ASIC: Working to Regain The Public’s Trust in 2019

Fri Jan 11, 2019 - 1:30am UTC

The Australian Securities and Investments Commission is having a rough year. Just this September, the banking royal commission’s interim report determined ASIC is not doing its job regulating or punishing banks and corporations, as it has simply stopped taking them to court.

January 10, 2019

The Australian Securities and Investments Commission is having a rough year. Just this September, the banking royal commission’s interim report determined ASIC is not doing its job regulating or punishing banks and corporations, as it has simply stopped taking them to court.

Commissioner Kenneth Hayne, whose team oversaw the recent report, said ASIC systematically opted for negotiation instead of litigation, hence failing to protect the public from white-collar crime. This approach made then-Treasurer Josh Frydenberg call ASIC out, saying the situation “is clearly unacceptable and cannot continue”.

Under chairman Tony D’Aloisio (2007-2011), ASIC failed to bring major cases against criminals, or has done so without success; cases against James Hardie, Centro, Fortescue and AWB ended with poor results for ASIC.

But even now, under new management, ASIC isn’t turning things around; while ASIC received an extra $70 million under new chairman Mr. Shipton and appointed Daniel Crennan to focus on litigation, not much has changed. In the last financial year alone, ASIC took in more than $1 billion, overwhelmingly by way of hidden taxes on small business and not from punishing financial crimes.

Council of Small Business Organisations of Australia chairman Mark McKenzie said the level of fees charged by ASIC was “absurd”. “These costs are growing at several times the rate of inflation and the increases are not a reflection of any increase in activity (by ASIC),” he said.

And while ASIC’s revenue grew by 252.6% percent in 2018, totalling $1.227 billion from fees and charges alone, it’s pursuing fewer and fewer cases.

Just how bad is ASIC failing? Out of the $1 billion-plus it made this year, only $1.3 million came from penalising the big banks. ASIC is bringing in more money, but its effectiveness is ever-declining: In 1998, 26 white-collar criminals were jailed after action by ASIC; in 2018, just five corporate criminals were imprisoned. In 1998, ASIC launched 215 official investigations; in 2018, it launched 126.

Some recent examples are mind-boggling to say the least;

In 2015, Justice Ray Finkelstein took it upon himself to double the penalty recommended by ASIC in its civil case against alleged former Telstra director Steve Vizard, as ASIC had struck a deal with Vizard that it would only pursue him through the civil courts if he admitted using confidential information.

This November, Westpac whistle-blower Graeme Holm went public and accused ASIC for failing to protect him from harassment and defamation after he agreed to act as a witness for the commission in a $65 million property spruiking racket investigation in 2016.

That same week, Liberal MP Steve Irons lashed ASIC for not taking action against directors linked to alleged undisclosed share placements, stock price manipulation and misleading statements at an ASX-listed company, LWP Technologies Ltd, that caused investors to lose $40 million.

Then there’s the matter of Mr. Clive Palmer – the billionaire businessman is being investigated by ASIC in two different cases: the Queensland Nickel collapse of 2016, which cost taxpayers $300 million, and Palmer’s takeover of the Coolum resort, which resulted in the abuse of dozens of mostly-elderly villa owners.

The Queensland Nickel case has seen no progress and has been heavily criticized, as key-witness and suspect Clive Mensink (Queensland Nickel’s CEO and sole-director, who happens to be Palmer’s nephew) is still a fugitive on the run, although his Bulgarian hiding place is well-known to ASIC. Witnesses are either not showing up to testify in court (despite warrants calling for their appearance), or lying to the court or admitting to taking millions of dollars from the company treasury for private expenses – all without legal consequences. Still, nothing has been done by ASIC.

The Coolum case has been halted since last April, when ASIC announced it was pressing charges against Palmer for abetting or counselling the commission of an offence by another person in relation to Palmer Leisure Coolum. In the Coolum case, Palmer took over a company which operated a timeshare-villas scheme in Coolum back in 2012, and his charges carry a maximum penalty of two years’ jail. Retiree villa-owners at the compound are still awaiting justice.

A little over nine years ago, Justice Robert Austin demolished ASIC in a 3,105-page report, accusing it of ineptly handling the case against directors Jodee Rich and Mark Silbermann, a case that ran for years only to be eventually lost. It seems little has changed.
Things have gotten so bad that some are calling for the Federal Government to scrap ASIC altogether and start over fresh.
So is ASIC beyond saving? Not necessarily, if ASIC can become a more effective corporate watchdog. Some cases, like those pending against Clive Mensink and others, are not too late to save.

ASIC needs to start doing its job, and fast, or it will lose what’s left of the public trust. It seems it has already lost the support of many market experts and government officials, and the pressure is on. The next few months will be critical in determining whether it deserves to receive such an enormous amount of taxpayer dollars – or anything at all.

Contact Info:
Name: Australian Securities and Investments Commission
Organization: Australian Securities and Investments Commission

This news is published on Reuters.

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