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Corporations
and Financial Sector Legislation Amendment Bill 2013
Introduced into the House of
Representatives on 20 March 2013
Portfolio: Treasury
Summary of committee view
1.1
The committee
seeks clarification in relation to the protection of the right to privacy, the
right not to be deprived of one’s liberty other than on grounds ‘established by
law’, and whether a number of civil penalty offences contained in the Corporations
Act 2001 should properly be considered as criminal for the purposes of
human rights law, and if so, whether they are consistent with the right to a
fair hearing.
Overview
1.2
The bill seeks
to amend a number of Acts[1]
to introduce a range of measures relating to the regulation of over-the-counter
derivatives and other financial products. The key measures are intended to:
- assist central
counterparties in managing defaults of clearing participants;
- improve the
allocation of resources by the Australian Securities and Investments Commission
(ASIC) and the Reserve Bank of Australia (RBA) in assessing the compliance of
Australian market licence and clearing and settlement facility licence holders
with their legal obligations;
- allow certain
Australian regulators including the RBA to exchange protected information with
other entities in Australia and overseas in the execution of their duties
subject to appropriate safeguards; and
- allow ASIC to
gather and share protected information with regulatory entities overseas for
supervision and enforcement purposes; and require ASIC to report on the use of
those powers.’[2]
Compatibility with human
rights
1.3
The bill is
accompanied by a self-contained statement of compatibility which addresses the
potential impact of the bill on the enjoyment on the right to privacy
guaranteed by article 17 of the International Covenant on Civil and Political
Rights (ICCPR).
Right to privacy
1.4
The statement of
compatibility identifies that the bill may engage the right to privacy as
certain parts of the bill 'allow various regulators including ASIC and the RBA
to share "protected information" with other entities' and that this
may include 'personal information' as defined in section 6 of the Privacy
Act 1988.[3] The statement goes on to state:
It is noted
that the amendments pursue a legitimate objective and the limitations imposed
on the right to privacy are not arbitrary. Effective regulation of financial
markets and products in today’s world is dependent on the exchange of
information among regulators and with other entities, given the increasing
complexity and globalisation of financial markets. Regulators generally have
strict conditions imposed on them through their enabling legislation with
respect to the use and disclosure of protected information, including
appropriate penalties for breaches of those conditions.
Care has
been taken to ensure that the provisions allowing for the use and disclosure of
protected information in the Bill are drafted narrowly enough to ensure that
personal information is not disclosed unnecessarily, and that its use and
disclosure is necessary for, or directly related to, the powers and functions
of the regulators.[4]
1.5
The committee
agrees that regulating financial markets and products is a legitimate objective
and seeking cooperation between national and international regulators, in
particular through the exchange of relevant information in appropriate cases
may be viewed as a rational means of pursuing such an objective.
1.6
The bill
provides for the sharing of such information with a range of international
regulators.[5]
However, neither the statement of compatibility nor the explanatory memorandum
provides any information about what protections are in place to guard against
the misuse of personal information provided by Australian agencies to overseas
agencies.
1.7
The
committee intends to write to the Parliamentary Secretary to the Treasurer to
seek further information about what protections will apply in relation to any
personal information
supplied to international regulators or regulators in other countries.
1.8
The committee
also notes that new provisions give the Reserve Bank of Australia expanded
powers to share information, including giving the Governor of the Bank a wide
discretionary power to approve in writing the disclosure or production of
'protected information' or a 'protected document' to any person or body
(including a foreign person or body).[6]
It is unclear why such a broad power is necessary and how it is therefore
compatible with the right to privacy.
1.9
The
committee intends to write to the Parliamentary Secretary to the Treasurer to
seek further information as to why it is necessary to include a broad power
enabling the Governor of the Reserve Bank of Australia to disclose protected
information to any person or body, and how this is compatible with the right to
privacy.
