Immunity from prosecution: considering ASIC’s new immunity policy

The Australian Securities and Investments Commission (ASIC) has recently published an immunity policy to encourage disclosure of information relating to potentially serious misconduct in financial markets. The Australian Competition and Consumer Commission (ACCC) has had in place for some time an immunity policy for persons who provide information regarding cartel conduct, which based on its own, and international experience, has encouraged disclosure of cartel behaviour and assisted ACCC to take action against participants.

In this article, we consider the key features of the ASIC immunity policy (ASIC Policy) as compared to the ACCC immunity policy (ACCC Policy) and how both tie in with statutory provisions protecting whistleblowers. 

Where immunity is not available, both organisations also have cooperation policies, which detail the favourable consideration and benefits of cooperating with the regulator’s investigations, in any ensuing court or administrative proceedings.

What misconduct falls within the scope of these immunity policies?

The ASIC and ACCC policies provide for immunity from civil liability, and (based on a formal Memorandum of Understanding with the Commonwealth Director of Public Prosecutions (CDPP)),[1] also for criminal proceedings. Both policies are concerned with very serious misconduct in commercial or financial activities. 

The ASIC Policy applies to suspected and actual contraventions of Part 7.10 of the Corporations Act 2001 (Cth) (Corporations Act). Part 7.10 concerns the most serious and complex contraventions in financial markets such as insider trading, market manipulation, false trading, market rigging and dishonest, misleading or deceptive conduct in relation to financial products and services. Contraventions of Part 7.10 are often ‘difficult to detect’. 

The ACCC Policy applies to suspected and actual cartel conduct in contravention of the Competition and Consumer Act 2010 (CCA). This includes: 

• price fixing;
  
  
• restrictions on outputs in the production or supply chain;
  
  
• allocating customers, suppliers or territories; or
  
  
• bid rigging.

Cartels usually involve secrecy and deception and that collusion is also often difficult to detect. 

Both policies are aimed at encouraging persons with critical information about serious commercial misconduct to disclose this, and assist the regulators in discharging their regulatory functions, with the knowledge that they will not be penalised for doing so. 

Application of immunity policies to corporations 

An important distinction between these policies is the classes of persons who are eligible for immunity. The ACCC Policy allows immunity to be applied for by corporations (and their related corporate entities and/or directors, officers or employees via derivative immunity)[2] as well as individuals. In contrast, the ASIC Policy only applies to natural persons which makes derivative immunity irrelevant. 

Much of the conduct in Part 7.10 of the Corporations Act is focused on conduct undertaken by an organisation unilaterally, whereas cartel conduct requires other participants. The ASIC Policy may be designed to protect individuals in order to facilitate prosecution of a corporation whereas the ACCC may find it a suitable compromise to prosecute a particular corporate player for cartel conduct while granting immunity to another corporation to achieve that particular purpose or objective. 

Conditions of eligibility

Both the ASIC and ACCC policies have strict conditions for eligibility.

Similarities

Putting aside derivative immunity, the notable similarities between corporate/individual conditional immunity under the ACCC Policy and individual conditional immunity under the ASIC Policy are:

• The immunity applicant must admit they participated in, or are participating in, the misconduct.
  
  
• Only the first person/entity to apply can be eligible for immunity.
  
  
• The immunity applicant is ineligible if they coerced others to participate in the misconduct.
  
  
• The immunity applicant must have ceased their involvement in the misconduct or undertake to do so.
  
  
• The immunity applicant must provide full, frank and truthful disclosure, and cooperate fully and expeditiously while making the application, and agree to continue to do so throughout the regulator’s investigation and any ensuing court proceedings.
  
  
• There must be another person involved in the misconduct. This is implicit in the ACCC Policy given the nature of cartel conduct and explicit in the ASIC Policy.

Differences

Important differences that emerge between the policies, which are unrelated to the status of the person as corporation, are:

• The ASIC Policy does not apply to the instigator of the misconduct. The comparable eligibility condition in the ACCC Policy is less strict – immunity is not available to a person who coerced another to engage in the conduct.
  
  
• Unlike the ACCC Policy, there is no explicit requirement for a person to enter into a formal ‘cooperation’ agreement with the regulator in the ASIC Policy or comply with any terms of that agreement for the grant of final immunity.
  
  
• The ASIC Policy does not apply where ASIC has already commenced an investigation into the alleged misconduct. In contrast, the mere fact that the ACCC has launched an investigation into alleged cartel conduct does not prevent a person from being eligible for immunity. Rather, the ACCC will not grant immunity where it is already in possession of evidence that is likely to establish at least one contravention of the cartel conduct prohibition.
  
  
• Unlike the ASIC Policy, the requirement to maintain confidentiality is explicit for conditional immunity under the ACCC Policy for criminal and civil proceedings. However, a person will not be eligible for final immunity from civil penalty proceedings under the ASIC Policy if they fail to maintain confidentiality regarding their status as an immunity applicant and details of the investigation.

Where a corporation establishes it is entitled to conditional immunity under the ACCC Policy, this can lead to the grant of derivative immunity (for identified employees and officers also involved in the conduct) where the relevant criteria have been satisfied.

Both the ACCC Policy and ASIC Policy say that they do not apply to persons who have engaged in coercion. In addition, the ASIC Policy states that it does not apply to a person who has instigated the misconduct. It is not clear if this is a distinction without a difference or whether this reflects a view by ASIC that the instigator must always be held to account regardless of the role played by other persons in the misconduct. This may be based on the notion that the misconduct would not have occurred but for the person who instigated it. 

