ASIC intends to publish a document by the end of the year that sets out factors that may be relevant in choosing enforcement remedies to recover compensation on behalf of aggrieved investors, Assistant Treasuer Bill Shorten has said.
Shorten made the remarks late last week in response to questions in the House of Representatives regarding the actions of the corporate regulator in investigating the collapses of Westpoint, Storm Financial and Trio Capital.
In May, Shorten was called on to answer questions regarding ASIC’s response to the collapses, including what total amount of investor money was lost in the collapses; what compensation actions did ASIC take against the parties; what criteria did ASIC use in choosing its actions; and what were the outcomes of the actions.
“One such remedy is to take action to recover damages or property on a person’s behalf, including as part of other court actions we take,” Shorten said.
“However, ASIC must form the view that it is in the public interest to commence such litigation.”
He said ASIC would take a number of factors into consideration when deciding whether it was in the public interest to take civil recovery action on behalf of an investor.
Among the factors under consideration are whether such action is considered viable; whether there is enough evidence to prove the civil recovery; and the extent of the impact or amount lost arising from the misconduct.
Other factors for ASIC to consider are the costs of commencing the civil action; the prospects of the action being successfully litigated by ASIC; and the availability of alternative forms of dispute resolution.
In response to questions about the actions ASIC had taken with Trio Capital, Shorten said the corporate regulator had focused on the conduct of directors and officers of Trio, the investment managers of the Astarra Strategic Fund (ASF) and ARP Growth Fund (ARP), and a number of other stakeholders.
“ASIC is also looking at the conduct of a number of financial advisers who advised their clients to invest in ASF. These investigations are continuing,” he said.
When Trio was placed into administration, the reported value of the AFS was around $125 million, he said.
“ASIC has not commenced any actions against any third parties for loss recovery purposes. As ASIC’s former chairman indicated to the Joint Standing Committee for Corporations and Financial Services on 24 November 2010, ASIC is unlikely to commence such an action in relation to ARP,” he said.
In regards to Storm, he said the corporate regulator’s investigations were ongoing.
In terms of Westpoint, the failed company had total capital invested at the time of its collapse in 2006 of about $388 million.
As a result of ASIC’s Westpoint actions, investors were expected to see a return of about $160 million to $170 million of the $388 million, Shorten said.
