ASIC’s compulsory information gathering powers

This information sheet (INFO 145) provides general information on our compulsory information-gathering powers, including:

• an explanation of why we need information-gathering powers;

• an explanation of how we use information-gathering powers;

• an overview of our most commonly used information-gathering powers;

• a description of ASIC’s approach to using these powers;

• information about what it means for you when you receive a notice to produce  documents or provide information; and

• a list of frequently asked questions (FAQs).

Why we need information-gathering powers

Our compulsory information-gathering powers are an important and necessary part of the work we do. The powers:

• enable us to obtain the relevant information we need to make regulatory and enforcement decisions;

• ensure that people providing assistance to ASIC are protected (a person will not be subject to a liability merely because they complied with a notice to provide information or documents (notice) issued by ASIC);

• clearly set out the terms upon which you provide documents and information to ASIC; and

• enable ASIC to obtain evidence in a form that can be used in court proceedings.

How we use our information-gathering powers

ASIC regulates Australian companies, financial markets, and financial services organisations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit.

As Australia’s corporate, markets, financial services and consumer credit regulator, we strive to ensure that Australia’s financial markets are fair and transparent, and supported by confident and informed investors and consumers. We do this by monitoring compliance with the law and taking enforcement action where necessary.  We also provide services to businesses and individuals through our registry, licensing and Client Contact Centre facilities, which handle requests, inquiries and complaints from consumers and businesses.

Parliament has given ASIC a range of compulsory information-gathering powers to enable us to require a person or entity to:

• provide us with documents and information; and
• attend an examination to answer questions and/or provide reasonable assistance.

We regularly use these powers because:

• our responsibilities are so broad that we conduct a large number of surveillances and investigations (e.g. we oversee, license and regulate a wide range of entities and individuals in the financial services, markets and corporate sectors, including financial advisers, fund managers, financial markets and their participants, insurance brokers, credit providers, registered managed investment schemes, companies, auditors and liquidators);
• the areas regulated by ASIC are often complex (e.g. financial transactions are largely document-based and often large scale, and in some cases there are a large number of entities and individuals involved); and
• many entities and individuals will not provide documents to ASIC on a voluntary basis because, among other things, they want the statutory protection from a potential breach of confidentiality or other liability that arises when a compulsory request is complied with.

Although not frequently used, we also have powers to apply for and execute search warrants to obtain documents that may not be available through use of our other information- gathering powers.

ASIC must use its powers for a ‘proper purpose’. This means that the use of a power must be designed to advance our inquiry. We recognise that we must use these powers responsibly and that it is important that there are safeguards in place to ensure these powers are not misused.

We use compulsory information-gathering powers in two broad areas of our regulatory activity:

• surveillances; and
• investigations of suspected breaches of the law.

Surveillances

The term ‘surveillance’ is used to refer to activities that involve gathering and analysing information on a particular entity or entities to test and ensure compliance with the law. Surveillances can be undertaken on companies, partnerships, licensed or unlicensed entities and individuals, and also on disclosure documents. Surveillances can be initiated either:

• on a reactive basis (e.g. in response to a complaint or industry intelligence); or
• proactively – to examine the industry environment or test a concern, issue or practice.

Surveillances are particularly useful because they allow us to engage with industry (often on a face-to-face basis) and to actively monitor their activities, so that we have a real presence in the market. Both the prospect and the act of surveillance can influence and bring about changes in individual behaviour and on an industry-wide basis. An example of a surveillance is the monitoring of companies that exhibit signs of financial distress. A surveillance in this instance might avoid potential insolvent trading.

Surveillances often involve direct interaction with an individual or entity and may also involve exercising ASIC’s information-gathering powers to inspect books and records, or to compel the production of documents or the disclosure of information.

Investigations of suspected breaches of the law

We receive thousands of reports about misconduct every year and also become aware of misconduct through other sources such as surveillances (discussed above). If we consider that there is a suspected contravention of the law that may warrant enforcement action, matters are referred to our Enforcement teams who conduct inquiries, formal investigations and enforcement actions in response to misconduct.