While a person might have instigated the misconduct, another person might be the one who is ultimately responsible for carrying it out. For example, if person X suggests to person Y that they should engage in insider trading and provides inside information to person Y who then carries out the impugned transaction, it would appear that person X would be ineligible for immunity because they ‘instigated’ the misconduct. However, the insider trading occurred because person Y actually acted on the inside information and carried out the particular transaction. 

It is not clear why person X is ineligible for immunity whereas person Y who carries out the impugned transaction is eligible. It would appear both persons are equally responsible for the misconduct occurring. The ACCC Policy leaves more room for judgment by the regulator, recognising that there may be circumstances where it is appropriate to pursue a person who facilitated, engineered or carried out the misconduct instead of the person who instigated it.

The ACCC Policy also demonstrates a degree of pragmatism by making it clear that it will grant immunity even where an investigation is underway provided the person gives it additional evidence to make a case against another person for cartel conduct. It is not clear why ASIC renders a person ineligible for immunity on the mere basis of an investigation being underway unless ASIC has made a policy decision that it will not commence any investigation without having enough information to pursue a person for serious misconduct. On its face, this is arguably incongruous with the purpose of an investigation as it precludes ASIC from receiving further detailed information which may shortcut their investigation.

Both policies require the immunity applicant to provide full, frank and truthful disclosure and cooperate with the regulator’s investigation and any ensuing proceedings as a condition of final immunity. The ASIC Policy makes explicit what is otherwise implicit in the ACCC Policy – that the giving of truthful, accurate and relevant evidence is a condition of the grant of final criminal immunity. Whilst not apparent in the ACCC Policy, Annexure B to the CDPP’s Prosecution Policy and Guidelines for Making Decisions in the Prosecution Process makes this obligation clear.[3]

Interestingly, ASIC’s policy requires a disgorgement of benefits, and potentially restitution, as a condition of final immunity from civil penalty proceedings. There is nothing comparable in the ACCC Policy, suggesting an explicit policy decision by ASIC that the grant of immunity does not entail that the person can benefit from their wrongdoing.

Process of obtaining immunity 

The process of obtaining immunity under both policies is quite similar. Both involve the applicant making a request for a ‘marker’ from ASIC or the ACCC. 

A marker is issued where the person is the first to apply for immunity in relation to the particular conduct that is the subject of the proposed disclosure. It preserves the person’s status as “first in line” for a limited time until the person is able to satisfy the conditions of immunity. The advantage of obtaining a marker is that it prevents another person from obtaining immunity even where they can satisfy the conditions of immunity immediately. An immunity seeker can request a marker on a hypothetical or anonymous basis provided they provide enough detail to enable ASIC or ACCC to determine if it has already issued a marker to another person.

In either case, a marker can be cancelled or ‘lapses’ where the applicant is unable to provide sufficient information to enable ASIC or ACCC to determine if the conditions of immunity have been satisfied, or the person does not meet the conditions of immunity. 

After a marker is obtained, a party will need to provide a detailed description of the alleged misconduct – the ‘proffer’. The key difference between the ASIC and ACCC policies is that ASIC will only accept a proffer in writing whereas ACCC will accept an oral proffer. The proffer will need to provide specific detail as to the type of evidence that can be provided. ASIC or ACCC may require an interview or the production of certain documents and in the case of ACCC, the provision of a signed witness statement. 

Confidentiality of information 

Both ASIC and the ACCC state that they will use their best endeavours to protect any confidential information provided by an immunity applicant except as required by law in accordance with their statutory obligations. The ACCC expressly stipulates it may be required to disclose the information provided under the policy where civil or criminal proceedings regarding cartel conduct have been commenced. In reality, when a penalty proceeding or criminal prosecution is commenced, obligations of discovery or the prosecutor’s obligation of disclosure would require the information to be made available to the other party.

In circumstances where a marker lapses or is otherwise cancelled, or immunity is not granted after a proffer, the information obtained from ACCC or ASIC can only be used indirectly to further their investigation. That is, it cannot be used as direct evidence against the (unsuccessful) immunity applicant. However, the information can be relied on to gather evidence that could be used against the applicant or any other party in civil or criminal proceedings. This potentially creates a risk that any information provided by the applicant might set off a chain of inquiry that could identify evidence that could be used against them in any subsequent civil or criminal proceedings. This further highlights the importance of ensuring that the immunity applicant has enough evidence to satisfy the conditions of immunity.

This is to be contrasted to a situation where there is a revocation of immunity. The ACCC Policy states that if conditional immunity has been granted and revoked, information provided by the immunity applicants (including witness evidence) may be used against them in any civil or criminal proceedings for a substantive contravention of the CCA. There is no equivalent provision in the ASIC Policy concerning the effects of revocation.

Complementary to whistleblower protections 

The Corporations Act protects a whistleblower against certain legal actions relating to whistleblower disclosure, including criminal prosecution, civil litigation or administration action. Critically, however, the protection for whistleblowers does not grant immunity to a person for any misconduct that they were involved in that was revealed by the disclosure. At most, ASIC will take into account the person’s co-operation in deciding whether to take action for any wrongdoing and what remedies they will seek against that person.[4] 

In contrast, the ASIC Policy is designed to give immunity to persons who are involved in the alleged contravention of provisions in Part 7.10 of the Corporations Act. This is why the ASIC Policy suggests that if the person is not involved in the misconduct, they should look to whistleblower protections. A person who makes a protected disclosure to ASIC that meets the relevant criteria[5] will be entitled to whistleblower protections. A person could be entitled if they disclose information to ASIC and:

• are a current or former employee, officer, contractor or associate of the company (or their close relative); and
• have reasonable grounds[6] to suspect a contravention of Part 7.10 of the Corporations Act by the company or another officer or employee of the company.

The immunity regime stands aside from the whistleblower protection regime as reflected in the different criteria for the two regimes.