ASIC needs to prioritise litigation for breaches of corporate law, says the Libs’ Andrew Bragg
Australia’s corporate regulator needs a US-style law enforcement approach and its current model is unworkable, the chair of an inquiry into ASIC says.
Australia’s corporate regulator needs a US-style “law enforcement” approach, the architect of the latest inquiry into the country’s business investigation agency has warned, saying its current model is unworkable.
Liberal Senator Andrew Bragg, in his first interview since publishing his 206-page-review of the Australian Securities and Investments Commission, told The Australian the regulator needed a new direction if it were to achieve better enforcement outcomes.
His view has been backed by a coterie of former regulators and corporate figures, who said ASIC’s mandate was too broad and the agency inadequately funded, and urging consideration of a break-up.
ASIC, the corporate regulator, is charged with upholding Australia’s corporate laws and taking enforcement action against law breakers and business figures. It can take civil or criminal action.
The commission, formed in 1998 in the wake of the Wallis inquiry, has faced criticism over its enforcement record and failure to tackle major breaches.
Senator Bragg told The Australian it was time to consider a split of ASIC, saying the regulator had shown a failure of leadership and that there had been some poor appointments, and calling for a new approach to governing the agency.
“Appointing people that have genuine law enforcement experience, who are for better or worse black letter lawyers, who are prepared to show the SEC-style approach, that’s what’s needed,” he said. “I’ve seen Labor appointees, I’ve seen Liberal appointees, and I think the executive has to think very, very carefully about who it appoints.”
The Securities and Exchange Commission, America’s corporate law enforcement agency, operates as a market-focused entity.
It is credited with an aggressive enforcement culture and fast results, and is able to hand whistleblowers a fee for “high-quality” information.
Writing in The Australian today, former ASIC chairman James Shipton also said that the regulator’s governance was broken, backing a call to split the regulator’s responsibilities between specialist agencies.
However, Mr Shipton said any split should not be rushed and would not deliver an “easy fix”.
The veteran regulator said any change to the regulator system “must be carefully designed”.
“Put simply, if we were designing the regulatory system for the financial sector from scratch it is highly unlikely that we would design it as it currently stands,” he said.
“Indeed, many of ASIC’s chronic flaws flow from the continued failure by successive governments to properly design the regulatory system in which it operates.”
A number of former regulators and corporate law experts have backed a split, but noted that a model must be decided on first.
Former ASIC deputy chair and boss of retirement giant Challenger, Jeremy Cooper, said the regulator had a massive mandate.
“Everyone accepts that ASIC’s mandate is very large, but what are the fixes?
“Do you have to go breaking it up or give it more resources? I don’t know.”
Senator Bragg said “one of the biggest lessons” of the inquiry was the importance of statutory appointments made to ASIC and its sister regulator, the Australian Prudential Regulation Authority.
“There’s been lots of mistakes made in terms of appointments to these organisations over time,” he said.
Senator Bragg told The Australian the scandal surrounding ASIC’s former deputy chair Karen Chester was a key example of the regulator’s problems, noting he and Labor Senator Jess Walsh were concerned about the regulator’s engagement with the committee on questions of her conduct.
Senator Bragg said he was also disappointed by the Albanese government “obstructing the inquiry”, singling out Treasurer Jim Chalmers’ intervention to block the release of a report into Ms Chester.
The report, prepared by law firm Seyfarth Shaw on behalf of Treasury, covered an investigation into the former deputy chair over allegations she behaved inappropriately.
As revealed in The Australian, ASIC investigated complaints from former ASIC former chief executive Warren Day, who told others at the regulator he was “carpeted with F-bombs” by Ms Chester after questioning her expenses.
ASIC chair Joe Longo told the Senate Committee in February he was unable to take any action in relation to Ms Chester as he had no powers to sanction or discipline other members of the commission.
But Senator Bragg said he was concerned about the way ASIC had approached the inquiry, noting the regulator seemed to “go out of their way to not provide information on their investigation methods” and obstruct the inquiry. Senator Bragg said he and Labor Senator Jess Walsh “agreed that ASIC was engaging in an appalling way”, noting their concerns “with the way that the (ASIC) chair and deputy chair presented at various Senate hearings”.
“There were questions about whether there had been any investigations into commissioners – you’d get one answer and then a completely different answer half an hour later,” Senator Bragg said.
Senator Walsh declined to comment, with a spokeswoman noting her statement in July that the report simplified “complex issues” which “detracts from the practical improvements to ASIC, suggested by involved witnesses throughout the inquiry”.
Senator Walsh said there was “room for improvement at ASIC” noting Senator Bragg’s review overlooked “sensible reform”.
But four weeks on from the latest in a series of parliamentary inquiries into ASIC, battlelines have been drawn over the 11 recommendations laid down in the Senator’s report into the corporate regulator, including a call to split the agency.
Backing his colleague, the Coalition’s new financial services spokesman Luke Howarth told The Australian he supported five of the recommendations, including Senator Bragg’s denunciation of ASIC, saying the regulator had “comprehensively failed to fulfil its regulatory remit”.
Mr Howarth, who was handed the job by Liberal leader Peter Dutton in March, said he also supported findings ASIC had too broad a remit and the government should consider splitting the agency.
This was in addition to backing a finding that regulatory agencies “adopt an enforcement approach which prioritises the litigation of all serious instances of suspected breaches of corporations law”.
But Mr Howarth also supported a call to reassess the funding of ASIC, which has been consistently hampered by a lack of resources.
The regulator saw $120m slashed from its budget in 2014 under then Liberal prime minister Tony Abbott.
ASIC insiders have pointed to the mute response from the Albanese government and others on the Senate economics committee as a sign Senator Bragg’s report lacks traction in Canberra.
Greens Senator Nick McKim, attended a number of earlier hearings, but was absent later, as he waged war on the supermarkets over alleged price gouging.
Senator McKim did not respond to repeated requests to discuss the party’s views.
Senator Bragg acknowledged the situation, noting “it’s often the case that these inquiries are run by and driven by just a couple of senators”.
Senior ASIC figures have privately bristled at Senator Bragg’s inquiry, one of several parliamentary settings which see the regulator’s actions scrutinised.
An ASIC spokesman said the regulator noted Senator Bragg’s report “and the range of commentary about it”.
“ASIC will take appropriate time to consider the report,” he said.
More Coverage
CBA opens up prefab mortgages in bid to fix housing crisis
Commonwealth Bank is the first major bank to ease lending guidelines around prefabricated housing in a bid to lift supply.
Financial planners hit with $80m bill
Labor promises review as financial advisers say the controversial CSLR levy for the coming financial year will make it harder to provide advice and even force many out of business.