ASIC hopeful for CDPP enforcement reset amid criticism of track record

Regulators are hoping new leadership and more funding will see white collar criminals held to account, amid despair over the Commonwealth Department of Public Prosecutions’ track record.

Senator Andrew Bragg said parliament had to ‘make sure the enforcement agencies are doing their job.’ Picture: NCA NewsWire / Martin Ollman

Senior regulators are hoping new leadership and more funding will see white collar criminals held to account, amid despair over the Commonwealth Department of Public Prosecutions’ track record.

In the wake of the latest inquiry into the effectiveness of the corporate regulator, which took aim at the Australian Securities & Investments Commission’s allegedly lax enforcement of the law, several figures have instead pointed the finger at the CDPP.

A recent report from the Senate Economics References Committee said ASIC was delivering “low rates of enforcement action”, with the regulator was relying on “relatively few civil and criminal prosecution mechanisms” and delivering penalties for offending that were “weak compared to the severity of the offending and delayed prosecution of offences”.

“ASIC litigates relatively few matters through the courts, having initiated just 75 new civil actions and 52 new criminal actions in 2021-22,” the report said.

Liberal senator Andrew Bragg said the decline in referrals reflected a timidity from the regulator, telling The Australian in the wake of the publication of his inquiry into ASIC that the parliament had to “make sure the enforcement agencies are doing their job”.

“I would have thought that landing a few big cases would be one way to measure it,” he said.

ASIC watchers say the regulator has prioritised cases it thinks it can win, leaving controversial cases or matters involving well-funded parties to go unpunished.

Senator Bragg, who ran months of hearings into the enforcement record of ASIC, has recommended the regulator be split in part due to concerns it was unable to handle the workload of regulating businesses.

ASIC often has two pathways to punish corporate criminals, ­either referring the matter to the CDPP to prosecute through the courts, or engaging commercial lawyers to litigate on its behalf in a bid to secure a fine.

ASIC and the CDPP are still bound by a 2006 memorandum of understanding that set out the principles the two were to co-operate under.

This sees ASIC not only refer matters for criminal prosecution to the CDPP, but also consult the prosecutor’s office prior to launching any civil litigation.

ASIC and the CDPP also meet, at least six times a year, to discuss matters under investigation.

But Senator Bragg’s report notes ASIC’s referrals to the CDPP have declined, even as the regulator’s other enforcement ­action and civil litigation has continued.

The report also singled out a declining number of referrals from ASIC to the CDPP for prosecution, with only 42 in 2022-23, compared with 86 in 2018-2019.

ASIC insiders point to concerns over the CDPP’s recent track record running sensitive commercial criminal action as why the regulator is wary of handing the prosecutors office big cases rather than running them through less onerous civil litigation pathways.

Notably, the CDPP folded in its major prosecution of alleged cartel conduct in an $2.5bn ANZ market raise, in which a coterie of investment banks were left holding shares in a deal that resulted in them agreeing to offload the overhang.

Former ASIC CEO Warren Day joined the CDPP on secondment earlier this year. Picture: NCA NewsWire / Martin Ollman

The CDPP pulled the case in February 2022 after the Australian Competition & Consumer Commission attempted to prosecute the investment banks and bankers after picking up the matter in mid-2017.

The ACCC launched its own review into the failed prosecution, with observers saying the case showed the weakness of the CDPP after years of stifled funding as well as the problems with the nation’s corporate laws.

University of Sydney Law School professor of corporate law Jason Harris said ASIC was an ineffectual regulator, but said elements of the CDPP made its job harder.

Dr Harris said any discussion about the CDPP had to acknowledge ASIC was also faced with too broad a remit, with the regulator relying on too few of its powers.

“ASIC needs to be using its full range of enforcement powers across the enforcement pyramid,” he said. “It’s a lack of effectiveness, not because it lacks powers, it’s got enough powers. The problem is it’s not using them, it is not conducting enough investigations or enforcing.”

Dr Harris said some of ASIC’s lax enforcement record was a ­result of the CDPP. “There are ­aspects of the CDPP that don’t view white collar crime as seriously as they should,” he said.

“But even on the civil side, ASIC is just not doing anywhere near enough what it needs to be doing.”

Dr Harris said even ASIC’s director banning was “minuscule” compared to the number of reports of breaches filed by liquidators.

“Out of potentially 20,300 offences each year, ASIC is pursuing maybe 60. That’s just not good enough, the community is entitled to see more,” he said.

Dr Harris said he supported Senator Bragg’s call to split ASIC, to resolve its issues of having too many areas of responsibility.

But he said any split required resourcing.

“If the proposal was to split ASIC and take ASIC’s existing budget and split that into however many regulators, I still think it would be a better outcome than we have now,” he said.

“There’s no question the corporate regulator needs more resources.”

But ASIC insiders are hopeful the CDPP has turned a corner under new leadership, with ­Raelene Sharpe appointed to run the prosecutor’s office in November last year.

ASIC is among the smallest referrers of cases to the CDPP, responsible for carriage of almost all criminal matters from commonwealth agencies.

However, this has led to a view among the regulators, ASIC included, that the CDPP is more interested in the prosecution of easy wins from criminal cases flowing from drug and crime breaches rather than complex matters involving corporate and business figures.

Last month ASIC moved to charge four people over an alleged “pump and dump” share trading scheme, in a case to be handled by the CDPP.

This came almost 18 months after ASIC first referred the matter to the CDPP, in December 2022, almost a year after the alleged misconduct was identified by the regulator.

But the CDPP has been seeking to reassure the regulators, with watchers of the prosecutors office hopeful its $35m funding injection over the coming two years will help stop the loss of skilled staff.

A key issue for the agency in recent years was retaining skilled staff, many of whom were poached by commercial law firms, with the Morrison years under the former Coalition government a lean period for the public service leading to many leaving.

A CDPP spokesman said the funding would be “used to increase the CDPP’s capability, engage skilled and experienced counsel for complex prosecutions, and manage costs awarded against the commonwealth in federal criminal prosecutions”.

ASIC’s former CEO, Warren Day, was also recently seconded to the CDPP as part of efforts to design and implement a new program of work and review the practising model.

This has seen the CDPP dump its document management system, provided by Nuix, and adopt evidence management platform EDT.