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Damning inquiry finds ASIC failed to prevent financial crime
SARAH FERGUSON, HOST: Adele Ferguson, welcome back to 7.30.
ADELE FERGUSON, ABC INVESTIGATIONS: Good to see you.
SARAH FERGUSON: Now, look, we have a report here that says that the regulator, ASIC (Australian Securities and Investments Commission), is reluctant or unwilling to start investigations. After everything we’ve been through with ASIC, how did we get to this point that this is what the report now finds?
ADELE FERGUSON: Well, that’s the big question. This has been going on for decades. We’ve had several of these investigations.
In 2014, we found that the regulator was so ineffective that it called for a royal commission into the Commonwealth Bank because ASIC was unable to do its job.
Fast forward to 2018, we have a royal commission. It’s scathing about ASIC. Nothing happens. Here we are in 2024 and here’s another report.
SARAH FERGUSON: So what’s at the heart of this? Are they not adequately funded, do they have no appetite to regulate the business community? What’s at the heart of the failures that this report found?
ADELE FERGUSON: It’s all of those things. Its remit is very broad. So over the years, because it’s been seen as ineffective, timid and slow, the Treasury has given it more and more things to look at – consumer law, banking, insurance – all of those things have been loaded onto this regulator.
Its budget has increased a little bit, but when you look at it in perspective, it takes in $1.8 billion a year. Its budget is about $500 million. It doesn’t have enough money and so it has a culture that is toxic. The staff are not properly motivated, according to a survey that was released recently, so there are a lot of problems with this regulator.
SARAH FERGUSON: What would be the purpose, as the report suggests, of splitting ASIC into two? What difference would it make?
ADELE FERGUSON: Right now, he’s doing two things. He’s looking at compliance of how companies in the market operate, and he also intends to be an enforcer.
It’s not doing its job as an enforcer properly. That’s one of the big problems with ASIC. So the suggestion is that if you split it into two and have a separate enforcement agency, then maybe it will do its job better.
SARAH FERGUSON: You used a very strong term earlier. You said that the culture within ASIC is toxic. So would the kind of solutions that are being called for in this report fix those internal culture problems, do you think?
ADELE FERGUSON: I think what needs to happen is you need to have a proper inquiry, the Senate inquiry can only do so much. You need to have experts actually looking at what a new-look regulator should look like, looking at whether the governance is right, whether the leadership is right.
Should governments choose the seats or should this be done in a different way?
So there are a lot of ways that need to be looked at that this report didn’t address that I think need to be done, but it’s very important that it’s done right.
SARAH FERGUSON: Now tell me about that, because one of the findings of the inquiry is that ASIC itself rarely operates with the severity permitted by its own mandate. Why is it so reluctant to use the powers it already has?
ADELE FERGUSON: Well, I think it comes down to culture. If you have a culture that is not to use the powers that you have, then you’re not going to use those powers and that’s been happening for decades. It’s not just a recent phenomenon.
During the royal commission, some of the horrible things that came out were that she was allowing companies to read draft press releases before they put them out, and Commissioner Hayne said that the regulated is dictating what the regulator says.
SARAH FERGUSON: Now, as we know, the Government has just received this report. They will take some time to consider it, but if you had a message for them about what they should focus on, what is the most important thing to do to transform ASIC, what would you, Adele Ferguson, say?
ADELE FERGUSON: I would say we need a proper enforcement agency. A lot of people have lost a lot of money over the years with companies that have done the wrong thing, and the regulator has been missing in action. So we really need to have a better regulator.
SARAH FERGUSON: Now, of course, as an investigator, you spent time with the individuals because, in the end, this is about ordinary Australians losing money because of the failure of this organisation. That’s right, isn’t it?
ADELE FERGUSON: Absolutely. There have been so many victims. I get emails every day from people who have been scammed by insurance companies, banks, franchise companies and the regulator. There is a common theme: where is the regulator?
SARAH FERGUSON: Adele Ferguson, it’s always a pleasure to have you in our studio, almost in our studio. Thank you for joining us.
ADELE FERGUSON: Thank you.