Being Investigated by a Regulator?
Here are 4 Practical Tips
This article provides some practical tips when involved in an Investigation by a Regulator. The tips are focused on an investigation by ASIC, however, they can also apply to how you communicate with and engage with other regulators relevant to your business.
You may also be interested in our article ASIC – The Role of the Corporate Regulator.
1. Understand Your Role in the Investigation
The most important factor when dealing with a regulator is to know your role in the investigation. Are you the target of the investigation or does ASIC think that you may be able to assist with an investigation in relation to another target?
Your role in the investigation will most likely change the approach you take to responding to requests and notices by ASIC. For example, if you are not the target of an investigation there may be some benefit to engaging in an interview voluntarily to allow the process to be dealt with quickly and easily. On the other hand, if you are the target of an investigation, it may be preferable to take a more defensive stance and only attend an interview when required to do so by a notice.
2. Producing Documents for the Regulator
ASIC can issue a notice requiring a person to produce documents under sections 30 and 33 of the ASIC Act. The documents that ASIC can request under these sections are very broad and include any documents relating to the affairs of a body corporate. A failure to comply with a notice requesting documents is an offence under both sections.
Notices to produce documents issued by ASIC are sometimes drafted based on what documents (or classes of documents) ASIC thinks may exist. When a notice is unclear, imprecise or too broad, the response may depend on the general approach being adopted in relation to the investigation. For example, if a notice is drafted in very broad terms, contacting ASIC to explain the work that will be involved in complying (and the time that proper compliance will take) may lead to the notice being narrowed. Similarly, if the notice is unclear, sensible engagement with ASIC to determine what they are looking for can make the process easier.
Whenever documents are being produced by compulsory process, it may be necessary to consider whether the documents are subject to legal professional privilege. Documents that are privileged do not ordinarily need to be produced. However, if production is resisted ASIC will require an explanation as to why certain documents are not produced.
Finally, notices issued by ASIC are often drafted by lawyers in a certain way. Similarly, there is a certain way that they are interpreted and responded to. Having a lawyer review any notice or request for documents will generally assist with proper compliance and avoid costly back and forth on the adequacy of production.
3. Attending Interviews
ASIC can make a request that a person attend its offices voluntarily for an interview. ASIC can also issue a notice under section 19 of the ASIC Act requiring a person to attend an interview to answer questions. The interview is in private and is to be treated as confidential. For example, an employee cannot report back to their employer, or anyone else, about the matters discussed. A person attending an interview is permitted to have a lawyer present.
Whether or not to attend an interview voluntarily will depend on a number of factors. Refusing to attend an interview voluntarily is not necessarily viewed as the person having something to hide. For example, if a person is subject to confidentiality obligations (to their clients or employer) it would be preferable to attend an interview under compulsion rather than voluntarily, to avoid any allegations that those obligations have been breached.
Careful and thorough preparation for any interview will make the process easier for everyone involved. Obtaining and reviewing relevant documents early will assist the witness to prepare for an interview and enable them to answer questions directly and clearly.
4. Enforcement Proceedings
This is the final and most drastic action a regulator can take. After an investigation, by way of requests for documents and/or interviews, a regulator may commence a proceeding alleging contraventions of the relevant legislation and seeking penalties.
Litigation is a difficult process at the best of times and enforcement proceedings by a regulator are no exception. Additionally, enforcement proceedings are a specific type of litigation and benefit from specialised legal advice. The best tip is to engage competent lawyers to act on your behalf in any Court proceedings.
How Can We Help
If a Regulator has come knocking on your door we recommend you seek specialist legal advice to ensure you understand the process and protections available to you.