For more information on the factors we take into account when considering matters brought to our attention, see Information Sheet 151 ASIC’s approach to enforcement (INFO 151).

Table 1: Relevant factors when seeking remedies – individuals

Factor	Examples of what we may take into account
The nature and seriousness of your suspected misconduct	The severity of your misconduct The number of breaches Whether the misconduct was isolated or repetitive Whether the misconduct resulted in risk to investors or others
The cooperation you provide	Whether you have merely complied with legal obligations, or have provided additional, voluntary cooperation The timeliness, substance, quality and value of your cooperation Whether the cooperation was truthful and complete Whether the information was already known to ASIC and, if not, whether it might otherwise have been discovered Whether a significant amount of time and resources are saved as a result of your cooperation
Your personal and professional history	Your culpability Your past compliance Whether you have made efforts to remedy the harm caused

Table 2: Relevant factors when seeking remedies – entities

Factor	Examples of what we may take into account
Self-policing before the discovery of misconduct	Whether the entity had: established effective compliance procedures provided a strong message regarding compliance
Self-reporting of misconduct when it is discovered (assuming you do not have an existing obligation to report the misconduct to ASIC)	Whether the entity: conducted a thorough review of the nature, extent, origins and consequences of the misconduct promptly, completely and effectively disclosed the misconduct to affected persons, to regulatory agencies and, where appropriate, to self-regulatory organisations, markets and the public
Any remediation undertaken	Whether the entity: dismissed or appropriately disciplined wrongdoers modified and improved internal controls and procedures to prevent recurrence of the misconduct appropriately compensated those adversely affected
The cooperation provided	Whether the entity voluntarily provided all information relevant to the underlying breaches The entity’s remedial efforts

Where can you get more information?

• INFO 151 ASIC’s approach to enforcement
• INFO 152 Public comment on ASIC's regulatory activities
• INFO 153 How ASIC deals with reports of misconduct
• INFO 238 Whistleblower rights and protections
• INFO 239 How ASIC handles whistleblower reports
• RG 98 ASIC’s powers to suspend, cancel and vary AFS licences and make banning orders
• RG 100 Enforceable undertakings
• RG 218 Licensing: Administrative action against persons engaging in credit activities
• ASIC immunity policy
• Prosecution Policy of the Commonwealth
• Call ASIC on 1300 300 630
• Submit a question online at www.asic.gov.au/question

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.