CORPORATE WRONGDOING may attract civil sanctions and higher penalties under a discussion paper released by the Treasury last week into corporate law reform.
The paper accords with a wider governmental strategy to explore ways of reducing regulatory burdens and simplify existing laws.
One proposal discusses the expansion of civil sanctions in corporate law to add more firepower to those policing dubious corporate behaviour, along with the possibility of increased penalties.
The review is intended to strike a balance between the need to have strong sanctions that deter and punish corporate wrongdoing and protect the market’s integrity, as well as foster a competitive business environment.
In a speech given to the Australian Securities and Investments Commission (ASIC) summer school, Treasurer Peter Costello praised the strong record of the regulatory body.
“ASIC’s enforcement record is a great testament to the assiduous work of ASIC in protecting mum and dad investors from corporate crooks and they have a record of which they can be proud,” Costello said.
The Treasurer also highlighted the potentially far-reaching damage that corporate wrongdoing can have on the national economy.
“Corporate wrongdoing has the potential to impact on the efficiency and development of the economy, and has repercussions for the broader community including employees, creditors, customers and shareholders,” he said.
“The Government is committed to ensuring that regulation strikes a balance between facilitating business efficiency and ensuring that consumers are protected.”
Highlighting the fact that 2007 is unavoidably a federal election year, Costello spoke of the dangers that both ASIC and the economy would face should an “ill-judged attack on [ASIC’s] resources” be allowed under what he said was Labor’s plan to take $129.8 million from ASIC’s budget over the next four years.
“The area of regulating for growth is complex,” Costello said. “It requires judgment and experience. There are many rewards for getting it right, just as there are dire consequences for getting it wrong.”
The paper reviews sanctions available under the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001. A discussion paper was concurrently released on the use and effectiveness of infringement notices issued by ASIC.
Also speaking at the event, ASIC chairman Jeffrey Lucy stressed the importance of the regulatory body assisting Australia’s position in the global market by maximising its potential with a strong base of effective regulation.
“Given Australia’s prominence in the Asia-Pacific region, as our Treasurer said, it is imperative that we continue to build our businesses, competing globally to survive, on foundations of a sound internationally-accepted regulatory regime,” Lucy said.
The strong performance of the “most resilient economy in the world” has been aided by the effectiveness of ASIC, for in Lucy’s words, “much of this economic success can be attributed to our regulatory regime here in Australia — a balanced, principles-based approach to disclosure, fundraising, corporate governance and the provision of financial services and products”.
Both papers ask for written submissions from stakeholders by 1 June 2007.