The corporate watchdog has dropped the ball on enforcement after being left confused by the Hayne royal commission and subsequent direction by the federal government to support the country’s economic recovery, public submissions to a parliamentary inquiry claim.
The Australian Securities and Investments Commission’s own submission to the inquiry said it could not pursue every complaint but showed reports of misconduct finalised over the past decade had fallen from 25,287 in 2011-12 to 16,695 in 2021-22.
Economist John Adams, who has been scathing of ASIC, said the corporate cop’s own submission was damning because only 35 official investigations (or 33 per cent) were commenced from public reports of alleged misconduct.
“It is completely unacceptable, if not outright scandalous, that a government agency with such significant resources cannot provide a proper account of its actions and performance and yet it expects the same of companies and operators with Australia’s financial system,” Mr Adams said.
Law firm Maurice Blackburn warned ASIC’s “newfound commitment to tougher enforcement appears to have fallen by the wayside”.
The firm pointed to ASIC’s August 2021 Statement of Intent which emphasised the regulator’s desire to avoid hampering economic activity and focus on educative and cooperative aspects of its role.
“This appears to be a reversion to the kind of regulatory inaction which enabled widespread misconduct of the kind dealt with by the [Hayne royal commission],” it wrote.
The Australian Restructuring Insolvency & Turnaround Association was equally scathing in its submission and warns ASIC is “not a best practice regulator” with an enforceable undertaking not used against a registered liquidator since 2018.
“In addition to it being inefficient and lacking transparency, it has failed to promote a turnaround culture in Australia,” ARIA said.
“Its failure to adopt a rigorous risk-based approach means that too much money is being spent on reporting that is not even considered by ASIC and too little enforcement action is being brought against directors who are rorting the system.”
The Chartered Accountants Australia and New Zealand joined other stakeholders in complaining that ASIC has too much on its plate and needs to be broken up.
“ASIC has a very large remit, which seems to grow with each passing year,” it said. “We consider that it may be timely for the government to consider whether ASIC should be restructured to better handle this increasing remit.
“We consider that ASIC is not able to apply its resources efficiently to undertake proportionate investigations and enforcement action and remove bad actors from the economy.”
The Australian Institute of Company Directors also agreed.
“ASIC’s remit is extensive and appears broader than any other similar conduct authority globally,” it said.
“The AICD considers that changes to ASIC’s governance structure could improve accountability, performance, culture and strategic oversight.”
Former ASIC chairman James Shipton – who has given evidence as part of a Treasury investigation into the conduct of deputy ASIC chair Karen Chester – has also made a submission and agrees that ASIC should be broken up.
The Australian Financial Review revealed the Morrison government came close to breaking up the corporate regulator under the former chairman Mr Shipton, after Treasury investigated the idea when it was raised in the final recommendations of the Hayne royal commission.
“A separate civil enforcement and prosecutorial agency that would take serious actions referred to it by ASIC, APRA and, perhaps, other regulators should be considered,” Mr Shipton recently said.
ASIC chairman Mr Longo is preparing to implement the largest restructure of the regulator in 15 years from July 1, designed to streamline enforcement, cut bureaucracy and deliver fast decision-making.