The Australian Securities and Investments Commission (ASIC) would be able to "disgorge" or confiscate company profits obtained by breaking the law, under a proposal to beef up Australia's corporate penalty regime.
A high-powered review of ASIC's enforcement powers on Monday said the penalties available to ASIC were often too weak to act as a real deterrent, or inadequate when compared with the severity of misconduct.
The position paper also pushed for longer prison terms for criminal breaches of the Act, arguing some criminal penalties should be doubled from five to 10 years.
The move towards tougher civil and criminal penalties comes after multiple reviews have found Australia's penalties for corporate wrongdoing have failed to keep up with the public expectations.
"Appropriate penalties send a signal to the community that breaches of the law are taken seriously and so promote confidence in the system, as well as providing a deterrent to would be offenders," the paper says.
In what would be a significant boost to the fines facing law-breaking companies, the paper proposed giving ASIC the power to demand companies be stripped or "disgorged" of any profits earned through misconduct - a penalty open to regulators in Canada, Hong Kong and the United States.
Offending companies could also be hit with fines, as well as having to hand over illegally-obtained profits.
"This position recognises that it may not be appropriate for a defendant to retain a profit or benefit derived from contravening the law, particularly where the financial benefit can be quantified," the paper said.
It also recommended a significant increase in the maximum fines imposed on companies that break laws administered by ASIC.
The penalty for a company that breaches the Corporations Act should be increased from $1 million to near $3 millon, it says, or three times the value of benefits obtained or 10 per cent of annual turnover.
The paper also called for tougher jail terms for some corporate offences that involved "dishonesty," saying a review of penalties in 2010 had increased the penalties for some crimes such as insider trading, but not others within ASIC's scope.
The paper proposed doubling the maximum prison term to 10 years in several areas, including misleading disclosure that materially damaged investors, and dishonest financial reporting breaches, which are treated as criminal offences.
The ASIC Enforcement Review comes after several inquiries have called for ASIC to be handed stronger powers to enforce corporate laws, to deter misconduct in the corporate sector and financial markets.
A Senate inquiry, published earlier this year, recommended ASIC be given the power to "disgorge" profits from white-collar crimes, such as insider trading or rigging of markets.
Outgoing chairman Greg Medcraft famously described Australia as "paradise" for white-collar criminals in 2014, saying civil penalties often amounted to a "slap on the wrist". Mr Medcraft is set to be replaced by former Goldman Sachs banker James Shipton.
The 2014 review of the financial system by former Commonwealth Bank chief David Murray also recommended tougher penalties for white-collar criminals and law-breaking companies. The ASIC Enforcement Review is a response to Mr Murray's inquiry.
The ASIC Enforcement Review has also proposed that ASIC's powers to obtain search warrants should be strengthened, and that it should also gain extra clout allowing it to ban senior managers and directors in finance who oversee breaches of the law.
The review is set to report to the government by the end of next month.
