The Australian Securities and Investments Commission was slammed for its slow pace and lack of transparency when dealing with rogue financial planners at the latest Senate Economics Legislation Committee meeting on Wednesday.
During the 90 minute session, ASIC chairman Greg Medcraft fielded a barrage of questions from Nationals Senator for New South Wales John Williams and Liberal Senator for NSW Bill Heffernan over the regulator’s handling of the Commonwealth Financial Planning case and the delay in banning former CFP senior adviser Ricky David Gillespie.
Medcraft was joined by ASIC deputy chair Peter Kell; commissioners John Price and Cathie Armour; and senior executives Chris Savundra, Warren Day and Greg Kirk.
Senator Williams asked Medcraft to explain why ASIC took three and a half years to permanently ban Gillespie in November last year, despite the fact investigations began in 2008.
Gillespie was one of seven CBA planners banned from the industry. He left the bank in June 2009 citing personal reasons and subsequently worked as a financial adviser at two firms before being banned by ASIC.
Kell said the Gillespie case was still ongoing.
Senator Williams also asked ASIC to explain the reasons behind why only a small number of selected cases were picked up by the Director of Public Prosecutions and why justice took so long to achieve.
“Surely ASIC can send information to the DPP and say here is something you should look at. Then let them make a decision to pursue criminal activity. Surely it’s just a simple email that can be flicked off the DPP,” he said.
Medcraft said that ASIC’s limited resources made it impossible to pursue every single case.
“I share your concerns about the time it takes to get criminal cases in front of the courts in Australia, which is sometimes three to five years. It’s quite amazing how long the process takes,” he said.
“I keep asking why this issue exists because we want a quick outcome to show the law works quickly and this is something we will revisit in the inquiry. I would like the system to be working in a far more streamlined and efficient way but there’s not an easy answer. I’m sympathetic to the fact that it takes three to five years to get in front of the courts but that is the contested nature of the system.”
Senator Williams also questioned whether it was ASIC’s role to pursue compensation for affected investors, citing the Storm case as an example of a long and expensive process which drained the regulator’s limited resources.
“I thought it was ASIC’s duty to enforce the law and ensure it is upheld, not to pursue settlements,” he queried.
Medcraft highlighted that ASIC had successfully retrieved $350 million in compensation on behalf of affected Storm clients but admitted that in the future, the class action industry could play a bigger role in seeking redress for investors.
“We have the power to pursue compensation action under the law which is certainly what we have done in relation to Storm,” he said. “In the future, in regard to compensation, the class action industry is quite effective in terms of pursuing compensation and maybe if we have a similar situation in the future we may allow the class action industry to pursue it.”
Medcraft said ASIC had established a dedicated team to examine each of the 270 Senate submissions and would seek to “identify opportunities to improve processes and do a better job”.
He acknowledged that many submissions were critical of ASIC and raised issues about the regulator’s preparedness to engage and consult with external parties.
“On that topic, I would like to say that engaging with those we regulate is crucial and one of ASIC’s critical tools we use to achieve our priorities,” Medcraft said, pointing out that ASIC conducted over 620 industry meetings last financial years.
“ASIC also reaches out to industry through the use of external advisory panels. In fact, we are involved with five panels. “
He listed them as the Australian Government Financial Literacy Board; Consumer Advisory Panel; ASIC External Advisory Panel; Markets Supervision Advisory Panel and the Registry and Licensing Business Advisory Panel.
