Critics unleash on ASIC: Call for overhaul gain momentum

During the hearings, which took place on 23 and 24 August, ASIC was criticised for its alleged excessive secrecy and sluggish response when potential cases of misconduct are reported to the regulatory body.

“Although we have strong corporate laws, the corporate regulator is defective,” said Senator Andrew Bragg.

“ASIC has an obligation to investigate and prosecute white-collar criminals. But even when there are clear statutory breaches, ASIC fails to act.

“In the case of Courtenay House, a Ponzi scheme, ASIC received 10 complaints before beginning regulatory action.

“Company insiders and professional bodies told us how ASIC failed to pursue their reports of insider trading, faulty disclosures, and other breaches,” he noted.

Mr Bragg was referencing the Financial Advice Association Australia (FAAA), whose CEO informed the parliamentary inquiry that, despite reporting the conduct of 11 advisers to ASIC in the past year, they received responses from ASIC for only one of these reports.

Namely, Sarah Abood told the inquiry that the FAAA has reviewed 11 cases that have been reported to ASIC.

“That’s not all of the cases that we have been notified of by members. They are the ones that we believe are serious enough and sufficiently grave to warrant additional action from the regulator,” she said.

Asked what action had been taken on these, Ms Abood said: “We don’t know. In one of those cases, further information was requested. But we don’t have any information about what has happened with the other cases that have been reported.

“As far as I’m aware, there’s no mechanism at the moment in which ASIC would respond to or let a member of the public know what happened to their report. They do state on their website and in an automatic email that you get back that only some cases of misconduct will be investigated.”

Ms Abood clarified that while it’s possible that action has been taken behind the scenes, of which the FAAA may not be aware, it’s the absence of transparency that is negatively impacting the industry.

“We absolutely think we could work more and help ASIC more with that standing. So we’ve made a few specific suggestions.

“One is that a priority reporting line be available to members of the profession and professional bodies that will generally have triaged the matters. The other is that we have an information-sharing mechanism in place whereby we can work better together to improve the standing of the sector.

“We have a memorandum of understanding with the Tax Practitioners Board, so it’s not without precedent. We think that something along those lines could work well.”

Lack of transparency

This lack of transparency was brought up several times during the inquiry, with Mr Bragg sharing that one witness told the inquiry how ASIC took 12 months to respond to their evidence of misleading disclosures.

This cloak of silence also extends to whistleblowers, he said.

“ASIC does not consider whistleblowers an integral part of the investigation process. Whistleblowers take significant risks to report corporate misconduct. At best, ASIC treats them with indifference, and at times do not respond to whistleblower complaints,” Mr Bragg said.

“For example, it took ASIC 18 months to meet with a whistleblower, and the ASIC investigators he met with were unaware of the extensive documentation he had already provided to the regulator.”

Ultimately, Mr Bragg concluded: “It is clear that ASIC is in a dire state. Australia desperately needs a strong corporate regulator that will enforce the law, and not facilitate corporate crime”.

The Senate referred an inquiry into the capacity and capability of ASIC to undertake proportionate investigation and enforcement action arising from reports of alleged misconduct to the Senate Economics References Committee on 27 October last year. The final report is due by the last sitting day in June 2024.