Dealing with Regulators in Australia: voluntary inquiries

Articles

Australia has many investigative bodies with coercive information gathering powers. If you are operating in Australia in any capacity, it’s likely that you will encounter one or more of these regulatory bodies at some point, whether that is on a voluntary or mandatory basis.

Powers of the Australian regulators         

At the Federal level alone, these include the Australian Competition and Consumer Commission (ACCC), Australian Transaction Reports and Analysis Centre, (AUSTRAC), Australian Prudential Regulation Authority (APRA), the Australian Securities and Investment Commission (ASIC), Australian Securities Exchange (ASX) and the Australian Taxation Office (ATO). Not to mention specific regulators and agencies for sectors including communications, energy,  higher education, human rights, not for profits, infrastructure and aged care.

Regulators in Australia have coercive and enforcement powers which include:

  • monitoring powers, which can be used to monitor compliance with provisions of an Act and to assess whether information given to a regulator is correct; and
  • investigation powers which can be used to gather material which relates to a suspected contravention.

Typically, Australian regulators have powers to require the production or inspection of documents, compel disclosure of information, require an individual to attend an examination, compel assistance with an investigation or comply with a search warrant. These powers are backed up by penalties for noncompliance which can involve substantial fines for corporations and imprisonment for individuals.

Voluntary inquiries from regulators 

A regulator will seek information about suspected misconduct or contraventions from a range of sources.

One option is an informal request for information and documents. A regulator may take this step where they have a positive view about your company’s preparedness to cooperate and a level of confidence in the relationship that your corporation has with the regulator.

A decision to proceed by way of an informal request for information and documents can also be driven by expediency – the regulator may not have sufficient information to commence a formal investigation and may be open to receiving information that precludes the need for deeper investigation at all.

There may be circumstances where voluntarily producing information and documents makes perfect sense. For example, the provision of explanatory material may resolve the regulator’s concerns without the matter proceeding to a formal investigation. It is important to seek legal advice about any informal request for information or documents and to give careful consideration to your response. You may wish to maintain an open and cooperative relationship with the regulator, but you want to avoid causing your corporation (or individuals within the corporation) unnecessary difficulties.

One key consideration is whether or not cost, convenience and strategy suggest that the company may be better served by responding to a compulsory process. This is particularly the case given that documents produced voluntarily may have different protections (or no protections) compared to information provided under compulsion. Considerations include:

  • whether there is a risk that confidentiality will be lost.
  • whether the documents are subject to a claim for legal privilege.
  • whether there are interests of a third party that may be affected, including any obligation of confidence.

This early stage of a regulator’s investigation is a good time to give consideration to seeking advice about putting in place a communications or privilege protocol, particularly if you consider it to be likely that the investigation is likely to progress. These protocols are designed to protect internal and external communications from compulsory production and may include requirements such as marking certain communications “Privileged & Confidential”, copying appropriate internal or external legal counsel on certain types of communications, and strictly limiting the number of people who are privy to certain communications.

When deciding what to do with an informal request, it is important to understand what the regulator is looking for and why. Is it your corporation, or individuals within your corporation, that is the subject of concern? It may be that the regulator has identified your corporation as potentially having relevant information or documents that relate to a concern about other entities or individuals.

A regulator will not understand your business as well as you do and the request may ask for a wide range of documents and information. If a request is vague or oppressive, there is an opportunity to clarify the request with the regulator. With the input of your lawyer, those discussions can proceed on the basis that you are exploring how the request might be refined and addressed without prejudicing your final position.

Once any refinement has been undertaken, you will need to assess what information and documents would be caught by the request. You will need to be aware that documents can reside in emails, data files, paper records, diary entries, business records and IT backups.

In considering and obtaining advice in relation to these steps, you will be in a position to decide whether to provide some, all or none of the information and documents on a voluntary basis.

If it is decided to provide information in response to a voluntary request, it is essential that you avoid providing misleading information, whether deliberately or inadvertently. If there are limitations in the quality and coverage of the information and/or documents provided, this should be made clear to the regulator to avoid subsequent criticism. Providing misleading information in response to a voluntary request can create serious problems further down the line.

Compulsory investigations and more 

At some point you may find yourself in a situation where you aren’t given the option of whether to co-operate.

Australian regulators have coercive and enforcement powers, allowing them to monitor compliance and gather materials if they suspect non-compliance is at play. It is important to know your corporation’s legal rights and the principles which might apply to the regulator. For further information on dealing with regulators, see our complete Guide to dealing with Regulators in Australia.

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).

Related insights Read more insight

Dealing with Australian regulators: Consider building a relationship

Regulators and investigative bodies have extensive powers that can be brought to bear upon your corporation. Your corporation might come in contact with a regulator in the course of a voluntary...

More
Dealing with regulators in Australia: warrants

If a regulator issues a warrant it is a serious matter. Typically, a warrant will only be sought after approval at senior levels within a regulator and can only be issued by a Magistrate or Justice...

More
The new fault element in continuous disclosure s674A and the directors’ duty of care

Overall, the new s674A will not materially alter the approach that directors should adopt in seeking to have the company comply with its obligations and discharge the directors’ own duties. It is...

More