ASICs Information Gathering Powers & Legal Privilege

ASICs Information Gathering Powers & Legal Privilege | The Alternative If You Are Able To Comply

By Shaun McGushin, Director | Projects & Finance with research contributions from Edwin Kwok, Lawyer, Ash St. Legal & Advisory

Key takeaways

  • ASICs information gathering powers can in some cases be quite onerous, costly and stressful
  • A mutually amicable solution may be possible with ASIC and preserve legal professional privilege where a party may have difficulty complying
  • Steep penalties for Parties failing to meet ASICs expectations (jail, fines)

ASIC’s information gathering powers
The Australian Securities and Investments Commission (ASIC) has very broad powers to compel people to produce the information it requires and in the manner in which it prefers. [1]

To help protect consumers and prevent or investigate financial services misconduct, ASIC uses its compulsory information gathering powers in two broad areas of its regulatory activity:

  • surveillance in respect of compliance with the law; and
  • investigation of suspected breaches of the law.

ASIC can use its compulsory information gathering powers to enable it to require any person or entity to:

  • provide it with documents and information; [2] and/or
  • attend an examination to answer questions and provide “reasonable’ assistance. [3]

Accordingly, if a party receives a compulsory notice from ASIC this can be for some quite an onerous, costly and even stressful experience, particularly when it is unexpected.

In this article we look at the scenario where a party (Party) is prepared to voluntarily agree to provide documents and information sought by ASIC but may not, due to its circumstance, really be in a position to undertake all the work required to properly do so including claiming Legal Privilege where it is able to do so. The Party may for example be in the process of shutting down its business and looking at winding up, if it is not already in liquidation, and therefore does not have the people or financial resources to compile the documents and information sought or determine where a claim for legal privilege can properly be made.

In our most recent experience ASIC has in such a scenario proved to be quite accommodating in reaching a solution that is mutually workable for both it and the Party.

Legal Professional Privilege
Legal Professional Privilege protects communications between lawyers and their clients from being disclosed without the permission of the client. As stated by ASIC, claims for privilege for documents generally fall into 2 categories:

  • legal advice privilege, where a document was created for purpose of obtaining legal advice; and
  • litigation privilege, where a document was created for purpose or actual or anticipated litigation involving the client as a party. [4]

Disclosure Agreements & Production Agreements
ASIC has set out its position on legal privilege and the procedure for making a claim. ASIC also has a standard disclosure agreement (Disclosure Agreement) to deal with disclosure and legal professional privilege. [5]

ASIC will not accept a blanket claim for privilege. A party claiming legal privilege normally needs to itemise the documents over which privilege is claimed and identify certain details and attributes associated with the documents including the basis for the claim as outlined in the Disclosure Agreement.

An alternative available to the Party is to seek to reach an agreement with ASIC to deal with the production of the documents and information sought and to preserve the right to claim legal privilege. In this type of scenario the Disclosure Agreement is not the right document to deal with the position.

Important The Party must be looking to find an agreeable solution with ASIC and it is not in the Party’s interest to get into a dispute or litigation with ASIC if that can be avoided. The Party also does not want to be, or seen to be, non-cooperative; it is an offence under the ASIC Act to obstruct or hinder an ASIC investigation. [6]

The Party can agree to enter into an agreement (Production Agreement) with ASIC, which sets out the terms on which ASIC may have access to the documents and information sought and the basis upon which the Party may claim privilege even if ASIC in the interim has had access to any such document or information. In this regard ASIC may gain access to the Party’s file server and will review the documents and information therein within the terms of agreed search parameters. The aim for the Party here is to avoid the Party having to locate and review all the documents and information sought and then determine in relation to which documents or information it may claim legal privilege beforehand, as the Party does not have the resources to do so. From its review of the documents and information that it has accessed ASIC can advise which documents or information it proposes to use and it is from this list that the Party will decide whether or not it will and it is able to claim privilege.

When looking at the customising the Production Agreement some practical issues to consider are:

  • The method by which the documents and information will be provided to ASIC (e.g. provision of the file server).
  • Details of the specific process by which the documents will be identified, searched for, copied, disclosed, used, released, stored and disposed of (e.g. search terms/parameters, databases queries, excluded terms, persons, dates, locations, file types, permitted uses information security standards).
  • What protections or assurances from ASIC are required for information that is disclosed to ensure any privilege is safeguarded.
  • Capacity constraints (e.g. financial, resources, time, large sized files).
  • Efficiency gains from using technology.
  • Dispute resolution for further disagreements on disclosure between the Party and ASIC.
  • Confidentiality of the Production Agreement.

Whilst the position may not be ideal and ASIC will get access to documents and information which it would not normally have, the Party is still able to preserve its right to claim legal privilege at a later time and also not be put to unaffordable or unnecessary expense. The Party only needs to focus on those documents and information that really matter and that is something that it should be able to do.

Ash St. Can Help You

In an environment where resources are finite for a Party, proper but pragmatic management of compulsory production notices from ASIC is critical to ensuring the interests of the Party are safeguarded and any privileged information is appropriately handled. If you are the recipient of a notice from ASIC then Ash St. Legal & Advisory will be able to assist you with formulating a commercial and comprehensive response to ASIC.

Contact us for more information on +61 2 8651 8700 or smcgushin@ashstreet.com.au


Disclaimer: © Ash St. Partners Pty Ltd. This communication is intended to provide commentary and general information only. It is not intended to be a comprehensive review of all aspects of the matter referred to. It should not be relied upon as legal advice as to specific issues or transactions. Liability limited by a scheme approved under Professional Standards Legislation.

[1] ASIC’s compulsory information-gathering powers, Information Sheet 145 (INFO 145), reissued in March 2020, https://asic.gov.au/about-asic/asic-investigations-and-enforcement/asic-s-compulsory-information-gathering-powers/#most-commonly-used

[2] s 33 Notice to produce documents in person’s possession, Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), https://www.legislation.gov.au/Details/C2020C00206

[3] s 19 Notice requiring appearance for examination, ASIC Act

[4] Claims of legal professional privilege, Information Sheet 165 (INFO 165), issued in December 2012, https://asic.gov.au/about-asic/asic-investigations-and-enforcement/claims-of-legal-professional-privilege/

[5] Ibid

[6] Section 65, Obstructing person acting under this Part [3], Australian Securities and Investments Commission Act 2001, https://www.legislation.gov.au/Details/C2020C00206