What Should You Do if You Get a Letter From ASIC?

ASIC sends communications to companies and businesses for many different reasons. They also have broad powers under the Corporations Act 2001 (Cth) (the Corporations Act) and the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) to request information. While some of ASIC’s letters may be quite self-explanatory, like notifying you of a business renewal that needs to be paid, some letters may ask questions that have the potential to lead to an investigation.

Why does ASIC ask for more information?

ASIC has broad powers to ensure that businesses and their office holders are meeting their obligations under the Corporations Act. From time to time ASIC may ask you to lodge specific documents, confirm your company details or ask you for information about your company, office holders or specific transactions.

There are two main reasons why ASIC will ask for information:

• surveillance purposes—this is to ensure your company has complied with its obligations. They may be prompted to send you the letter if they have received a complaint from someone or they may be proactively checking some issues
• investigating a potential breach of the law—this may come about if someone has complained of misconduct or if ASIC has obtained information that makes them suspicious of misconduct.

By asking for information or requesting you to lodge specific documents, ASIC is giving you an opportunity to comply with your obligations. If you do not comply, ASIC may initiate a formal investigation, request a search warrant or seek out information from other sources.

What if the letter is a scam?

Unfortunately, email scams are now a fact of life and ASIC hasn’t been spared. There has been activity recently where scammers have targeted people who are listed on ASIC’s registry. The email tends to ask for personal information or request fee payments.

Before you click on an email from ASIC or forward it onto anyone, there are a few things you can do to check whether it’s a scam:

• Check the actual email address that the email came from. If it hasn’t come from an email that ends is @asic.gov.au it’s unlikely to be from ASIC.

• Also check if all the details are correct, like your full name, address and any payment details. If your renewal payment isn’t due for a few months it’s also unlikely to be from ASIC.

If in doubt, don’t click on any links and report the email to ASIC.

What can ASIC ask for?

If the letter isn’t a scam, you will need to comply with it. ASIC can ask for a range of information including:

• your books for inspection—this can include books that detail your company’s affairs or any financial products or services that you provide. They can also ask other people who have these books to produce them (this power is under Part 3, Division 3 of the ASIC Act)
• general information about a transaction or specific aspect of your business’ compliance (these powers are under Part 4, Division 3 of the ASIC Act).

How should I respond?

Even if the questions or request looks innocuous, ASIC is restricted in how it can use its broad powers. ASIC can only use its powers to:

• perform its functions or powers under the Corporations Act and the ASIC Act
• ensure compliance with the law
• investigate an alleged or suspected contravention of the law
• conduct a formal investigation.

If ASIC asks you to lodge a document or requests more information their request will fall under one of these categories.

Before you respond to the letter, check it carefully and make sure you understand exactly which entity or officeholders it relates to. This is particularly important if you have several companies or entities in your business. It’s also best to let other relevant stakeholders in your organisation know about the letter, like your CFO or anyone responsible for corporate reporting, and involve them if required.

When drafting a response to the letter be open and honest. If ASIC has asked for specific information or wants documents lodged then you must comply with their request. If you have received a request for your books or any other documents, these should also be provided to ASIC.

One of the only situations where you don’t have to provide your books or any other documents to ASIC is if they are covered by legal professional privilege under section 69 of the ASIC Act. Legal professional privilege applies to specific communications that you have had with your lawyer. If you’re not sure if your documents are covered by legal professional privilege it’s best to speak to your lawyer.

If you are concerned that the information may incriminate you or someone else in your organisation, you must still provide it to ASIC. While you are not obligated to provide any information over and above that requested it’s never a good idea to try and hide information from a regulator – they have very broad powers and if their suspicions are raised they may just use them.

If the letter is more open-ended, commonly known as a “please explain” letter, or you’re not sure how to respond, it may also be worthwhile speaking to someone who knows about your compliance activities or is an expert in the area, like CCASA.

Before sending any information to ASIC, make sure you take a copy of it so you have a record of what you have sent them. You may also need some of the documents to continue running your business.

ASIC will advise you in their letter when you need to provide them with the information. If you don’t think you can meet this timeline write to ASIC and request more time. It’s best to do this rather than just sending the information late. This is because ASIC can penalise you if you don’t comply with the letter.

What happens if I don’t respond to the letter?

If you don’t respond to ASIC’s letter your business and its office holders may find themselves in significant trouble. ASIC has the power to issue warning letters, initiate court action and even deregister the company in some instances. ASIC can also issue a notice under s1274(11) of the Corporations Act that requires a company to make good a default payment.

If you don’t have a good reason for not complying with the notice or provide false information ASIC can ask a court to certify that a notice has not been complied with. If the court believes you have intentionally or recklessly breached the law or given false information they may fine you up to $18,000 or even imprison you for two years under Part 3, Division 7 of the ASIC Act.

What happens after I send the information to ASIC?

After you send the information or give ASIC access to it, ASIC will review the information. It may take some time, but they will eventually let you know what happens next. If they find everything’s in order, then there will be no further action. If ASIC believes there is an issue they may conduct a full investigation or penalise your company or office holders.

If you want some help complying with your obligations to ASIC, feel free to get in touch with the team at CCASA.