CLERP 9 How the infringement notice process will work

Sunday, 01 August 2004


    If you’re a director of a listed company, you have continuous disclosure obligations under the Corporations Act. Companies breach these obligations if they don’t immediately disclose price-sensitive information to the market operator so that it can be provided to investors.

    CLERP 9, which commenced on 1 July, has introduced a new remedy to this problem. If we have reasonable grounds to believe that a company has breached the continuous disclosure provisions, we will investigate and may issue the company an infringement notice, requiring payment of a fine.

    This article outlines how we'll be handling the infringement notice powers under CLERP 9, and how the new process works.

    Key features

    The four key features of the infringement process.

    • Infringement notices will be issued for less serious breaches of the continuous disclosure obligations.
    • An ASIC delegate who has not been involved in the investigation of the alleged breach will decide whether or not to issue a notice. The company will be able to present information before the delegate makes a decision.
    • The company can decide whether or not it will comply with the notice.
    • Compliance by the company is not an admission of liability. Although ASIC will publish details of the notice, it cannot start further proceedings against the entity for the breach specified.

    A 10-step process

    The process for issuing infringement notices for breaches of s674(2) or s675(2) of the Corporations Act consists of 10 stages.

    1. ASIC investigates alleged breach. If a possible breach has been identified we may conduct an investigation using our compulsory powers. In the course of the investigation, we will decide whether it is appropriate to use the infringement notice, depending on the seriousness of the alleged breach and the view of the relevant market operator.

    2. An ASIC delegate is briefed. If we believe it may be appropriate to issue an infringement notice, an ASIC delegate is briefed to determine whether there has been a breach. The delegate won't have been involved in the investigation of the suspected breach, and will look at the matter for the first time.

    3. The ASIC delegate examines the matter. The delegate examines the matter and forms a belief as to whether there may have been a breach. In forming that belief, the delegate must consider the views of the relevant market operator.

    4. We issue a hearing notice. If the delegate believes there has been a breach, ASIC informs the company in writing, in a confidentialhearing notice. The notice includes the reasons for believing there has been a breach, and sets date, time and place of the hearing.

    5. The hearing is conducted. The delegate must hold a hearing to determine whether to issue an infringement notice. At the hearing, the company may give evidence and make submissions. Companies do not have to appear (they can choose not to appear or may simply provide written submissions), and they have the right to legal representation.

    6. We may issue an infringement notice. The delegate takes all submissions and evidence into account and may decide to issue an infringement notice if there are reasonable grounds to believe there has been a breach.

    7. We serve the infringement notice. The infringement notice sets out all the requirements for compliance. Companies have 28 days to comply.

    8. The disclosing entity responds. The entity may:

    • comply with the notice, or
    • seek an extension of time to comply, or
    • seek to have the notice withdrawn, or
    • choose not to comply with the notice.

    9. Action following response to the notice. If the company complies with the infringement notice, we cannot begin proceedings against it. If the company doesn't comply with the notice, we may start civil proceedings against the company under Pt 9.4B and/or s1324B of the Corporations Act. If we withdraw the notice, we are not restricted in the action we may take.

    10. We publish details of the notice. If the infringement notice is complied with, we will publish details of the notice. If we begin proceedings against the company following withdrawal of, or failure to comply with, a notice we will publish this fact.

    We believe that infringement notices will help address less serious breaches of the continuous disclosure laws in a timely and efficient way — and removing the need for long and expensive court cases


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