ASIC should focus more on becoming a feared regulator locking rogue directors and financial services executives up rather than thinking about media management, a key critic of the corporate regulator says.
In an interview with Professional Planner, Liberal Senator Andrew Bragg says he believes ASIC should spend more time taking people through the courts so that there is a clear consequence for those in breach of laws.
Bragg says the media – and not ASIC – that tends to get greater traction when it comes to ensuring whistleblower complaints and other issues get outcomes.
Exposes in the press, Bragg says, tended to draw people’s attention and sometimes embarrass regulatory authorities into moving on issues that he attributes to cultural issues within the corporate regulator.
“There’s a range of cultural and structural issues that the committee has canvassed over the past 18 months – they are very serious issues,” Bragg says.
“On reflection, the media has played a very important role in ensuring some things are done. It is not really the ideal situation. What we really want is a feared corporate regulator – one that is prepared to put people into the clink. I think until we have that we are going to have more of the same.”
He says he believes ASIC should be more prepared to take its chances in court using criminal provisions of the law as opposed to using civil penalties as much as it does, and it must also not be afraid of losing cases along the way.
“They’ve got to be prepared to use the criminal penalties they have in the statute book, that’s what they have got to do,” Bragg says.
“They overly rely on civil penalties and there is a succession of people who probably should be banned as company directors or financial services executives. There is a merry-go-round of people who should be banned or maybe jailed.
“A key part of being a feared cop is you have to be prepared to lose some and I don’t think they have been prepared to lose some so this has given rise to the bad culture we have.”
Bragg says that one of the problems may be the fact that ASIC is a large organisation which overstretched into too many areas, and he is reflecting on whether the existing structure is the best one for corporate regulation going forward as a part of his committee work.
Criticisms that ASIC still needs to do more to put people behind bars from Bragg follow the most recent round of Senate estimates during which ASIC revealed its progress on a range of investigations.
The corporate regulator told the most recent round of Senate estimates held on 15 February that its track record over the past quarter was that it began 80 investigations, charged 19 individuals with criminal offences and had gotten nine criminal convictions.
It managed to score $60 million in penalties as a result of civil enforcement actions, and it also hit two entities with infringement notices in relation greenwashing, a practice whereby an entity makes exaggerated claims about its environmental friendliness in order to maintain or get new investment.
A further issue Bragg has floated in recent times is his belief that there is a need for a new Financial Systems Inquiry to examine the financial ecosystem properly and determine whether it is fit for purpose in an era where new technologies are dominating the finance sector.
“I think we should have a systems inquiry where we can look at the emerging risks particularly in relation to the growth of compulsory super and how it’s impacting the economy,” Bragg says.
“I think we also need to look at where digital is going and the risk of mass disruption of the economy and financial system because of digital.”
Bragg says the federal government’s recent review of the Reserve Bank of Australia was weak as it did not deal with payments or digital issues to any great depth, and that an FSI is needed to explore these issues properly.
One of the hot button issues over the past year has been swirl of scandal that has surrounded the confidentiality breach on tax policy development that PwC and its former tax partner Peter Collins ended up being disciplined for by the Tax Practitioners Board.
That case study has brought a tsunami of scrutiny by politicians from all sides of the political spectrum on professional services firms, the ethical and professional standards of accounting bodies in particular, and what, if anything, needs to be done to strengthen the regulatory framework to minimise misconduct by professionals.
Bragg said that he hoped legislators involved in the current review processes reach a “sensible landing” with recommendations for change.
“We don’t want to destroy professional services, but we want to make sure the structures are modern and fit for purpose,’ Bragg says.
“I started my career at EY. I know what those places are like, and I think there is a need to modernise in response to this Collins business, but we need to make sure we don’t throw the baby out with the bathwater.”
