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business reporter Daniel Ziffer

Economist alleges corporate watchdog ASIC is only investigating tiny proportion of complaints

In 2014, the boss of the nation's corporate watchdog said Australia was a "paradise" for white collar crime, due to weak penalties. 

Economist John Adams's analysis of investigations by the Australian Securities and Investments Commission (ASIC) suggests things may have worsened.

He alleges that fewer than 1 per cent of complaints are going on to be investigated.

"The impact is that potential predators in the market have more confidence to actually engage in illegal activity," said the former advisor to former Liberal senator Arthur Sinodinos. 

"Because obviously the view would be: 'Well, the chances of getting investigated by ASIC is less than 1 per cent'.

"But, also, the chance of ASIC actually [being] successful in bringing that investigation to trial and [getting] a conviction — the bar for that is even higher."

Mr Adams, of Adams Economics, based his research on a decade's worth of ASIC annual reports and publicly available information.

He alleges the ratio of investigations compared to allegations of misconduct is falling:

  • Almost 2 per cent of allegations in the 2014-15 financial year resulted in an official investigation
  • Only 0.7 per cent of allegations in the 2020-21 financial year resulted in an official investigation
  • On average, since July 2015, 91 per cent of disclosures by corporate whistleblowers resulted in no further action.

Mr Adams alleges that this ratio — of complaints made to investigations commencing — leads to a dim conclusion.

"So, yeah, if you're a white collar criminal in this country, you would feel fairly confident of actually being able to engage in white collar crime," he said. 

Mr Adams began his assessment after putting together a 600-page complaint about a financial matter.

The complaint is under investigation by the regulator.

ASIC response

The agency said 35 per cent of complaints were referred for action, resolved or beyond its jurisdiction.

In 65 per cent of cases, it said, complaints were analysed and no further action was taken.

An ASIC spokesman said Mr Adams has made several claims concerning ASIC to federal parliamentarians and media outlets.

“Two senior executives of ASIC agreed to meet Mr Adams [in early September] and hear his views about his ‘report’," the spokesman said in a statement.

“Every year, ASIC receives more than 10,000 separate reports of misconduct and possible breaches.

"Every single report is examined and assessed — some for further examination, some for consideration by a more appropriate agency, or not warranting further action, and others referred for follow-up investigation.

“These outcomes, year by year, are publicly available on our website and published in our Annual Report.”

The agency's most recent annual report, listed that 15 per cent of misconduct reports were referred for action. It noted that 65 per cent were analysed and assess for "no further action".

Mr Adams suggests the difference in the figures occurs because ASIC is referring only to reports from members of the public.

His research included breach reports from auditors and financial licence holders, as well as notifications from liquidators. 

Allegations of deceptive conduct

Legal counsel for the Australasian Centre for Corporate Responsibility (ACCR) James Fitzgerald said that, without adequate regulation, public trust was eroded.  

"The report … suggests that Australian companies are far from adequately regulated, leaving shareholders exposed to unacceptable risks and tarnishing Australia's reputation as a safe and transparent investment destination," he said. 

ACCR is a not-for-profit organisation that advocates for shareholders. Last year it commenced proceedings in the Federal Court of Australia, alleging misleading and deceptive conduct by Santos Ltd of "greenwashing" its clean energy credentials. 

Those proceedings are ongoing.

"ACCR's decision to commence the court proceedings itself, rather than to refer the matter to ASIC, was in part informed by ASIC's anaemic performance record to date," Mr Fitzgerald said.

Senators' support

Senators from both major political parties back Mr Adams' contentions — and his push for an inquiry into how ASIC deals with investigations.

Liberal senator Andrew Bragg says he has long had concerns about the culture inside ASIC.

"ASIC is not focused on law enforcement and prosecution," Senator Bragg says.

"It appears ASIC does not investigate enough complaints, or undertake enough law enforcement. There should be a proper review into these matters as more changes are clearly needed."

Senator Bragg was recently appointed chair of the Senate Economics References Committee. He says the committee could "do the job" of examining how ASIC deals with complaints and referrals.

"I will take steps to investigate the feasibility of this step," he says.

Meanwhile, Labor senator Louise Pratt also supports the push, having previously supported a Senate inquiry into a failed property scheme with the umbrella title of Sterling Income Trust

"This report exposes ASIC's failings in following up the growing number complaints it receives about corporate and financial misconduct," she said.

"We should expect better from our Australia's corporate regulator".

Senator Pratt said as a member of the parliamentary committee that has oversight of regulator, the data sounded "alarm bells".

"These issues keep me awake at night as I have seen too many constituents fall victim to corporate misconduct with devastating consequences," she said.

Busy schedule

ASIC regulates the 'conduct' of local businesses and has had a busy few years.

At the banking royal commission it was spanked for its reluctance to take big banks to court, relying on negotiated deals called "enforceable undertakings" that compensated customers but often did not include an admission of guilt.

There were gruelling and, at times, embarrassing appearances in the witness box when examples showed the regulator to be cowed by large institutions.

In some circumstances, it even asked companies to approve text for press releases the watchdog was going to send out … about what the company had done wrong.

Then chair James Shipton and his deputy Daniel Crennan changed tack on ASIC's reluctance to go to court, assuring the public its approach at the end of an investigation had changed to: "Why not litigate?".

Then both left their jobs in a messy investigation about expenses and ASIC dumped the "Why not litigate?" stance after the government emphasised an expectation the regulator would be more supportive as the nation's economy was focused on recovering from the impact of COVID-19.

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