01 May 2013
ASIC compulsory information gathering powers and legal professional privilege
by Nicholas Mavrakis, Jonathan Slater
Sometimes it is in your interests to disclose privileged information to ASIC
Recipients of compulsory information requests from the Australian Securities and Investments Commission (ASIC) are not required to provide information to ASIC that is the subject of a claim for legal professional privilege (LPP). LPP applies to conﬁdential oral and written communications with a legal adviser created for the dominant purpose of obtaining or receiving legal advice or for preparing for actual or anticipated litigation.
ASIC has recently issued Information Sheet 165: Claims of legal professional privilege (the Information Sheet), which sets out ASIC’s approach to dealing with claims for legal professional privilege. ASIC has indicated that it may accept information the subject of LPP on a conﬁdential basis under a “voluntary conﬁdential LPP disclosure agreement”, where ASIC will agree that the disclosure of information to ASIC will not be a waiver of any privilege that exists at the time of the disclosure.
Disclosing legal advice or other information or reports the subject of legal professional privilege to ASIC may in certain circumstances assist ASIC and the recipient of the information in more effectively resolving an ASIC investigation or surveillance. For example, a company may have commenced an internal investigation into a suspected breach of the law and obtained legal advice or other reports the subject of LPP to assist with that investigation. There may be merit in providing such advice or report to ASIC to assist with its investigation.
However, you should proceed cautiously, given the wider risks of waiving privilege over sensitive information. This article deals with matters to consider in deciding whether to enter into a voluntary disclosure agreement with ASIC.
LPP claims over documents and oral information
Recipients of compulsory ASIC notices that request information the subject of a claim for LPP have the following options available to them:
provide the LPP document to ASIC: this would amount to a waiver of the privilege;
withhold the LPP document: this is the safest option to maintain privilege over the document — ASIC warns that a failure to retain the document may amount to non-compliance with a notice; or
provide the document to ASIC under a “voluntary conﬁdential LPP disclosure agreement": see the discussion of the voluntary disclosure agreement below.
If you wish to withhold the information from ASIC and claim LPP, ASIC requires a notice recipient to complete a schedule itemising each document and providing certain information, including the names of all authors and recipients and their positions and employment (if any), the category of LPP claimed and its basis, the names of persons who claim to assert the privilege (including third parties), and the location and form of the document.
For LPP claims over oral information provided in response to an ASIC question during a compulsory examination, ASIC requires that the interviewee provides — either during the examination or at a later date speciﬁed by ASIC — certain details, including the names of all parties who communicated the information or to whom the information has been communicated and their positions and employment (if any), the category of LPP claimed and its basis, the name of persons who claim to assert the privilege (including third parties), and whether the information has been recorded in part or in whole in a tangible form.
Voluntary disclosure agreement
The voluntary disclosure agreement is an agreement to be used where the notice recipient chooses to allow ASIC to have access to the privileged material.
Under the voluntary disclosure agreement, ASIC and the privilege holder agree that the disclosure of the information to ASIC is not a waiver of privilege existing at the time of the disclosure.
ASIC’s justiﬁcation for introducing the voluntary disclosure agreement is that there is a public beneﬁt to accepting privileged documents, as it will assist in achieving effective and efficient conclusions of investigations and the identiﬁcation of critical issues.
As mentioned above, there will be times when it is in your interests to disclose privileged information to ASIC. In doing so, however, you should be aware of at least the following issues:
While ASIC and the disclosing party agree that the disclosure of information to ASIC under the voluntary disclosure agreement is not a waiver of privilege and the agreement prevents ASIC from asserting such a waiver, this will not prevent third parties from asserting that the privilege has been waived. ASIC expressly accepts this position in the Information Sheet and recommends that legal advice be obtained prior to entering into a voluntary disclosure agreement.
ASIC will treat information provided under a voluntary disclosure agreement as conﬁdential, but the responsibility to otherwise safeguard the privilege rests with the privilege holder. Where ASIC has been compelled by law to disclose information, the privilege holder must assert privilege for it to be maintained. For example, a discovery order in proceedings or a subpoena may compel ASIC to disclose privileged information. In this situation, the privilege holder must apply to the court to protect privilege over the document. This will require the privilege holder to go to its own expense to defend any claim for privilege in court.
As yet, there is no guidance on whether privileged material provided to ASIC on a voluntarily but conﬁdential basis will amount to a waiver of privilege. This is problematic as, pursuant to s 127(4) of the Australian Securities and Investments Commission Act 2001 (Cth), ASIC has an obligation to disclose information to other agencies where ASIC is satisﬁed that it “will enable or assist” those bodies to perform a function or exercise a power. These agencies include federal and state police departments, the National Crime Authority, corporate crime task forces, the Australian Transaction Reports and Analysis Centre, the Australian Competition and Consumer Commission, the taxation offices of the Commonwealth and the states, various anti-corruption commissions, and overseas regulatory bodies. The Australian Securities and Investments Commission Regulations 2001 (Cth) also allow disclosure of particular information to the Institute of Chartered Accountants in Australia, CPA Australia and the National Institute of Accountants. In this way, the extent to which ASIC and other regulatory bodies will be able to use information acquired under a voluntary disclosure agreement is unclear.
If approached by ASIC to enter a voluntary disclosure agreement, consider carefully:
the risks of entering into such an agreement;
whether it is appropriate in the circumstances; and
alternative options available.
ASIC has not given any indication of an intention to negotiate the terms of the standard form of the voluntary disclosure agreement. However, if there is a desire to enter into an agreement, you may be able to negotiate additional terms to further protect the conﬁdentiality and privilege in your documents.
This article was first published in the Financial Services Newsletter, Vol 11 No 9, May 2013