As the independent corporate and financial regulator, ASIC has extensive information-gathering powers. These powers include the power to compel a company (and certain representatives or agents of the company) to produce specific documents relating to certain matters, such as the company’s affairs. ASIC typically does so by serving a notice to produce pursuant to provisions of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
A notice to produce from ASIC is a serious matter. An intentional or reckless failure to comply with it is a criminal offence.
While ASIC’s information-gathering powers are broad, they are not boundless. Below is an overview of some of the key considerations for persons who receive an ASIC notice to produce.
When can ASIC compel production of documents?
It is only for specific purposes that ASIC can serve a section 30 or 33 notice to produce. These include for the purpose of a formal investigation, or in relation to an alleged or suspected contravention of a relevant Australian law. Less commonly, ASIC may also serve a notice for the purpose of carrying out market surveillance.
Importantly, receipt of a notice to produce is not necessarily an indication of wrongdoing. The person the subject of the investigation or alleged/suspected contravention may (or may not) be someone else.
What documents can ASIC seek?
The ASIC Act empowers ASIC to obtain:
- Specified books relating to the affairs of a body corporate, whether from the body corporate itself or from its representatives or agents;
- Specified books that relate to:
- the affairs of a body corporate;
- the affairs of a registered scheme; and
- the supply of financial products or financial services.
These powers enable ASIC to compel production of a broad scope of documents. They require a proper connection between the investigation and the documents sought, but an ASIC notice to produce is not akin to a subpoena in litigation. It may still be valid even if it requires production of documents that may ultimately be irrelevant to the investigation.
Nevertheless, the notice to produce must identify the documents sought with sufficient clarity and precision, so that the recipient can form a view about what documents must be produced. Otherwise, if the notice describes the documents too generally, it will be invalid. The legislative provision(s) the subject of the investigation or suspected contravention will inform how broad the documents in the notice may be specified.
What documents are in my “possession”?
For a notice under section 33 of the ASIC Act, the recipient has an obligation to produce documents in their “possession”. However, the obligation is not limited to documents in the physical possession of the recipient; it also includes documents in the “custody” or “control” of the recipient. It follows that the recipient may be required to produce documents in the physical possession of third parties. The recipient will need to consider whether it has the right or ability to require the third party to provide it with the documents, because if it does, it will be required to produce them to ASIC.
What if relevant documents are confidential and/or subject to privilege?
While confidentiality is not a proper basis to refuse to produce documents to ASIC, legal professional privilege is a proper basis to do so. Typically, ASIC will accept a valid claim of legal professional privilege as a reasonable excuse not to produce documents under a notice to produce. However, the claim must be properly substantiated with information and, if necessary, evidence, in accordance with ASIC’s Information Sheet 165.
What if compliance with the notice to produce will be burdensome?
Compliance with a notice to produce from ASIC can be expensive and time-consuming. Documents will need to be reviewed, to ensure that they fall within the scope of the notice and to identify any material subject to legal professional privilege. Enquiries and arrangements with third parties may also need to be made, in case those persons hold relevant documents that the recipient must produce. Production to ASIC will generally need to occur in accordance with ASIC’s document production guidelines, which is technical and specific. In all, the process of ensuring compliance can result in a substantial diversion of resources.
ASIC can enforce a notice to produce unless there was a “reasonable excuse” for non-compliance. Ordinarily, however, the inconvenience and expense of complying with a notice will not provide a reasonable excuse. That is so even if the recipient outsources its document administration and storage to overseas-based entities, as was the case in Australian Securities and Investments Commission v Maxi EFX Global AU Pty Ltd  FCA 1263.
Expense and inconvenience may, in certain circumstances, provide a reasonable excuse for non-compliance. However, cogent evidence to substantiate the excuse would be necessary, including evidence from the key decision-maker(s) involved in the process of compliance. In Maxi, the Court found that in the absence of such evidence, “it cannot be accepted that [the recipient] ever had a reasonable excuse for its non-compliance”.
This article was written by GRT Senior Associate, Alexander Sloan.