In its final report, handed down on Wednesday evening, the Senate economics references committee wrapped up almost two years of work with a recommendation that the Australian Securities and Investments Commission (ASIC) be separated into two distinct entities – a companies regulator and a separate financial conduct authority.
Handing down 11 recommendations, committee chair Senator Andrew Bragg said it is “clear ASIC has failed”.
“Chief among the recommendations is the separation of ASIC into two separate bodies; one focused on companies and the other on financial services enforcement. ASIC conceded during the inquiry that its ‘very wide remit’ impacts its approach to regulatory activity,” Bragg said.
“Separating this broad remit into two individual bodies will provide a more coherent and consistent approach to corporate regulation and law enforcement.”
Indeed, this recommendation was high on the priority list, though it was not at the very top – that spot was reserved for a call on the government to “recognise that the Australian Securities and Investments Commission has comprehensively failed to fulfil its regulatory remit”.
While these first two recommendations were the subject of pushback from other members of the committee, Bragg insisted that all of the other recommendations flow from them.
“This report and, indeed, the whole inquiry process have shown that ASIC is not a capable regulator,” he said in the committee’s report.
“From the opening days of this inquiry, when the committee was inundated with numerous stories of Australians who had lost their life savings, the family home, or their dignity to shady investment schemes and corporate criminals, to ASIC’s continuing attempts to evade this committee’s scrutiny, to the high levels of evidence the committee has received detailing ASIC’s shortcomings, the committee is left with little option other than making the recommendations below.
“The value of a robust system of corporate regulation is significant in that it fosters economic productivity and market integrity. The overburdening of ASIC with its excessive remit is one of the principal issues facing Australia’s system of corporate regulation.”
In a statement, an ASIC spokesperson said it would “take time to consider the report”.
“Throughout the inquiry, we have shared our strong enforcement record on behalf of Australian consumers and investors. ASIC is in court almost every day pursuing wrongdoing and, in the last 12 months alone, launched around 180 new investigations,” the spokesperson said.
“We note the release of the chair’s report, dissenting commentary from the deputy chair, and the Treasurer’s comments about it this week. ASIC will take time to consider the report.
“ASIC is already working with Treasury to act on the recommendations from the Financial Regulator Assessment Authority’s review of ASIC’s effectiveness.”
Criticism of the report
The government senators made their own set of comments, which deputy chair Jess Walsh and Senator Deborah O’Neill noted do not constitute a dissenting report. In these comments, they opined that recommendation 1 reduces the “significant evidence provided to the inquiry in a complex area of regulation over the past almost two years to little more than a headline”.
“The simplification of these complex issues detracts from the practical improvements to ASIC’s operation suggested by witnesses, and indeed by ASIC itself, throughout the inquiry,” the senators said.
“So, too, does the call in recommendation 2 to separate ASIC’s functions into ‘a companies regulator and a separate financial conduct authority’.”
However, the senators did note that while some evidence presented to the committee supported the regulator’s broad remit, other evidence suggested ASIC is “spread too thin”.
They also criticised the amount of time they had to review the report, saying the government senators received it just 24 hours before it was tabled. However, they agreed that “there remains opportunity for improvement in ASIC’s operations and this is why we have chosen to write additional comments rather than a dissenting report”.
Ahead of the report’s release, speaking on ABC Radio, Treasurer Jim Chalmers said he was concerned because Bragg had a tendency to adopt a “heavily partisan and heavily personal” approach, rather than making a “genuine effort” to get to the bottom of an issue.
“It’s always about him and not about ASIC or the economy or the regulator,” said Chalmers.
“I think people have seen I’ve got a willingness to renovate and modernise our regulators to make sure they’re the best versions of themselves. We’ll see what the committee report says later in the week.”
In a statement following the release of the report, Walsh reiterated her criticism of the recommendations, saying they have “overshot the mark and completely missed an opportunity for bipartisan support”.
“There is room for improvement at ASIC, so it’s a shame sensible reforms that could be implemented immediately have been overlooked,” Walsh said.
“The inquiry received useful evidence and suggestions from stakeholders that could have been a genuine opportunity to improve ASIC. Unfortunately, these have largely been ignored in the chair’s report, favouring a headline grab instead.”
