ASIC is a step closer to being granted access to adviser phone calls after a Bill proposing increased surveillance powers was presented to parliament late last year and remains without amendment.
The Bill – which followed on from recommendations in the 2017 ASIC Enforcement Taskforce Review report – includes a proposal to change the Telecommunications Act so the corporate watchdog can “receive and use intercepted information for its own investigations”.
The amendment would make ASIC a ‘recipient agency’, meaning it would be on par with Federal Police in being able to request and receive materials from ‘interception agencies’ to support investigations into breaches of the Corporations Act.
Currently, the regulator can only receive a telephone intercept (TI) as part of an investigation involving a joint agency. In essence, the amendment would mean that ASIC can access recorded phone calls more readily if it suspects a breach and without the involvement of external agencies.
“It would entitle ASIC to receive information in certain circumstances where there’s a serious offence of the Corporations Act combined with other factors such as serious fraud,” says Mark Bland, a financial services lawyer at Mills Oakley and ex-ASIC employee. “This means they could receive material for a matter only ASIC is looking into.”
Bland says that while the proposed law would generally relate to serious offences like fraud and bribery, there is potential for “much broader use” in relation to the Corporations Act.
“On director’s duty, for example, there’s an offence around the obligation of good faith and good purpose, as well as other areas like disclosure of material [and] knowingly issuing a defective PDS,” he explains.
‘A tool any agency would like to have’
In April 2018 the government agreed in principle to all the ASIC Taskforce Review’s recommendations. Legislation was slow to follow, however, until the Hayne royal commission. When the Morrison government released its subsequent Restoring Trust in Australia’s Financial System roadmap, a commitment was made to fortify the regulator by strengthening, among other things, its TI powers.
Treasury’s consultation period for the proposal last year resulted in a mixed bag of submissions.
The Australian Competition and Consumer Commission (ACCC) supported the proposal after experiencing “very similar, if not identical problems” obtaining phone calls to use as evidence. The Australian Financial Markets Association (AFMA), on the other hand, derided the proposal as “administratively convenient to ASIC” and said it would erode existing privacy protections.
“Administrative inconvenience is not a sufficient public justification for undermining fundamental principles of good policy and civil protections,” the AFMA stated.
Several other bodies endorsed the proposal on the condition that either an independent review or privacy impact assessment were first completed.
The Law Council of Australia made the point that while ASIC already has the power to access phone calls as part of a joint investigation, anything that requires further powers is probably serious enough to bring in heavier artillery anyway.
“It is not clear enough why ASIC should receive TI materials for offences that are allegedly occurring that are not, in Treasury’s words, ‘sufficiently serious enough’ for a core criminal enforcement agency such as the Australian Federal Police to investigate,” the Law Council’s submission states.
Opponents uniformly cited privacy as the main concern.
“The ability to receive TI material would arguably be a tool that any agency would like to have,” the Law Council continued. “However, agencies have been limited in recognition of the serious privacy intrusion of the information.”
Advisers caught up
Bland reckons the proposal – if it passes both the house and the senate – could impact advisers, but he also believes ASIC should be empowered in the appropriate ways so that it can properly regulate the industry.
“There is certainly the prospect for the conduct of advisers to be caught up in this, but I personally don’t feel like the industry has to be concerned,” he says. “We have to trust the enforcement agencies with the powers given to them and acknowledge the accountability measures that are in place to ensure the proper use of those powers.”
He predicts the powers would be used more in cases of market manipulation and insider trading than financial advice, anyway. If advisers are caught up, he says, it would likely be for serious and sophisticated breaches. “For me, it doesn’t cause particular concern,” he says.
As to the Law Council’s point that the police would be involved if the offence was serious enough, Bland refuses to prevaricate.
“I don’t accept that market issues are only important where the Federal Police are involved,” he says.
In relation to privacy concerns, he believes they should be addressed but shouldn’t preclude the right tools being placed in the right hands.
“I don’t think the [privacy] concerns are serious enough to warrant agitating against the granting of the powers,” he says.