The Australian Securities and Investments Commission has called for more powers, including a broadening of the definition of “whistleblower”, in a paper defending its role as the corporate watchdog.
ASIC’s final submission to the Senate inquiry investigating its performance responds to criticisms raised in many of the 214 submissions so far submitted to the inquiry.
The criticisms have included that ASIC did not take action to head off issues related to “low doc” loans, popular before the global financial crisis; that it does not adequately respond to consumers; that it is captive to industry, and is not being held accountable.
Macquarie University corporate governance lecturer Michael Quilter called ASIC’s third and 200-page long submission to the inquiry the “biggest regulator CV ever”.
“The problem for ASIC is in part a perception issue - as the character of its prosecutions stand, it puts lots of resources into basically punishing a few individuals, and pretty light punishment at that. There is an imbalance between resource allocation and outcome effect. This is what plays in the media and conditions negative responses to ASIC.”
In its submission, the regulator wrote it was proud of its performance track record, citing the performance of the financial system during the global financial crisis, and Australia’s reputation for safe, stable and well-regulated financial markets.
But in order for it to improve its effectiveness, ASIC suggested changes to training and compliance requirements in the financial services industry, the expansion of the definition of whistleblower in the Corporations Act, a review of criminal and civil penalties, and a higher bar to entry for businesses and individuals seeking a financial services or credit license.
The definition of a “whistleblower” should be expanded to include a company’s former employees, financial services providers, accountants and auditors, unpaid workers and business partners, according to ASIC, which argued current corporate whistleblower protections in the Corporations Act were out of step with commonly held expectations about their scope and coverage.
However AJ Brown, Professor of Public Policy and Law at Griffith University’s Centre for Governance and Public Policy, said the whistleblower protections suggested by ASIC were “seriously defective” and a “pale shadow” of what was needed for whistleblower protection measures applying to the corporate sector.
Professor Brown said a review into whistleblower provisions kicked off by the then Attorney General Robert McClelland in 2009 had never been concluded, but even that review covered a greater list of issues than ASIC’s current suggestions.
“It fails to deal with policy confusion that we think exists at a Commonwealth level as to what the scope of the wrongdoing is that whistleblowers would be able to report and get protection for,” Professor Brown said.
“It’s still totally unclear what breaches of the Corporations Act or matters within ASIC’s jurisdiction might mean in terms of the type of actual wrongdoing that could be disclosed.”
Professor Brown said whistleblower protections also needed to be expanded to protect people who blew the whistle anonymously.
The regulator wants financial advisers to have to pass a new national exam before being able to give advice, as well as new powers to deal with “bad apple” advisers via mandatory reference checking.
ASIC has also called for a review of criminal and civil penalties, which it said had not been done for over a decade, with penalties often failing to meet community expectations. It has also asked for a general power to issue search warrants, and argued its current powers were leading to inefficiencies and delays.
Mr Quilter said the Corporations Act needed to start treating the greed in the corporate world as seriously as greed or crime generally.
“For instance a prominent director, who is convicted of breaching the criminal penalty provisions of the Corporations Act may serve only a couple of years in prison. However the outcome of their conduct is not simply a break and enter into one home but more like a break and enter into thousands, for which the penalty seems weak.”
He added that ASIC should have sought reviews of penalties sooner.