Senate Hearings Demonstrate Dire State of ASIC

The Senate Economics Committee continued public hearings for the ASIC Inquiry. The takeaway from today’s hearings is that although we have strong corporate laws, the corporate regulator is defective.

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.

In the last year, the Financial Advice Association reported the conduct of 11 financial advisors to ASIC. They have only received a response to 1 of these reports. In instances where ASIC does act, they repeatedly fail to engage the complainant to obtain evidence or update them on their investigations. One witness told us how ASIC took twelve months to respond to their evidence of misleading disclosures. It was also revealed that ASIC failed to interview key insiders who were willing to provide evidence of insider trading at Nuix.

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.

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. 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.

Public hearings resume tomorrow.

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