Information-gathering powers
1.10
The bill
proposes to insert a new 136(2A) in the Australian Securities and
Investments Commission Act 2001 which will require ASIC to report annually
to Parliament on the exercise of its information-gathering powers. This
formalises the practice adopted by ASIC since 2010-2011.[7]
1.11
The
committee notes the information contained in the ASIC annual reports for
2010-11 and 2011-12 and considers these reports and the introduction of a
statutory reporting requirement to be a welcome development. The committee is
of the view that the provision of information of this sort may assist it and
other bodies in reviewing the exercise of compulsory information-gathering
powers and any impact on the right to privacy.
Creation of criminal offences – the
right not to be deprived of one’s liberty other than on such grounds as are
‘provided by law’
1.12
The bill
proposes to insert a new section 79A(7) into the Reserve Bank Act 1959
to empower a person providing protected information, or a document containing
protected information, to impose conditions on the use of that material. The
bill makes failure to comply with the conditions imposed a criminal offence,
with a maximum penalty of two years’ imprisonment. This is the same penalty as
applies to Reserve Bank of Australia officials who breach the prohibition on
the disclosure of protected information for unauthorised purposes under section
79A of the Reserve Bank Act 1959.
1.13
Article 9(1) of
the ICCPR provides protection against arbitrary or unlawful deprivation of
liberty:
No one shall
be deprived of his liberty except on such grounds and in accordance with such
procedure as are established by law.
1.14
International
human rights jurisprudence has established that ‘law’ in this context means not
only that there must be a domestic rule adopted as part of the standard
legislative process (or an accepted rule of the common law), but that the law
or rule in question must satisfy what is known as the ‘quality of law’ test.
This means that it must be sufficiently precise so as to provide an indication
in advance to a person whose rights are to be affected by the law of the
circumstances under which, and the extent to which, the person may be deprived
of their liberty.
1.15
The imposition
of conditions under proposed new section 79A(7A) appears tantamount to the
creation of a criminal prohibition, contravention of which is punishable with
up to two years’ imprisonment, It is not clear on the face of the legislation
what conditions might be imposed, and any conditions are stated by the proposed
new section 79A(7B) to not be a legislative instrument so will not be subject
to any Parliamentary scrutiny. Accordingly, the bill gives rise to the question
of whether a deprivation of liberty imposed as the result of a person’s failure
to comply with such a condition can be described as being on grounds
‘established by law’.
1.16
The
committee intends to write to the Parliamentary Secretary to the Treasurer to
seek clarification as to whether the provision made by the bill permitting the
imposition of a term of imprisonment for a failure to comply with a condition
imposed under the proposed new section 79A(7A) is consistent with article 9(1)
of the ICCPR.
Civil penalty provisions and rights
in relation to the determination of criminal charges
1.17
The bill
proposes to amend section 1317E(1) of the Corporations Act 2001, which
deals with civil penalties, in order to list the various civil penalties
contained in that Act in tabular form.[8]
The table lists dozens of civil penalty provisions in respect of which a court
must make a declaration of violation when a contravention is established and in
respect of which a court may impose pecuniary penalties of varying levels on
individuals and corporations.
1.18
In a number of
previous reports the committee has raised the issue of whether the imposition
of civil penalties may amount to the determination of a ‘criminal charge’ or
the imposition of a ‘criminal penalty’ for the purposes of articles 14 and 15
of the ICCPR.
1.19
The civil
penalty provisions in the Corporations Act 2001 involve relatively minor
regulatory rules but also much more serious forms of conduct that can have a
significant adverse impact on the operation of markets and the interests of
investors and the public. The latter include, for example, engaging in avoidance
measures, false trading and market rigging, and insider trading. Some of these
forms of behaviour, when subject to significant pecuniary penalties, have been
held by courts in other jurisdictions to be ‘criminal’ for the purposes of
human rights law.[9]
1.20
The committee
intends to write to the Parliamentary Secretary to the Treasurer to seek
clarification whether some or all of the civil penalty provisions referred to
in section 1317E(1) of the Corporations Act 2001 should, in the light of
international human rights law and the committee’s comments on this issue,
properly be characterised as ‘criminal’ for the purposes of article 14 and 15
of the ICCPR. If so, the committee seeks clarification whether these provisions
are consistent with the right to a fair trial in articles 14 and 15 of the
ICCPR.
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