Immunity for employees that engage in white-collar crime, what’s the catch?

The Australian Securities and Investments Commission (ASIC) has last week announced a new policy that will provide employees that engage in serious white-collar crime with immunity from civil action and criminal prosecution. The policy applies to market misconduct offences outlined in Part 7.10 of the Corporations Act 2001 (Cth), such as market rigging, insider trading and dishonest conduct in the course of carrying on a financial services business. These offences ordinarily carry maximum penalties of 15 years imprisonment or a fine of $1 million or three times the benefit of the contravention.

Sounds too good to be true, employees? It is. The immunity will only be afforded to the first participant in the activity to disclose it to ASIC, provided that they were not the instigator of the misconduct. Moreover, even immune employees will not be able to get away completely ‘scot-free’. Other accountability mechanisms remain available to ASIC to discipline the ‘whistleblower’, such as bans from being a company director. The whistleblowing employee also remains subject to any compensation proceedings brought by parties who have suffered loss as a result of the reported conduct. Claims of this nature are not covered by the immunity policy. This position reflects the sentiment of Sean Hughes, the ASIC Commissioner, that employees that have engaged in poor or improper behaviour “don’t get a walk-away free card”.

In more unfortunate news for misbehaving employees, there are other circumstances that will preclude the availability of the immunity. Protection will not be granted where the ‘whistleblower’ does not co-operate with ASIC in any subsequent investigation. Similarly, the immunity is unavailable where ASIC is already undertaking an investigation into the conduct reported. Finally, where the ‘whistleblower’ employee has coerced other employees into engaging in the reported conduct, the immunity will not be afforded to them.

Nor will the immunity be available to corporations. From an employer perspective then, this means that the employer corporation itself, were it to report misconduct to ASIC of its own accord, will not be protected from any civil action or criminal prosecution that follows. Additionally, no employees involved in the activity would be afforded the immunity in these circumstances.

Take Home Messages

ASIC hopes that the grant of this immunity from civil action and criminal prosecution will serve as an incentive for more employees to report on criminal activity and other serious misconduct that may occur in the workplace, particularly by those that engage in the practice.

Nonetheless, it is important for employees that may be engaging in misbehaviour of this nature to understand that the immunity is not a ‘get out of jail free card’. There are several circumstances that may prevent the immunity from operating and, even where it does operate, other disciplinary procedures exist to render them accountable in some form for their actions.

Finally, it is also key for employees to understand that the immunity will only be afforded to the first participant employee to report the misconduct to ASIC. Consequently, even a participant employee that reports the conduct in good faith, without prior knowledge of a fellow participant having reported the conduct, will not be immune from civil action or criminal prosecution.

For more specific information on any of the material contained in this article please contact Sathish Dasan on +61 8 8210 1253 or sdasan@normans.com.au or Anastasia Gravas on +61 8 8217 1331 or agravas@normans.com.au.