Volunteer at your risk – ASIC investigations part 2

In our article of 20 May 2019 entitled ‘No such thing as semi formal: What you need to know about ASIC Investigations’, we considered the advantages and disadvantages of both informal investigations by ASIC and formal investigations under section 13 of the Australian Securities and Investments Commission Act 2001 (Cth) (‘the ASIC Act’).

This article will consider some of the key issues from our previous article in more depth, along with some of the common pitfalls where a volunteer can get caught out and the consequences.

Privilege against self-incrimination

You should be wary of participating in an informal interview with ASIC, or allowing your employees to do so, unless you have had the benefit of legal advice prior to doing so.

Whilst there can be good reasons for assisting ASIC on a voluntary basis, people often do so having taken the view that they have nothing to hide.

Whilst this may well appear to be the case, until the nature of the investigation is fully understood, it is impossible to know whether the evidence provided by either you, or your company’s employees, may be incriminating and whether, by participating on a voluntary basis, you have foregone some legal protections.

Accordingly, we recommend that you seek legal advice at an early stage if ASIC make an approach seeking information.

If a formal interview is conducted by an ASIC officer, you or your employee will receive a notice which will set out the particulars required.1

In the case of a formal interview, attendance at the examination is compulsory and non attendance can result in prosecution and in extreme cases, a prison sentence.

You should ensure that you or your employees have a legal representative present to ensure that:

  • privilege against self incrimination is claimed, where appropriate, in relation to the answers to questions. Importantly, if that privilege is not claimed at the appropriate time, the privilege is lost and whilst the privilege can be claimed by an individual employee, it cannot be claimed by the employer;
  • the questions raised by the ASIC officer do not exceed the scope of the notice;
  • the answers provided do not exceed the scope of the notice; and
  • legal professional privilege is claimed in relation to information requested, if and when appropriate.

Following the interview, a record of interview, being the transcript of the interview, will be provided to the interviewee for review.

It is important that the interviewee reviews the transcript carefully as the signed or authenticated record of that interview is prima facie evidence of the statement it records, and unless certain exceptions apply as follows:

  • the privilege against self incrimination;2
  • the statement is not relevant to the proceeding and the person objects to the admission of evidence of the statement;
  • the statement is qualified by another statement and the person objects to the admission of that statement into evidence; and
  • the statement discloses matter in respect of which the person could claim legal professional privilege.3

Importantly, any request for further assistance by ASIC following the formal interview process must be treated carefully.

The best approach is to request that ASIC issue a further notice to ensure that the process is formal, recorded, and a legal representative is present.

If information is provided on a voluntary basis, the protections listed above do not apply.

Whilst volunteers may be able to obtain an undertaking from ASIC that gives them the same protections as would have been available in a formal investigation4, the undertaking will only apply to ASIC and not to other third parties. If ASIC seeks further information in the context of an informal investigation, if a volunteer agrees to cooperate and provide ASIC with a statement on a voluntary basis, they waive their right to the privilege against self-incrimination.5 

In our experience, ASIC are reluctant to provide such undertakings in any event.

As a consequence, you need to give very careful consideration to the transcript of the interview and ensure that it does not contain any inadvertent contradictions.

Before you agree to participate in an informal ASIC investigation, you should think carefully about your potential exposure.  Further, before any of your employees agree to participate, you should ascertain the full extent of the information likely to be discussed, and consider whether legal advice is required.

Legal professional privilege

Legal professional privilege is a very important protection against self-incrimination. It exists to enable clients to obtain proper legal advice by enabling them to communicate information fully and frankly. There are two categories of legal professional privilege which can attach to confidential information. The first is advice privilege, this relates to communications and documents which were created with the dominant purpose of giving or obtaining legal advice.6 The second is litigation privilege, this applies to communications and documents which were created for the dominant purpose of providing a client with legal services in relation to anticipated or actual legal proceedings to which the client is a party.7

As explained earlier in relation to the privilege against self-incrimination, legal professional privilege falls within the exceptions referred to above.

However, when assisting ASIC in a voluntary capacity, a volunteer is in danger of impliedly waiving their legal professional privilege in related proceedings.8 To prevent this from occurring, a volunteer should carefully review the information and/or documents that the propose to provide to ASIC to ensure that they are not disclosing any advice received from their legal representatives.

Should an interviewee ultimately decide that they want to provide ASIC with the legally privileged information, ASIC can elect to accept the information on a confidential basis.9  ASIC’s standard ‘Voluntary confidential LLP disclosure agreement’ does provide that the disclosure is not a waiver of privilege at the time of disclosure, however, the interviewee as the privilege holder retains the responsibility to safeguard legal professional privilege.10 As such, if ASIC is legally compelled, for example in the event of court ordered discovery or a subpoena, the interviewee bears the burden of asserting privilege.11 ASIC also advises that the agreement does not prevent third parties asserting waiver of privilege, and that interviewee’s should consider seeking legal advice.12

Lavan comment

Each investigation is different and will turn on the specific combination of factors involved. Lavan’s Corporate Disputes team can provide you with advice tailored to your situation to help you navigate the process of either a formal or informal investigation, and successfully avoid the common pitfalls.  Should you require assistance please do not hesitate to contact Cinzia Donald, Nick Stagg or Lorraine Madden.

16 July 2019
Corporate Disputes
AUTHOR
Cinzia Donald
Partner
AUTHOR
Nick Stagg
Partner
AUTHOR
Lorraine Madden
Special Counsel
SERVICES
Corporate Disputes


FOOTNOTES

[1] Australian Securities and investments Commission Act 2001 (Cth) s 19.

[2] Australian Securities and Investments Commission Act 2001 (Cth) s 68(3).

[3] Australian Securities and Investments Commission Act 2001 (Cth) s 76(1).

[4] Australian Securities and Investments Commission Act 2001 (Cth) ss 68(2)-(3), 76(1)(a).

[5] Ibid.

[6] Australian Securities and Investment Commission, Information Sheet 165: Claims of Legal Professional Privilege (December 2012), 2.  

[7] Ibid.

[8] Tom Middleton, ASIC Corporate Investigations and Hearings (Thomson Reuters, online, 2002) [3.210]

[9] Australian Securities and Investment Commission, above n 6, 4-5.

[10] Ibid.

[11] Ibid. 

[12] Ibid.