When a matter is referred to an Enforcement team, we may commence a formal investigation to investigate suspected misconduct, to find out whether there is evidence that a contravention of the law has occurred and, if so, to gather that evidence to use in appropriate enforcement action. For example, this may be a civil action, a brief to the Commonwealth Director of Public Prosecutions (CDPP) to consider whether to lay criminal charges, or a brief to an ASIC delegate to consider whether to conduct an administrative hearing.

In undertaking formal investigations, we will use our compulsory information-gathering powers to collect documents and information. A formal investigation also allows us to use our power to conduct compulsory examinations of people who may have information that can assist in our investigation. During a formal investigation, we gather information from people and entities that are the subject of our investigation, and also from people and entities who are not suspected of any wrongdoing, but may have information that is relevant to our investigation.

The difference between a surveillance and an investigation

Surveillances and investigations are both types of inquiries we make. A range of compulsory information-gathering powers are used in both types of inquiries to obtain the required information. The difference between the two types of inquiries lies in the range of information-gathering powers we are able to use, and the purpose for which the information is gathered.

Formal investigations occur when we suspect there has been a contravention of a law  relating to our regulatory responsibilities, which include regulation of corporations, financial services and consumer credit. Only formal investigations can invoke the use of all our powers to conduct an examination and to request reasonable assistance. After a formal investigation begins, we can also apply for and obtain search warrants when the circumstances call for it. We seek to find out whether there is evidence that a suspected contravention has occurred. If that evidence exists, we consider what action should be taken.

A surveillance inquiry can utilise only our powers to inspect documents and compel the production of documents or the disclosure of information. Its purpose is to test and ensure compliance with the law.

Our most commonly used information-gathering powers

Our most commonly used powers include the power to:

• require the production of documents;
• inspect documents;
• require disclosure of information;
• require you to attend an examination;
• compel assistance with an investigation; and
• apply for a search warrant;

Power to require the production of documents

We can require a person to provide us with certain documents. The Australian Securities and Investments Commission Act 2001 (ASIC Act) (Similar provisions exist under the National Consumer Credit Protection Act 2009.) provides that these powers can only be exercised:

• for the performance of any of ASIC’s functions or powers under theCorporations Act 2001and the ASIC Act (corporations legislation);
• to ensure compliance with the corporations legislation;
• in relation to an alleged or suspected contravention of the law; or
• for the purposes of a formal investigation.

Before using a power to require production of documents we will consider whether in the circumstances it is more appropriate to use other methods to obtain the documents, including requesting that they are provided voluntarily.

When we require the production of documents we must issue a notice in writing. The notice describes the documents we are seeking and the time and place for production of the documents. The time for production must be a reasonable time from the date of service of the notice, taking into account the documents required and the type of inquiry. In some cases, it may be appropriate to require documents to be provided immediately. The notice must state, in general terms, the basis on which we require production of the documents.

The notice may request the production of electronic data and files. In this case, ASIC staff may provide assistance to facilitate the production of such information (e.g. by providing storage devices such as USB keys, or providing assistance to image relevant material contained on a hard drive).

The power to require production of documents is a power we use frequently, particularly in our enforcement work. In our surveillance work, we expect that it is more likely that documents can be produced voluntarily.

Your rights and responsibilities

The notice exercising the power to produce documents also sets out your rights and responsibilities, including:

• a requirement that you produce the original documents in your possession to ASIC at the specified time and date (although in some cases copies may be requested);
• a requirement that you produce the specified documents irrespective of whether they might tend to incriminate you or make you liable to a penalty; and
• a right to refuse to disclose documents that are covered by a valid claim of legal professional privilege. If you claim legal professional privilege you will need to be able to explain why this privilege will apply to the information.

