Andrew Bragg claims ASIC faces governance issues

Liberal Senator Andrew Bragg has questioned the governance of ASIC as he warned it should face questions about the use of encrypted communications systems by its senior figures.

ASIC deputy chair Karen Chester. Picture: Britta Campion

Liberal senator Andrew Bragg says the corporate regulator is “beset with corporate governance issues”, as he warned it should face questions about the use of encrypted communications systems by its senior figures.

Senator Bragg, who is chairing an inquiry into the effectiveness of the Australian Securities & Investments Commission, said he was concerned about reports deputy chair Karen Chester had exchanged messages with short-seller John Hempton.

Mr Hempton, who runs investment house Bronte Capital, has confirmed to The Australian he exchanged a large number of WhatsApp messages with Ms Chester.

However, Mr Hempton said Ms Chester had in recent times cut off contact with him.

“She doesn’t reply to my emails, but I continue to send her the odd fraud, I sent her a fund manager I think is a fraud,” he said.

Despite the reported large volume of messages between Mr Hempton and Ms Chester, The Australian understands only three were declared to ASIC around the beginning of last year.

No allegation of wrongdoing is made, only that the extent of the communications concerned ASIC figures.

Senator Bragg said there were concerns around ASIC governance. “The way they manage their own governance and probity issues clearly is a problem,” he said.

“There are professional bodies that make complaints to ASIC that they just ignore. It’s a very sick organisation.”

Mr Hempton emailed Ms Chester in November 2019 raising his concerns over Mayfair 101, which ASIC subsequently took action against.

Emails show senior figures in ASIC commenced discussions around publishing a warning about Mayfair the day after Mr Hempton’s email to Ms Chester. However, the regulator disputes whether the short-seller’s tip-off triggered action.

n a tweet on Monday, Senator Andrew Bragg claimed ASIC had an ‘obsession with secrecy on its own governance issues’. Picture: NCA NewsWire / Gary Ramage

Emails published under freedom of information show senior figures within ASIC’s investment managers team, in response to a redacted forwarded email marked “treat as in confidence”, said the regulator was “thinking of something like WARNING – MAYFAIR 101”.

Sources close to the regulator claim Ms Chester was not aware of plans or consideration to publish a warning about Mayfair in November 2019.

However, Ms Chester has played a core role in the Mayfair case and has been served a defamation concerns notice by Mayfair 101 boss James Mawhinney in response to comments made by the deputy chair.

The Australian has heard concerns from ASIC figures that the extent of the communication between Ms Chester and Mr Hempton was not fully declared in commission meetings.

Senior figures in ASIC were also concerned about expectations over the speed the regulator was moving against Mayfair, which faced formal demands for information in December 2019 before issuing proceedings against the company in April 2020.

In a tweet on Monday, Senator Bragg claimed ASIC had an “obsession with secrecy on its own governance issues”.

In response to a tweet from Senator Bragg, Mr Hempton noted ASIC had faced governance issues “for a while”. “I am glad the senator is making it an issue,” he said. “It should have been dealt with a decade ago.”

Senator Bragg has repeatedly clashed with ASIC over attempts by the inquiry he chairs to gain information regarding action by the regulator.

He has also sought to have the regulator and Jim Chalmers reveal the findings of a bullying complaint made into Ms Chester.

Senator Bragg said he was concerned about the way ASIC had handled “internal governance issues”. He said: “My role here is to investigate as the chair and be asking questions.”

ASIC was contacted for ­comment.