‘ASIC has failed’: Senate committee releases final report

After almost two years, the Senate economics references committee has handed down its findings in relation to the Australian Securities and Investments Commission’s (ASIC) investigation and enforcement activities.

In a statement, committee chair Senator Andrew Bragg said that over the last 20 months, the committee has “uncovered the dire state of ASIC”, saying the regulator is an organisation “without transparency, few prosecutions, and a litany of cultural, structural and governance issues”.

Handing down 11 recommendations, Bragg said it is “clear ASIC has failed”.

“Chief among the recommendations is the separation of ASIC into two separate bodies; one focused on companies and the other on financial services enforcement. ASIC conceded during the inquiry that its ‘very wide remit’ impacts its approach to regulatory activity,” he said.

“Separating this broad remit into two individual bodies will provide a more coherent and consistent approach to corporate regulation and law enforcement.”

Alongside this call to split the regulator, the committee also recommended a number of measures to improve governance and transparency.

“Too many Australians have been hurt by ASIC’s persistent failure to enforce the law and win prosecutions. Looking at the cases of Nuix and Dixon Advisory, it was clear to the committee that ASIC’s failure facilitated continued corporate misconduct,” Bragg said.

“The committee understands the pressure of ASIC levies on small business. We have recommended lightening the load on small business by recalibrating the funding model.

“We need regulators to be responsive and transparent, but most of all to be focused on enforcement.”

He added that if the measures are adopted, they would “provide Australians with the protection and confidence which is sadly absent”.

The inquiry, which was initially referred on 27 October 2022, has been plagued with what Bragg called “obfuscation” from the regulator.

In the interim report tabled in the Senate in June 2023, the committee said it was “concerned by ASIC’s behaviour in relation to the commencement of this inquiry”.

“Rather than engaging with the committee in a transparent and accountable manner, from the outset ASIC has chosen to attempt to undermine and influence the process of the inquiry before evidence had been gathered or hearings held,” the interim report said.

That report rejected 11 of 13 claims for public interest immunity made by ASIC chair Joe Longo, with a deadline set for 18 July 2023. ASIC did not supply the committee with the information, leading to Bragg releasing a statement taking aim at the regulator.

“It is disappointing, but not surprising that ASIC has not complied with a unanimous order of the Senate for the production of documents. ASIC has not met our expectations,” Bragg said.

“As representatives, we cannot do our jobs if the agencies, for which we conduct oversight, are permitted to treat Parliament with contempt.

“As it stands, the Senate cannot conduct its inquiry without access to ASIC’s case files. We are unable to comply with our terms of reference.

“This is a serious undermining of the Senate’s role and its investigative powers.”

Last week, Bragg flagged that the final report would address the “pain points” that are hitting financial advisers.

“As chair of the Senate economics committee, I understand financial advisers are under huge pressure,” the senator said on LinkedIn.

“Next week, I will be addressing some of the pain points with ASIC levies in the final report of the Senate economics committee inquiry into ASIC investigation and enforcement.

“I know financial advisers have been ignored by the Labor government on three key areas: ASIC levies, compensation scheme levies/Dixon scandal, unworkable drafting on restricting members from using their super to pay advice fees.”