After we have been provided with the documents we can inspect them, make copies and  keep them for as long as we need to for conducting and finalising our inquiries, including for the duration of any court proceedings. We will return documents to the person who produced them when the matter has been finalised. While we have the documents, we must provide access to anyone who would normally be entitled to inspect the documents were they not with ASIC (e.g. the owner of the documents or, when a company subsequently goes into liquidation, the liquidator). In some circumstances we are permitted to release the documents to other government or regulatory bodies.

Our power to inspect and compel production of documents is different from the power we have to apply for and execute a search warrant. Search warrants are obtained only when there are compelling reasons to do so, such as when there is a risk that the documents we seek will be lost or destroyed after it is known an investigation is in progress. Search  warrants are discussed further below.

Power to inspect documents

We have the power to inspect certain documents that must be kept under the Corporations Act (e.g. financial records). An inspection (unlike the powers to compel the production of documents) does not require us to issue a written notice. Although we are not required to give prior notice of an inspection, in many cases it will be appropriate and practical for us to make an appointment before conducting an inspection.

The ASIC officer who is conducting the inspection can make the request to inspect documents in writing or orally, and the inspection usually takes place at the premises where the documents are located.

The power to inspect documents does not entitle ASIC to take possession of the documents or to make copies of the documents. If we wish to do either we must request their voluntary production, or use our powers to require you to provide us with documents (see section above). An officer inspecting documents may, if appropriate, give a written notice for the production of documents at the time of the inspection.

Power to require disclosure of information

We also have the power to require disclosure of information. This power may be exercised for any of our regulatory work, but it is most commonly used when we are conducting a surveillance, making preliminary inquiries before the commencement of a formal investigation, or monitoring compliance with an enforceable undertaking.

When we use this power, we will usually ask you to provide a written response to questions.

Your rights and responsibilities

The notice exercising this power also sets out your rights and responsibilities, including:

• a requirement that you produce the specified information irrespective of whether it might tend to incriminate you or make you liable to a penalty; and
• a right to refuse to disclose information that is covered by a valid claim of legal professional privilege. If you claim legal professional privilege you will need to be able to explain why this privilege will apply to the information.

Power to require you to attend an examination

We have the power to require you to attend an examination and answer questions on oath or affirmation. We can only use this power if we suspect or believe that you can provide information that is relevant to a formal investigation we are conducting (or intend to conduct). The threshold for commencing a formal investigation is that there is reason to suspect a contravention of the law has occurred. The test required by the courts for ‘reason to suspect’ is that the view formed needs to be more than speculation, but does not need to be  as high as a belief based on reasonable grounds.

To use this power we must issue you with a notice in writing. The notice must state the general nature of the matter we are investigating (or intend to investigate). ASIC is not required to inform you of the nature of the questions to be asked.

The notice also sets a time and place for the examination and it must be served within a reasonable time before the date on which you are required to appear, to give you an opportunity to seek legal advice.

Your rights and responsibilities

The notice requiring attendance at an examination also sets out information about your rights and responsibilities, including:

• that the examination will take place in private;
• that you may be represented by a lawyer;
• that a record of the examination will be made if you request it (note that the ASIC officer conducting the examination may choose to do so in any case);
• 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. If you claim legal professional privilege, you will need to be able to explain why that privilege will apply to the answer; and
• a requirement that you answer the questions put to you, irrespective of whether the answer may tend to incriminate you or make you liable to a penalty. You may make a claim for privilege on the basis that the answer you give may incriminate you and, in this case, any incriminating information you provide may not be used in a criminal prosecution of you or in proceedings to impose a pecuniary penalty on you, other than in perjury proceedings.

Examination is confidential

The discussion that takes place in the examination is confidential and if you attend an examination you will usually be forbidden from discussing the content of the examination with anyone (other than your lawyer) for a period of time.

Examinations are conducted as a part of an investigation into a suspected contravention of the law. Accordingly, it is appropriate that the information that is received is kept confidential while the investigation is ongoing. The information may be disclosed to third parties on a confidential basis during the course of the investigation, if necessary for the investigation. If the investigation leads to litigation, the information received during an examination may be made available in open court. In some circumstances we are permitted to release the transcript and relevant documents to other parties conducting litigation, or to other government or regulatory bodies.

