Conaghan has argued that given Treasury confirmed it had provided written advice on gaps in the regulation of managed investment schemes to the government on at least seven occasions, the government not making any changes to the regulation of MISs was a failure.
“Despite all these warnings, Treasury couldn’t name a single regulatory or legislative change the government has made in response,” Conaghan said.
“The government was warned. They failed to act. And now Australians are staring down up to $1.2 billion in lost super.”
The shadow minister has previously pressed for Treasurer Jim Chalmers to release the MIS review and “put the facts on the table and address this issue directly for Australians”.
Originally announced as part of the 2022 federal budget, Treasury was tasked with reviewing the MIS regulatory framework in March 2023.
Estimates also confirmed Treasury has now provided its advice on the potential Part 23 support mechanism for victims.
Treasury noted that the potential loss through investors in Netwealth, which had sent a letter seeking Part 23 support in October, was in the realm of $100 million.
Ruth Moore, assistant secretary member outcomes and governance branch, told estimates that she is unaware of any other applications under Part 23, however in order for an application to be approved, there are a number of conditions that need to be met.
These include that the minister must be satisfied that “fraud has occurred that has resulted in a loss to the entity, and that as a result of that fraud the entity is unable to meet redemptions for members”.
The minister also needs to consider that it is in the public interest, Moore added.
She also said that Treasury has engaged with APRA to provide advice, and that advice has been provided to Financial Services Minister Daniel Mulino.
Treasury clarified that the advice provided is around how to go about the process of considering the matter, not advice on whether or not the Part 23 application should be approved.
“This advice is on the Minister’s desk. Victims have waited long enough. The government can’t keep hiding,” Conaghan said.
Senator Dave Sharma argued this pointed to a systemic failure of ministerial oversight.
“These are everyday Australians who saved for retirement and trusted the system,” Senator Sharma said. “Labor ignored clear warnings, dragged its feet, and left Australians exposed to the biggest super failure in our history.”
Senator Andrew Bragg added that it is “all well and good if you are caught up in the Macquarie thing”, referring to the company covering the initial investment of its members in Shield at a cost of $321 million, however it is less clear how it will work for members of other platforms who have been “fleeced by these crooks”.
“ASIC has been completely hopeless, [Treasury] have sat on a report from the Senate that recommend that you fix it, I mean, what do you say to all these people who have been fleeced?” he said.
Finance Minister Katy Gallagher said she doesn’t accept Bragg’s criticism of ASIC, adding that there are “regulatory responses and work that has to be done before the government is able to make some of those decisions”.
Estimates also confirmed that ASIC is still operating under the Statement of Expectations set out by former Treasurer Josh Frydenberg, with a new statement not expected until the replacement for ASIC chair Joe Longo is in place.
“After three years in office and the largest super fraud failure on his watch, the Treasurer still hasn’t bothered to update ASIC’s mandate,” Conaghan said.
“It is extraordinary negligence – and a damning indictment of the government’s priorities.”
AIOFP executive director also took aim at the regulator in a letter to MPs, stating that the role of ASIC “should not be overlooked” despite it taking strong action against a range of parties related to Shield and First Guardian.
“ASIC were warned on at least two occasions in 2023 recently highlighted by Senator Bragg but failed to act, this unfortunately allowed another $526 million of consumer savings to be allocated to the failed products,” Johnston said.
“We cannot understand why ASIC did not take advantage of Section 920A [1] [ba] of the Corporations Law that gives them power to act if they ‘believe’ or think it ‘is likely’ persons are contravening the Law.
“If they had acted when alerted this matter could have been largely avoided. The perpetrators actions would have been frozen until ASIC could further investigate the circumstances. This Law gives ASIC extraordinary powers to intervene in any commercial matter.”
He added that there needs to be an explanation as to why the regulator didn’t take this approach.
“ASIC is silent on this issue but it is obvious they need to start employing ‘street smart’ lawyers instead of the inexperienced or bureaucratic Lawyers who are removed from or never been in the ‘real commercial world’,” Johnston said.
“The common political response is more regulatory power, but ASIC have ample already, the harsh reality is the ASIC senior management are predominately all career bureaucrats who don’t fully understand the commercial market and behave accordingly.
“This needs to change to protect consumers and the advice profession going forward.”
