Call for penalties to assist victims

ILL-GOTTEN profits recouped from companies under tougher laws should be returned to victims and not sucked into government coffers, a consumer advocacy group says.

The call comes as the Federal Government fast-tracks legislation to increase penalties and introduce “disgorgement remedies” for finance companies who profiteer through misconduct.

Passed by the House of Representatives last week, the legal changes are listed to go before the Senate tomorrow.

The Consumer Action Law Centre, which advocated for many victims at the financial services royal commission this year, says the laws should be tougher and better benefit victims.

Chief executive Gerard Brody said the cash recovered under the new disgorgement rules (effectively clawback provisions) should go to the victims of the misconduct.

“Given the focus is on returning ill-gotten gains, the effect of disgorgement isn’t punitive like a pecuniary penalty,” he said. “As such, it is appropriate for the court to at least have a discretion to return these to consumers, or for the benefit of consumers, in appropriate cases.”

His comments follow the conclusion last week of the seventh and final of hearings for the royal commission, with 134 witnesses appearing across 68 hearing days.

The commission heard how the corporate regulator, the Australian Securities and Investments Commission, needed more powers to properly police the finance industry.

Mr Brody also questioned if the laws to beef-up financial penalties would give the watchdog enough teeth.

Despite providing for higher maximum penalties, the laws were not specific enough, he said.

Even in cases where penal- ties were inadequate, lawyers and courts might look to legal precedents.

“The courts are likely to continue to look to previous penalties to guide penalty decisions, rather than the new larger maximum in legislation,” Mr Brody said.

A report by the Organisation for Economic Co-operation and Development had highlighted shortcoming in the Australian system.

As a result, the consumer advocacy group “strongly recommend” legislation include further guidance for courts that would encourage higher penalties in appropriate cases, he said.