Usually, we require that witnesses keep the details of their examination confidential while we complete our investigation. If the investigation does not lead to litigation, we will generally release you from your obligation of confidentiality.

Power to compel assistance with an investigation

We can also compel you to give ‘reasonable assistance’ in connection with an investigation or a prosecution. Examples of reasonable assistance include requiring you to sign a power of attorney, provide passwords for access to computer files, or provide a key to a locked safe. The overriding requirement is that the assistance sought by ASIC must be reasonable.

If you receive a notice requiring assistance with an investigation you have similar rights and responsibilities to those that apply to an examinee (see above).

Power to apply for a search warrant

We have the power to apply to a court for the issue of a warrant to search premises for books and records. The power to apply for a search warrant comes from a number of sources. We may apply for a search warrant under the ASIC Act, the Corporations Act or the Crimes Act 1914.

A search warrant will only be sought in a formal investigation when there has been approval by a senior ASIC officer to seek a search warrant. A magistrate or Justice of the Peace issuing the warrant must consider the evidence relating to the commission of the alleged offence. Execution of any search warrant issued at ASIC’s request is by the Australian Federal Police (AFP), with ASIC officers assisting.

We also have the power to seek the issue of warrants to obtain stored telecommunications data from service providers. Stored communications are messages that are not in the process of passing over a telecommunications system, rather they are being held on the equipment of a service provider. An example of a stored communication is an email message or an SMS that has already been delivered to the intended recipient and that is stored on the equipment of the service provider. Use of these warrants is subject to annual reporting to the Commonwealth Attorney-General’s Department and review by the Commonwealth Ombudsman.

We do not have the power to apply for warrants to intercept telecommunications. The AFP can apply to seek warrants to intercept telecommunications for the purposes of investigations into suspected insider trading and market manipulation offences. As we also conduct investigations into these matters, we may work with the AFP to identify potentially appropriate matters for investigation by the AFP and support the investigation of those matters the AFP chooses to conduct.

Our approach to the use of our powers

Our approach to using our powers is to:

• limit the burden and intrusion;
• be accountable and transparent; and
• protect confidentiality;

Limiting the burden and intrusion

We recognise that receiving and complying with a notice to produce documents or provide information can be intrusive and burdensome. When we decide to use a power to require production of documents, we will often seek to limit the compliance burden by:

• where appropriate, consulting with a recipient, before issuing the notice, on the scope of the request in terms of the description of the documents, the amount of time it will take to produce the documents and a convenient location for the production of the documents;
• only requiring documents that we believe are needed for the surveillance or investigation;
• providing a reasonable time for complying with the notice; and
• considering any alternatives to issuing a notice, such as obtaining the documents or information voluntarily.

Before using our examination power we will consider whether it is appropriate to interview a person on a voluntary basis, rather than compel them to attend an examination. Whether a voluntary interview is feasible will depend upon the circumstances of the person from whom assistance is sought and the nature of the information that we wish to obtain. A critical factor will be the person’s preparedness to voluntarily provide information and, subsequently, make a statement to ASIC. If we do issue a notice for an examination, we will often consult on the most convenient time at which to hold the examination.

Accountability and transparency

ASIC is an Australian Government body accountable to the Minister and to Parliament. Use of our powers is subject to parliamentary scrutiny through the Parliamentary Joint Committee on Corporations and Financial Services and the Senate Standing Committee on Economics. From time to time, our powers are also subject to review by parliamentary inquiries.

Many of our decisions are reviewable through the court system. For example, in circumstances where it is alleged that we have used our powers unlawfully or have acted beyond our power, a legal challenge can be commenced through the courts. The Commonwealth Ombudsman can investigate complaints about our processes which may encompass the exercise of our powers.

Within ASIC, decisions to use our compulsory information-gathering powers are subject to an internal scrutiny and approval process. The decision to use our powers is made by senior ASIC staff in the context of the particular surveillance or investigation. A team leader (most likely an executive staff member) is required to approve the specific use of a compulsory information-gathering power. An ASIC lawyer performs the final review of a notice exercising a power.

