Whats New for the Contentious Financial Services Landscape after the Australian Federal Election
27 May 2022
27 May 2022
We set out below four key areas relevant to the contentious regulatory and litigation landscape where we expect to see changes on the horizon following the federal election.
One of the headline election promises made by the ALP was to introduce an independent National Anti-Corruption Commission by the end of 2022, which will operate with the independence, resources and powers of a standing Royal Commission into serious and systemic corruption in the federal government.
The proposed National Anti-Corruption Commission will be the first of its kind at a Federal level. The ALP is proposing it will have broad jurisdiction to investigate Commonwealth ministers, public servants, statutory office holders, parliamentarians and government agencies, including the power to investigate allegations that occurred before its establishment. Other notable features of the proposed Commission include that it will have discretion to investigate matters on its own initiative or in response to referrals (including from whistleblowers) and have the power to hold public hearings and to make findings of fact, including findings of corrupt conduct (but not to determine criminal liability).
Whilst the precise details of the proposed commission have yet to emerge, we expect that as with many royal commissions, the proposed National Anti-Corruption Commission will have broad powers to issue notices requiring production of information and documents and summoning witnesses to give evidence, not only to those under investigation, but also to those in possession of relevant information – such as financial advisors involved in public infrastructure projects, public procurement, and transactions involving the use of public funds.
It is unlikely that the ALP will push forward with legislation proposed by the Morrison government to implement a Commonwealth deferred prosecution agreement (DPA) scheme and a 'failure to prevent bribery' offence.
The DPA scheme proposed in the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 (a version of a Bill first put forward by the Coalition Government in 2017) was intended to provide a regime for agreements between prosecutors and a corporation to suspend criminal proceedings in exchange for compliance with agreed conditions. The relevant offences covered by the DPA scheme included foreign bribery, money laundering, fraud, breaches of sanctions laws, and various market misconduct contraventions in the Corporations Act 2001 (Cth) such as insider trading, market manipulation, and dishonest conduct in relation to a financial product. The Bill also sought to introduce a corporate 'failure to prevent bribery' offence, similar to an equivalent offence in the UK. (See our earlier update on the Bill.)
Labor Senators had opposed the proposed DPA scheme, which they considered created "a two-tiered justice system where corporate criminals are granted the unique privilege of effectively negotiating their own so-called "punishment" in secret while everyone else is subject to the full force of the law in a court of law". They did, however, support introduction of a corporate 'failure to prevent bribery' offence. The Bill was not subsequently debated or progressed.
In light of the strong dissent on DPAs, we do not expect the ALP will be keen to implement a DPA scheme in the form envisaged by the Morrison government. It remains to be seen whether the ALP will look to introduce the corporate failure to prevent bribery offence, or propose a differently structured DPA regime. As global financial institutions are often regulated by multiple regulators across the jurisdictions in which they operate, the occurrence of a conduct constituting a criminal offence in one jurisdiction will often give rise to issues in multiple jurisdictions, including jurisdictions where DPA regimes do exist, such as the UK and the US. The absence of a DPA regime in Australia continues to give rise to potential challenges for global firms navigating cross-border regulatory exposures and contrasting enforcement approaches by different regulators.
The Financial Accountability Regime Bill 2021 (FAR Bill) was proposed by the Morrison government in response to the recommendations made in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
The FAR Bill proposed a regime administered by ASIC and APRA which imposes accountability, key personnel, deferred remuneration and notification obligations on directors and senior executives of financial entities in the banking, insurance and superannuation industries. In particular, the FAR Bill proposed civil penalties on accountable entities for failure to comply with certain obligations. The proposed regime included new regulatory powers to require individuals to produce documents and information, and to appear for examination. The FAR Bill also provided for the admissibility of an investigator's report as prima facie evidence in a civil proceeding of the facts or matters stated in the investigator's report. (See our earlier update on the Bill.)
Labor Senators have previously expressed support for the FAR Bill, although it remains to be seen whether the new government will propose legislation which is in substantially the same form as the FAR Bill.
It is unlikely that the ALP will push forward legislation proposed by the Morrison government in October 2021 on litigation funding. The Morrison government had proposed the Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021 which proposed amendments to the Corporations Act 2001 (Cth) to introduce a new type of managed investment scheme called a class action litigation funding scheme, with additional requirements to be introduced into the Corporations Act to regulate these types of managed investments schemes. The Bill proposed a requirement that distributions from claim proceeds to litigation funders would require Court approval that the distribution was "fair and reasonable". The Bill proposed a rebuttable presumption that any distribution to litigation funders that exceeded 30% of the total claim proceeds is unfair and unreasonable. This was considered to be one of the more contentious aspects of the Bill.
ALP members had voiced opposition to the Bill in the past, both in the media and through parliamentary speeches, criticising the Bill as being "hostile" to class actions, in that the 30% "cap" would make meritorious and valuable claims uneconomic for a litigation funder to support. It remains to be seen whether the ALP will seek to introduce reforms which are more friendly towards class actions, including whether there may be reform on a federal level to allow law firms to charge contingency fees, similar to the Victorian model which has been in place since 2020 (see our earlier update on class action contingency fees in Victoria).
Authors: Lorraine Hui, Partner; Julia Miller, Senior Associate; and Rohan Kumar, Lawyer.