Secretive ASIC must be held accountable

New laws to stop PwC-style events will be completely useless unless Labor takes corporate law enforcement seriously.

Labor’s instinct to help ASIC obstruct the Senate’s work on improving law enforcement suggests the PwC laws could be hollow at best.

For almost nine months, the Senate has been trying to investigate why the corporate cop ASIC regularly fails to enforce Australia’s corporate laws.

ASIC is attempting to block the Senate’s access to case files which will show how the regulator goes about investigating and prosecuting. Or, more correctly, not prosecuting.

There are two reasons why ASIC’s obfuscation is a major problem.

First, the next PwC scandal is being created now because the regulators are trying to lock in their indolent business model where law enforcement is too hard or beyond the capacity of the regulatory agency.

The PwC breaches are complex as they sit across multiple frameworks but one thing is clear: the PwC staff felt they could get away with it.

Frankly, I was not surprised about the PwC matter. It emerged months after we had established the ASIC inquiry and the anaemic enforcement efforts were obvious.

Very few white collar criminals are put behind bars in Australia or face severe civil penalties. The white collar criminals will be watching how this plays out. If ASIC is able to obfuscate and avoid proper scrutiny by the Senate, it will lay the groundwork for more malfeasance.

PwC partners felt they could use the government’s private information and monetise it. The same principle applies in a series of cases we are examining where it seems that people feel they can manipulate public accounts and engage in insider trading without being prosecuted.

To do our job, we have selected case studies where we have sought a series of ASIC records.

One, Nuix is a technology company that provides internet searches. There are a number of allegations that disclosures were improperly made and insider trading occurred. ASIC says no action can be taken.

Two, ALS is a company that provides certificates about the quality of coal. It admitted that fake coal certificates had been issued over many years but no further action was taken by ASIC.

Three, dozens of super fund executives swapped their personal superannuation investments ahead of their fund making public devaluations during the pandemic. Investigations were undertaken but there was ultimately no action from ASIC.

NSW Liberal senator Andrew Bragg.

These are all closed cases but ASIC is blocking our access as it doesn’t want us to discover their “investigative methods”. This is a laughable approach. The Senate’s role is to oversee the work of government bodies as a house of review.

What’s worse is that ASIC’s proposed solution to the obfuscation is to do everything in secret – which Labor backs.

Second, the government campaigned on transparency and integrity but it is now covering up ASIC’s internal misdeeds. To be clear, it has not been Labor’s fault that ASIC has historically been poor at law enforcement, but it is becoming their problem.

The new announcement to enact PwC laws makes regulatory anaemia a bigger political problem for Labor because expectations of fewer scandals will increase. Yet it appears Labor has no interest in transparency at the regulators.

At Senate Estimates in February, ASIC attempted to cover up a $200,000 Treasury investigation into the conduct of the ASIC deputy chair Karen Chester. Finance Minister Katy Gallagher defended ASIC’s evidence and agreed that “no adverse findings were made”.

It was subsequently revealed to the committee that the Secretary of the Treasury wrote to the ASIC chair in February 2022 informing him that the Treasury “investigation found that many of the instances of alleged conduct could be wholly or partially substantiated”.

Senator Gallagher was then forced to walk back her evidence at Senate Estimates defending the ASIC deputy chair.

Then in March, the Senate ordered the government to hand over the Treasury report. But the Treasurer Jim Chalmers claimed public interest immunity over the report. He falsely claimed that “the investigation did not find all of the allegations substantiated” and that disclosure would result in “undue prejudice”.

The public deserve to know the findings of a taxpayer-funded review into the conduct of a senior bureaucrat responsible for corporate law enforcement.

It is unacceptable that the executive government would be complicit in this cover-up

More recently, the Minister for Financial Services, Stephen Jones, has defended ASIC’s PII interest immunity claims over closed case files, and insisted that the Senate “provide ASIC with a chance to present its claims in camera” and that “an in-camera hearing is the appropriate way forward.”

Senator Gallagher reiterated this defence of ASIC’s request in the Senate last week, arguing it would be the appropriate next step to “assess ASIC’s concerns”.

The government has clearly decided to keep ASIC’s governance issues and lax enforcement record secret.

I fear this will only lock in the same weak law enforcement structure which paved the way for scandals like PwC.

Ultimately, effective law enforcement is more important than an ever-growing statute book.

Andrew Bragg is a Liberal senator for NSW