We publish statistics on the use of our most significant compulsory information-gathering powers in our annual report. The first annual report to include this information will be the 2010–11 annual report.

Protecting confidentiality

We must take reasonable steps to protect the confidentiality of information we obtain through our compulsory powers. There are, however, circumstances in which we may disclose this information. For example, there may be instances where we are required by a court to produce documents that were provided to us in response to exercise of a compulsory power, or access to a record of an examination may be provided to other government departments or other parties who are litigating a matter to which the examination relates.

Documents or information may be disclosed to third parties on a confidential basis during an investigation if necessary for the investigation.

These requests for access to confidential information are subject to rigorous processes. Our Regulatory Guide 103 Confidentiality and release of information (RG 103) explains the practices we will adopt for the disclosure of information we have obtained through the exercise of our compulsory information-gathering powers. In many cases, a person affected by a proposed disclosure will be given a chance to make a submission about whether disclosure should occur.

What does it mean when we issue a notice?

If we require you to provide documents or information, it does not necessarily mean that we suspect you may have breached the law or committed an offence. In many cases, we have exercised the power because we believe you have information that may be relevant to a matter we are looking into.

Inquiries undertaken by ASIC commonly seek information from a variety of individuals or entities. For example, if we have identified a potential case of insider trading we may need to issue notices to a range of people and entities, including:

• the person whose trades may constitute insider trading;
• their broker and the broker’s employer;
• people who are alleged to have provided or received the inside information and their employers;
• the Australian Securities Exchange (for trading data, official announcements and CHESS material); and
• the person’s bank to trace the funds received.

What if you don’t understand what is required?

If you receive a notice or request from ASIC in relation to any of our powers and you do not understand it, or have any questions, you should contact the officer named in the notice and/or seek independent legal advice.

Failure to comply

A notice is an important document and there may be serious consequences for failing to provide the information and/or documents it requests. If you receive a notice and you do not understand it or think you may have problems in complying, it is important that you contact ASIC or your lawyer immediately. Provided you are acting reasonably and in good faith, we will endeavour to assist you to comply with the request.

If, however, we find that you do not have a good reason for not complying with a notice, we can certify to a court that a notice has not been complied with. The court can then, in its discretion, inquire into the case and order compliance. The court can impose a penalty if it finds that a person has:

• breached the law by intentionally or recklessly, and without reasonable excuse, failed to comply with a notice; or
• given information or made a statement that is false.

The penalty for such a breach is 100 penalty units ($18,000) or imprisonment for two years, or both.

Frequently asked questions

This section aims to answer some questions that we are frequently asked about our compulsory information-gathering powers.

General

When can ASIC use its information-gathering and investigative powers?

ASIC can use some of its powers for general surveillance, while other powers can only be used when ASIC is conducting, or intends to conduct, a formal investigation. For example, to compel you to attend an examination, ASIC must be conducting (or be intending to conduct) a formal investigation, whereas the power requiring the production of documents does not require a current (or contemplated) formal investigation.

I don’t understand why I have been served with a notice. Have I done something wrong?

We have served you with a notice because we believe you have information that may be relevant to a matter we are currently looking into. The fact that you have received a notice does not necessarily mean that we suspect you have committed an offence or that you are under investigation.

Production of books and inspections

What if I can’t get all the documents by the due date?

The ASIC officer who issued the notice should have allowed sufficient time for you to comply with the notice. However, if you have any problems you should immediately contact the ASIC officer named in the notice to discuss your concerns, or speak to your lawyer.

Do I have to physically produce the documents at the ASIC office?

Production of documents is generally required to be done in person. In certain circumstances, arrangements can be made for documents to be couriered or posted to the relevant ASIC office. You should contact the officer named in the notice and confirm whether the documents can be accepted by one of these alternative methods, or speak to your lawyer.

What if I need the documents I provided to ASIC for the day-to-day activities of my business?

