The Australian Securities and Investments Commission (ASIC) is Australia’s corporate watchdog. According to it’s own website it is “Australia’s corporate, markets and financial services regulator” and contributes “to Australia’s economic reputation and well-being by ensuring that Australia’s financial markets are fair and transparent, supported by confident and informed investors and consumers”.
But it seems it failed to act either quickly or responsively when whistleblowers from one of Australia’s big four banks, CBA, aka the Commonwealh Bank, provided it with information about serious breaches and misconduct by staff within the bank. Today it was announced that, due to its poor follow-up in the CBA case, the watchdog itself will now face its own Australian Senate inquiry.
Rogue Planners: Senate Demands Answers
By Adele Ferguson and Chris Vedelago, Sydney Morning Herald – June 19, 2013
Australia’s corporate watchdog will face a Senate inquiry into its performance that is likely to embroil the Commonwealth Bank and raise questions about the effectiveness of new financial reforms.
A notice of motion was put in the (Australian) Senate this afternoon by Nationals senator John Williams and supported by ALP senator Doug Cameron and Greens Senate leader Christine Milne, showing unanimous support from all sides of politics.
Senator Cameron said the inquiry into the Australian Securities and Investment Commission will be wide ranging, and given the scale of the problem, it is “appropriate for the Senate to investigate a range of issues including financial planners, the Commonwealth Bank and ASIC”.
The motion, expected to pass unopposed, will be voted on in the Senate on Thursday following revelations in Fairfax Media that the regulator took 16 months to act on information from whistleblowers about serious misconduct inside the Commonwealth Bank’s financial planning unit.
It also failed to act for three and a half years on information provided by CBA in June 2009 about serious allegations of forgery and fraud by a planner, who was allowed to continue to work in the industry during the regulator’s inaction.
“I will suggest to the committee that submissions open next month and we can expect to have public hearings later this year,” Senator Williams said. The committee is expected to report to the senate in March 2014.The inquiry’s terms of reference are wide ranging, including an examination of corporations legislation and whether it needs to be changed; a review of the accountability of the regulator; the effectiveness of its complaints management policies and practices and its approach to corporate and private whistleblowers.
Jeff Morris, a CBA insider who revealed his identity to Fairfax Media said whistleblower protection in his case consisted of “advising me to get out with what I had left”.
“When you choose to tread the path of the whistleblower you knowingly ‘take arms against a sea of troubles’,” he said. “What you don’t expect though is for the odds against you to be lengthened by a Monty Pythonesque regulator.”
The CBA whistleblowers repeatedly contacted ASIC starting in late 2008 but were never asked to participate in an investigation or reveal their identity.
According to Mr Morris, the whistleblowers visited the headquarters of the regulator 16 months later after becoming ‘‘sick of waiting’’ for action. Within a month, ASIC had moved to seize CBA files. An investigator later told Mr Morris that if they hadn’t forced the issue their report might still be ‘‘bouncing around’’.
Senator Williams said it was clearly a situation that ASIC is far too slow to act. “The result is financial loss and stress placed on many Australians,” he said.
“Sixteen months to act on the Commonwealth Financial Planning issue is too long. Years to act on Stuart Ariff [a liquidator who is currently serving six years in jail] is too late. ASIC needs to lift its game and I am hopeful that this enquiry will result in improvements to ASIC and how it performs.”
But despite the wide-ranging political support for the inquiry, some senators are demanding to know what role the Labor government has played in allowing ASIC to become a ‘‘kangaroo court’’.
‘‘ASIC is a problem as an agency. It’s administration and management has been of very serious concern to many in this parliament, and particularly in this senate chamber, for some time now,’’ Liberal senator David Johnston said in the Senate today.
Senator Johnston questioned the Prime Minster Julia Gillard’s decision to give Greg Medcraft, ‘‘a mate’’, the $700,000 year job as chairman of ASIC in violation of the government’s own merit-based public sector appointment process.
‘‘What on earth is going on here? The corporate regulator is run by someone who has a cloud over them. This kangaroo court of ASIC needs to confront a parliamentary inquiry.’’
The looming inquiry comes as ASIC has acknowledged that ‘‘unacceptable and unlawful conduct’’ had occurred inside the financial planning arm of the Commonwealth Bank.
But deputy chairman Peter Kell has defended the regulator’s delay in investigating the CBA matter as ‘‘how law enforcement works’’.
‘‘I can understand why any investigation, whether it takes 12 months or 12 days, is never going to seem fast enough for those suffering the stress of lost money. But CFP was a complex matter and cases like this involve much background work before a public result is achieved,’’ Mr Kell wrote in an opinion piece published by Fairfax Media on today.
The inquiry is likely to also investigate new financial reforms that will come into effect on July 1 known as the Future of Financial Advice.
Here’s a link to an opinion piece, also penned today, by former CBA financial planner turned whistleblower, Jeff Morris. ASIC Has Let Down CBA’s Victims: Whistleblower
Mr Morris, along with several other bank employees, alerted ASIC to allegations of serious misconduct within CBA in October 2008. Morris left the bank earlier this year and decided to go public to warn about the perils of being an ASIC whistleblower.
And, here’s a more detailed background story into the whole scandal: The Bank, the Whistleblowers, the Regulator and the Lost Savings