Dealing with regulators in Australia: compulsory processes and examinations

Articles Written by Sar Katdare (Partner), Kevin Lynch (Partner)

Australian regulators have a range of compulsory information gathering powers. If your organisation is under surveillance or facing an investigation relating to a suspected breach of the law, you may be required to submit documentation and information, attend questioning and provide reasonable assistance.

These powers will require a corporation to provide all responsive information, other than information that it has a claim for legal professional privilege. The identity of the regulator and the law that underpins the regulator’s powers will dictate how legal professional privileges and privileges against self-incrimination will operate in your situation.

Compulsory examination

A regulator will have the power to require you to attend an examination and answer questions on oath or affirmation. There may be limits on the exercise of this power. In many cases it can only be exercised where there is reason to suspect a contravention of the law has occurred. In most cases a request will be made in writing, stating the general nature of the matter that is being (or will be) investigated and a time and place for the examination. Typically it must be served within a reasonable time before the date for the examination to give you an opportunity to seek legal advice.

You have a right to refuse to answer questions on the basis that the answer would disclose information that is covered by a valid claim of legal professional privilege, but you (or your lawyer) will need to be able to explain why that privilege will apply. In many cases you may also make a claim for privilege on the basis that the answer you give may personally incriminate you.

Typically the discussion that takes place in an examination is confidential, which means that you will be forbidden from discussing the content of the examination with anyone (other than your lawyer) for a period of time. The regulator, on the other hand, may be able to disclose the information to third parties on a confidential basis during the course of the investigation or during any legal proceedings. The information received during an examination may eventually come out in open court.

Privileged documents and information

Australian regulators cannot compel the production of privileged communications without express legislative powers. Legal privilege is recognised by the courts as a fundamental common law immunity to a regulator’s legislative powers.

There are two distinct categories of legal professional privilege:

  1. Advice privilege, applying to confidential information (communications and documents) brought into existence for the dominant purpose of giving or obtaining legal advice; and
  2. Litigation privilege, which applies to confidential information (communications and documents) brought into existence for the dominant purpose of a client being provided with professional legal services in relation to actual or anticipated legal proceeding.

You should seek advice in relation to presenting a legal professional privilege claim over information and documents that is responsive to the compulsory process, in particular if:

  • you are the privilege holder; or
  • you may want to seek to assert the legal professional privilege claim on behalf of the privilege holder.

Different regulators will have different powers and processes in place for a claim of legal professional privilege and specific statutory requirements may apply.

On occasion there may be carefully considered strategic reasons to provide privileged communications to a regulator. If so, you should seek appropriate legal advice to establish a framework for the provision of that material. A regulator may have a standard agreement for voluntary confidential legal professional privilege disclosure which sets out the terms on which the regulator may elect to accept such information.

Such a disclosure needs to be carefully considered in conjunction with expert legal guidance. Whilst you may reach agreement with the regulator that the provision of information is not a waiver of any privilege existing at the time of the disclosure, these arrangements do not prevent third parties from asserting that privilege has been waived. This is an important consideration, particularly in an era of increasing regulatory action and class actions in which plaintiffs seek to piggy back on regulatory investigations and proceedings.

Third party access to documents

As indicated above, when dealing with regulators, your responses and strategy should be informed by the possibility of third parties seeking to access compulsorily produced documents and/or a transcript of examinations. These third parties may include plaintiff law firms who wish to use such information for the purpose of working up private claims (including possible class actions). By way of example, ASIC policy is generally to assist private litigants by providing information and documents if requested, subject to:

  • avoiding potential prejudice to ASIC investigations.
  • any legal limitations on ASIC ability to disclose confidential or private information.
  • the rights of third parties affected by the provision of information.

Additionally, documents and information you disclose to a regulator, for example the ACCC under its compulsory information gathering powers, may be the subject of discovery orders in subsequent proceedings, irrespective of whether or not you are a party to the proceedings. Such an outcome may include your documents and information being discovered to competitors.

Prior to any disclosure, you should carefully consider (and seek legal advice on) possible claims of confidentiality, particularly with respect to commercially sensitive documents and information. In the event your documents and information become the subject of a discovery order, it is important to obtain legal advice and consider establishing an appropriate confidentiality regime to minimise the risk of your documents and information being discovered to competitors.

Self-incrimination

The privilege against self-incrimination is available to natural persons, but not corporations.

In some cases legislation grants a regulator the power to compel a person to answer questions and provides that the privilege against self-incrimination does not excuse a person from answering questions. These laws usually provide a level of immunity regarding the answers given. Other statutory safeguards against incrimination may also be provided, including restrictions on sharing the information obtained with law enforcement agencies.

It is important to obtain legal advice if your dealings with a regulator give rise to concern that you or any other individual in your organisation may incriminate themselves and to ensure you access the privileges and/or safeguards that may apply.

Get advice

It is important to get legal advice when faced with compulsory information gathering processes. At this stage you will need advice on your legal rights and how to best navigate the inquiry. See our complete Guide to dealing with Regulators in Australia for further information on these processes, including how to respond to warrants.

This article is general in nature. Your dealings with a regulator are of fundamental importance to your business and you should seek expert legal advice.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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