In a parliamentary joint committee on corporations and financial services hearing on the oversight of the Australian Securities and Investments Commission (ASIC), the takeovers panel and the corporations legislation on Tuesday, ASIC confirmed a significant drop in the number of briefs referred to the Commonwealth Director of Public Prosecutions (CDPP).
Liberal senator Paul Scarr pressed Tim Mullaly, ASIC executive director for enforcement and compliance, on the lack of referrals in the financial year to 31 March, noting that just seven have been made so far, compared with 37 in FY2023, 52 in FY22, and 84 in FY21.
“For the nine months to 31 March for the current year, we’re at seven, which is on a proportionate basis, materially different from the prior year,” Scarr said.
“I just want to check that figure to see whether or not that is, in fact, right and if it is right, what the reasons might be?”
Mullaly confirmed that the figures are correct, including that just two of the referrals have so far resulted in charges being laid.
“We acknowledge that it’s lower than in past years,” he said.
“There’s a number of factors that need to be considered in relation to that. One is somewhat of a timing issue. So, my teams are aware of the need to ensure that we have matters referred to the DPP. I think over the course of the next few months, there’ll be some work done to make sure that we that we do increase that figure.
“I think the other thing to consider in relation to referrals, is really the nature of the work that we’re undertaking and the priorities that we’ve set ourselves.”
The banking and financial services royal commission, Mullaly said, impressed upon ASIC that the regulator should be “litigating more and litigating more against the big end of town, the banks, the insurance companies”.
“We have done that,” he said.
“Prior to the royal commission, there was not many matters that we’ve taken against any of the four major banks or insurance companies, etc. Subsequent to that, we have any number of matters against those entities, and we continue to do that.
“What that does though is takes our resources, or prioritises our resources towards civil matters as opposed to criminal matters. And I think as chair [Joe] Longo said, those civil matters can sometimes take quite a while to resolve through the courts.”
Mullaly added that the regulator is dealing with them on a “day-to-day basis”, however that meant the resources are not able to “work on new matters or work on criminal matters as much”.
“We’re aware of the need to ensure, to the extent that we can, a growing level of outcomes both civil and criminal and to get the right balance there,” he said.
“At the moment, that balance is probably skewed more towards civil than criminal, but myself and the team are aware of that and we’re looking to do what we can to redress it.”
This is far from the first time that a parliamentary committee has questioned ASIC’s enforcement approach.
During a Senate economics references committee inquiry last year, Senator Andrew Bragg pressed ASIC representatives for a more thorough explanation as to why criminal proceedings were not pursued in the Dixon case.
“Well, there is a range of concepts in what you are referring to. ASIC frequently takes civil proceedings against corporate entities, we take criminal proceedings against individuals and, on some occasion, corporate entities where we have the evidence that will make the criminal threshold,” said deputy chair Sarah Court.
Unlike civil proceedings, work of the Office of the CDPP is primarily funded through parliamentary appropriations – so increased referrals wouldn’t increase the levy paid by advisers.
Dealing with the big end of town
Committee chair, NSW Labor senator Deborah O’Neill, questioned ASIC chair Joe Longo on whether, based on the “depth of the pockets of ASIC and the CDPP”, the regulator would shy away from taking action.
“Do you ever make a decision on a financial basis of these are too big, these entities are too big for us to take on?” O’Neill asked.
Longo answered emphatically that “we do not approach any matter in that way”.
He did add, however, that regardless of the size of an entity, decisions are made regarding the complexity of an investigation and that the “scope of the investigation has to be really focused on the most serious aspects of the alleged misconduct”.
“We can’t investigate every aspect of that situation very often,” Longo said.
“Sometimes we can because it’s relatively straightforward, but often, it isn’t like that.”
Mullaly added that the “enforcement special account” is in place to enable ASIC to “pursue those matters”.
“That’s not a factor that we take into account, the size or financial capacity of the potential offender or defendant,” he said.
Mullaly added: “If that requires us to appeal matters to the High Court, then we will appeal matters to the High Court.”
O’Neill then delivered a warning to any businesses that may consider themselves too big for ASIC to target.
“To be clear to anybody listening to this, don’t think you’re too big, ASIC will come after you and if required, the resources will be allocated to taking the matter to its natural end through the court in accordance with current law,” she said.
So with the adviser levy at $2,800, they raised $45M to fund regulation and enforcement. And 2 people have been charged? so thats about $22M for each charge? It might be better to just let 2 people get away with their crimes. You could even pay the criminals a million to stop, that would still save advisers over $40M.
There are rarely referrals of the big banks, their executives and other big players. Is this because ASIC basically just looks after the big end of town ?
Imagine this. An ASIC employee works there for 5 years, learns the ropes then gets a job at a big bank.
“Do you ever make a decision on a financial basis of these are too big, these entities are too big for us to take on?” O’Neill asked.
Why doesn’t the senator acknowledge that it it the federal government’s responsibility to fund regulators properly instead of imposing extortionate levies on advisers. There would be plenty of money if they scrap parliamentary pensions, judges’ pensions, Life Gold Passes and all those other perks and rorts.
So lemme bust up on the lyrics here: As the banks etc have been removed (or removed themselves) from financial advice, the number of prosecutable complaints has dropped dramatically?
Connection, anyone?