You should make your own copy of any documents before providing them to ASIC to ensure that you can continue to carry on your business.

We may in some instances make copies of such documents if you have not done so before complying with a notice.

I have read the notice and I think it requires me to produce a document that I hold in electronic form. I am not sure what is required of me.

You should immediately contact the officer listed on the notice, or speak to your lawyer. We will discuss with you the most appropriate method for providing information contained in electronic form.

The notice requests a huge amount of documents. How can it all be relevant to the inquiry?

In many cases, we would have contacted you to limit the scope of the notice. However, in some cases, due to the nature and complexity of the inquiry, a large volume of documents may be required. If you have any doubts or questions, you should contact the officer named in the notice for further clarification, or speak to your lawyer.

How do I know this person is from ASIC?

The ASIC officer will have an authorisation card which will include a photograph of the officer. They may also provide you with a business card.

You should request to see these documents. If you have any doubts, you can ask to speak to the officer’s manager.

I don’t understand the purpose of this visit/notice

The ASIC officer will provide you with sufficient information about the purpose of the visit, or if you receive a notice to produce documents, the notice itself will detail what the matter is about.

If you require clarification or have further questions, you should speak to the officer concerned, or speak to your lawyer.

Some of the documents that have been requested relate to clients of mine. I am concerned that producing the documents breaches my clients’ confidentiality.

ASIC’s requirement that you produce the documents overrides your duty of confidentiality  to your clients. The ASIC Act provides statutory protection for you in these circumstances. However, the information may be protected by legal professional privilege. You should seek your own legal advice if you are concerned about your duty of confidentiality to your clients.

Examinations

Can my lawyer attend my examination with me?

You are entitled to be legally represented at an examination.

Can I refuse to answer the questions during an examination?

You must answer the questions asked in an examination unless answering requires you to disclose information that is covered by legal professional privilege. If you claim legal professional privilege you will need to be able to explain why privilege will apply to the answer.

Am I required to answer questions that may incriminate me, and if so, can ASIC use this information against me in legal proceedings?

You cannot refuse to answer a question on the basis that doing so might incriminate you. However, if you claim privilege on the basis that the answer may incriminate you, and that answer does include incriminating information, the information you provide may not be used in a criminal prosecution against you, or proceedings to impose a pecuniary penalty on you, other than in perjury proceedings.

What happens if I refuse to attend the examination?

It is an offence to refuse to attend an ASIC examination without a reasonable excuse. In addition, if you are served with a notice and fail to attend the examination without a reasonable excuse, we can ask the court, in its discretion, to inquire into the case and order compliance.

An example of a reasonable excuse might be illness, for which a medical certificate should be provided. An excuse of pressing business or inconvenience may not be deemed to be reasonable.

If you receive a notice to attend an examination and feel that you cannot attend, you should contact the ASIC officer named in the notice as soon as possible and/or seek your own independent legal advice.

Why are the examinations confidential?

Examinations are conducted as a part of a formal investigation into a suspected contravention of the law. Accordingly, it is appropriate that the information that is received is kept confidential while the investigation is ongoing. If the investigation leads to litigation, the information received during examination may be made available in open court. If you attend an examination, we usually require you to keep the details of the examination confidential while we complete our investigation. If the investigation does not lead to enforcement action, then we will generally release you from your obligation of confidentiality once the investigation is complete.

Is a record made of the examination?

We may make a record of the examination and must do so if you request it.

Am I entitled to a copy of any transcript of the examination?

If we prepare a transcript of the examination then you are entitled to a copy of that transcript.

Important notice

Please note that this guide is a summary designed to give you the basic information you need about ASIC’s compulsory information-gathering powers. The guide does not cover all of ASIC’s information-gathering powers and as it avoids legal language whenever possible there may be some generalisations about the application of the powers that are described.

The particular circumstances of a matter will need to be taken into account when determining how ASIC’s powers may be applied. As such, this information sheet is not designed to be a substitute for legal advice.

This is Information Sheet 145 (INFO 145), reissued in September 2015. Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.