PERSONAL RISK MANAGEMENT FOR DIRECTORS

Regulators in Australia and overseas have received significant increases in their resources and powers over the last five years.

In the wake of the Global Financial Crisis, the Australian Securities and Investment Commission (ASIC) budget trebled to $361m. While this was pulled back slightly in 2011, it will receive a further boost of $192.9m over the next four years. This increase in resources has allowed ASIC to both sustain more investigations, as well as to pursue those investigations beyond that which they would have previously.

Not only have the regulators been given increased resources, their powers continue to be expanded and the penalties that can be levied are being increased. Up until 2010, the Australian Competition and Consumer Commission (ACCC) could not levy fines unless it launched criminal proceedings for a breach of the Competition and Consumer Act (previously the Trade Practices Act). As of 2011, however, the ACCC can now levy fines up to 10 percent of the company’s revenue, and can impose significant fines and banning orders upon individuals.

With the political uproar over the perceived excesses of business executives, these regulators have been empowered and have become more aggressive in their pursuit of senior executives and directors over allegations of wrongdoing. Many of these investigations are prolonged and expensive, with most of those that are prosecuted taking more than three years to be completed.

In a number of these cases, the prolonged and public nature of most of these investigations means that the senior executives or board members involved will suffer irreparable damage to their reputations and incur hundreds of thousands, and in some cases millions, of dollars in legal defence costs.

Jan-Mar 2013 Issue

AIG Australia