This article was written by Tim Bednall.
ASIC released its long-awaited immunity policy on 24 February 2021.
Introduction
ASIC's immunity policy offers immunity from criminal prosecution and civil penalties for an individual (not a corporation) involved in a contravention of the market conduct provisions of the Corporations Act with at least one other person, if the required criteria are satisfied, which include being first to report the contravention to ASIC, co-operating in any subsequent ASIC investigation and court proceedings, and ASIC not already investigating the contravention.
The ACCC has had an immunity policy in place for some years, used most famously in the ACCC's cartel case against ANZ and two global investment banks relating to a share issue.
Details of the Immunity Policy - Who qualifies, for immunity from what?
The policy applies only to immunity from criminal prosecution or civil penalties under Part 7.10 of the Corporations Act, concerning market misconduct and insider trading in relation to securities and other financial products.
Part 7.10 includes offences for market manipulation, false trading, market rigging, false or misleading statements, inducing persons to deal, dishonest conduct, and the insider trading offences of dealing, procuring or tipping.
The policy does not extend to any other provisions of the Corporations Act or the ASIC Act. There is no immunity in relation to provisions concerning directors' duties, continuous disclosure, takeovers, prospectuses, or managed investment schemes, for example.
Nor does ASIC offer any immunity from damages claims, including class actions, or administrative proceedings, which may include cancellation of an AFSL or imposition of licence conditions, in relation to market misconduct.
Unlike the ACCC immunity policy, ASIC only offers immunity to individual persons, not corporations. The policy appears to be designed to encourage whistle-blowing by officers and employees against their companies, rather than by one principle party (irrespective of legal form) against another.
The criteria that must be satisfied in order to gain immunity narrow the scope of the policy even further. In order to qualify, an individual must:
- Have been involved in conduct that may contravene a provision of Part 7.10
- Be one of two or more persons involved in the misconduct
- Have not co-erced anyone else to participate in the misconduct
- Admit that they have participated
- Be the first person to apply for immunity in relation to the misconduct, before ASIC has commenced an investigation into the misconduct
- Not be the instigator of the misconduct
- Have ceased or be prepared to cease engaging in the misconduct
- Provide full, frank and truthful disclosure
- Co-operate fully and expeditiously with ASIC, and undertake to continue to do so in any subsequent investigation and court proceedings
How to apply for immunity
A person can request a "marker" that gives them temporary priority under the immunity policy in relation to particular conduct. ASIC will conduct an initial investigation and either confirm or cancel the marker. If immunity is denied, the "marker" is cancelled and another party is then entitled to seek immunity for that same conduct.
It should be noted that "without prejudice" communications with ASIC offer no protection in criminal matters (in this context, or generally).
Information given to ASIC by a person whose marker is cancelled will not be used directly against that person or any other person, but it could be used indirectly to assist ASIC to investigate the matter further and take action against the person or others involved. For example, if ASIC first learns of misconduct from an applicant, it can then use that information, not otherwise known by ASIC, to make further inquiries using powers of compulsion to interview people, gather evidence and obtain documents that can then be used against the original applicant and others involved.
Once a marker is confirmed, the person seeking immunity must make a written "proffer", setting out the details of the relevant misconduct. ASIC will consider the proffer, and may still deny immunity at that point, in which case the information in the proffer can also be used "indirectly" against the applicant and others involved.
If ASIC decides to offer immunity, a "letter of comfort" will be issued to the applicant by the DPP or ASIC. Final immunity will not be confirmed until the applicant has co-operated fully in any subsequent investigation and proceedings, including appearing as a prosecution witness.
Observations
Offering immunity when such narrow criteria apply, and when there is no real privilege against self-incrimination for information given voluntarily to ASIC by those seeking immunity, creates a high risk for applicants. It will be interesting to see how ASIC applies this policy, but if information given by potential applicants is subsequently used against them "indirectly" because ASIC determines that they don't meet the narrow criteria, the jeopardy may be regarded as too great and the policy may become redundant.
ASIC's immunity policy is clearly a "toe in the water". It is of very limited application, ensuring that ASIC has plenty of discretion when deciding whether to grant immunity, enough levers to force complete co-operation from applicants, and plenty of leeway to use the information provided by "unsuccessful" applicants against them and others involved in the matter.
The limits of the policy also ensure that ASIC cannot be criticised for granting immunity to "the big end of town", because corporate entities don't qualify. That limitation may come at a cost to ASIC: it is far less likely that an employee of a large company involved in a contravention with other companies will seek immunity if it means their employer will be prosecuted on their evidence, than if the employee and their employer can both obtain immunity. As they could, and have done, under the ACCC's immunity policy.
