Need more than a warm inner glow: Call to pay whistleblowers

The man who helped start the royal commission into the banking system has backed paying whistleblowers who reveal corporate criminal activity amid complaints financial firms are getting away with “parking fines” for actions undermining hundreds of thousands of people.

Jeff Morris, who received a Medal of the Order of Australia for his actions uncovering malpractice within the Commonwealth Bank, which ultimately led to the Hayne royal commission, said many more whistleblowers would come forward if they received compensation for their efforts.

Commonwealth Financial Planning whistleblower Jeff Morris campaigned for the Hayne royal commission.Credit: Dominic Lorrimer

He was backed by a leading academic who warned a proposal to split the corporate watchdog would only go part way to rectifying a broken corporate culture, arguing prosecutors had to be much more aggressive against misbehaving firms.

A Senate committee this week recommended the Australian Securities and Investments Commission be split into a company regulator and financial conduct investigator, finding it had failed to deliver justice to investors while adopting a timid approach to criminal proceedings.

It also supported the introduction of financial rewards for corporate whistleblowers if their revelations delivered significant public benefit, while those whose careers were destroyed by their actions should receive compensation. In the United States, corporate whistleblowers can receive between 10 and 30 per cent of the value of fines against criminal companies.

Morris, who exposed problems within the Commonwealth Bank’s financial planning arm and then ASIC’s management of complaints, said the financial, health and social pain facing whistleblowers put off many from going public.

He said lifting the size of fines against companies, and giving whistleblowers a percentage of those fines, would give people who were likely to lose their jobs at least some financial protection.

“The government would gain revenue out of this, and it would barely cost them anything,” he said. “People would come out as whistleblowers if they knew they would get some financial protection.

“I reckon 99 out of 100 walk away. I say you should do it, but warn them it’s going to come with huge costs, your mental health and family, and at the end of the day, you’ll only have the satisfaction of knowing you did the right thing.”

Morris said he was disappointed that the federal government had failed to act on commitments made after the Hayne royal commission that it would consider payments for whistleblowers, arguing it had taken more legal action against people prepared to speak publicly.

He said another problem was the attitude of ASIC, which appeared more interested in collecting fees and charges from companies rather than properly examining their behaviour.

“You’ve got to have fire in the belly and be prepared to take action against corporate crooks. That’s not there,” he said.

The committee found that ASIC under-utilised its extensive powers to enforce corporate law, with its actions “frequently mild” compared with the severity of wrongdoing and the harm inflicted on investors and the broader economy.

ASIC’s funding has been increased by $400 million since the government came to office in 2022, but the committee said the agency should receive more to increase its litigation efforts.

Academic Andy Schmulow says ASIC inflicts parking fines on companies that make millions from their poor behaviour.

University of Wollongong financial regulation academic Andy Schmulow said the Senate report was a good start towards overhauling ASIC, which was struggling under its dual mandate of managing companies while policing the financial sector.

Schmulow, who gave evidence to the inquiry, said splitting the organisation would at least give ASIC the ability to take pre-emptive action rather than having to rely heavily on public complaints.

He said the Commonwealth Director of Public Prosecutions had to be much more aggressive in taking on criminal proceedings against companies, and the penalties imposed on those firms had to be substantially larger.

“They have a very high success rate in court. But that’s not an indication of them doing a good job, it’s an indication that they’re not taking any risks,” he said.

“At the moment, the penalties themselves are not enough. It’s not more than a parking fine of $60 while these companies make tens of millions of dollars.”

The government has said it will look at the committee’s inquiry but has criticised the way the report was pulled together and the failure to set out key features of how a reformed ASIC would operate.

Labor committee member Jess Walsh said the inquiry had received useful suggestions that could be used to improve ASIC.

But the chairman of the inquiry, Liberal senator Andrew Bragg, said he believed the problems across ASIC were clear.

He said changing its structure was the best way to improve its operation.

“You’d have a company’s regulator, which enforces the corporate law on things like insider trading. Then you have a separate financial services agency, which looks after enforcement in financial services, so financial advisers and the like,” he told ABC TV.

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