Jan 192017
 

drawing-sorry

Boo Hoo

In March 2016 I lodged a submission with the Senate Standing Economics References Committee which is inquiring into penalties for white collar crime in Australia. However, for reasons which remain a mystery (probably just an administrative stuff-up), my submission did not make it to the committee, and so is not published on the Inquiry’s website with the other 139 submissions appearing there (at 19 Jan 2017).

The 139 submissions are listed (and publicly available) on two web pages:

Although my submission didn’t contain any astonishing revelations or brilliant insights, a considerable amount of thought and work went into creating it, and the facts and ideas it contains are probably worth considering. Therefore, I’ve decided to publish most of the submission here, just for the record.(The Senate Committee is due to report by 28 February 2017.)

OFFENCES IN CORPORATE INSOLVENCY

The committee is looking at penalties for white-collar crime in general. The focus of my submission was the field of corporate insolvency and the penalties for white collar crimes committed by directors of insolvent companies. Continue reading »

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Dec 042015
 

The Senate Economics References Committee has criticised the contempt that some directors show for company laws, the “mild” consequences of non-compliance and the low likelihood that unlawful conduct will be detected.

In its report “Insolvency in the Australian construction industry: I just want to be paid” – published 3 December 2015 – the Senate Committee states:

The committee considers that the estimates of the incidence of illegal phoenix activity detailed in this report suggest that construction industry is being beset by a growing culture among some company directors of disregard for the corporations law. This view is reinforced by the anecdotal evidence received by the committee which indicates that phoenixing is considered by some in the industry as merely the way business is done in order to make a profit.

The committee is particularly concerned at evidence that a culture has developed in sections of the industry in which some company directors consider compliance with the corporations law to be optional, because the consequences of non-compliance are so mild and the likelihood that unlawful conduct will be detected is so low.

This culture is reflected in the number of external administrator reports indicating possible breaches of civil and criminal misconduct by company directors in the construction industry. Over three thousand possible cases of civil misconduct and nearly 250 possible criminal offences under the Corporations Act 2001 were reported in a single year in the construction industry. This is a matter for serious concern. It suggests an industry in which company directors’ contempt for the rule of law is becoming all too common.

[from Executive summary, Phoenixing (page xix) and paragraph 5.100 (page 87)]
Continue reading »

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Jun 192015
 

(19/6/2015) A lively public hearing before the Senate Committee looking into insolvency in the Australian construction industry has been told by several speakers that sub-contractors should be protected by requiring head contractors to place money in trust funds. The Committee also heard about debt collection methods, outlaw bikie gangs and new allegations concerning events leading up to the collapse of Walton Construction in October 2013.

Those appearing before the Committee on 12 June 2015 included Mr Dave Noonan, National Secretary of the Construction and General Division, Construction, Forestry, Mining and Energy Union (CFMEU), representatives of the Subcontractors Alliance, Project Resources, Masonry Contractors Association of NSW, EcoClassic Group Pty Ltd and Erincole Building Services Pty Ltd.

MORE TO COME: At the close of the day Senator Cameron said: “Chair, there might be other issues once we have a look at the Hansard. We might need to get some of this group back again further on. This inquiry is going to run for a bit of time yet, so we will need to have a look, see what you said and come back.”

The official Hansard transcript of the hearing on 12 June 2015 was recently published on the Parliament’s website. A PDF copy of the 56 page transcript may be downloaded from that site by clicking here.

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Senate Committee told about phoenix activity in construction industry

 Corporate Insolvency, Insolvency Law, Official Inquiries, Regulation, White collar crime  Comments Off on Senate Committee told about phoenix activity in construction industry
May 292015
 

Parliament website
The Senate Committee established to inquire into “Insolvency in the Australian construction industry” – which is code for illegal phoenix activity in the construction industry – has received written submissions from industry bodies, unions, contractors associations, superannuation funds, insolvency practitioners, the ATO and the ASIC. A total of 18 submissions were received and are available for download from the Parliament of Australia website. Below is a screenshot of the list of submissions.

Submissions to committee

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Mar 052015
 

A set of “policy positions” on insolvency law and practice has just been issued by Australia’s insolvency practitioners association – the Australian Restructuring Insolvency and Turnaround Association (ARITA).

The policies are titled:

  • Policy 15-01: ARITA Law Reform Objectives (Corporate)
  • Policy 15-02: Aims of insolvency law
  • Policy 15-03: Current Australian corporate restructuring, insolvency and turnaround regime and the need for change
  • Policy 15-04: Creation of a Restructuring Moratorium (Safe Harbour)
  • Policy 15-05: Stronger regulation of directors and creation of a director identification number
  • Policy 15-06: Advocate for Informal Restructuring
  • Policy 15-07: Reworked Schemes/Voluntary Administration regimes to aid in the rehabilitation of large enterprises in financial distress
  • Policy 15-08: Extension of moratorium to ipso facto clauses
  • Policy 15-09: Streamlined Liquidation for Micro Companies
  • Policy 15-10: Micro Restructuring
  • Policy 15-11: Pre-positioned sales

ARITA’s 17-page paper – named Policy Positions of the Australian Restructuring Insolvency and Turnaround Association – is the final version of its discussion paper, A Platform for Recovery 2014.  It is attached to its submission on 2 March 2015 to the Productivity Commission’s public inquiry into ” barriers to setting up, transferring and closing a business”.

It seems ARITA’s policy positions paper is not yet (mid-day 5/3/15) published as a separate document on ARITA’s website.  However, I have created a copy, which is available on my website now.

ARITA’S full 59-page submission to the Productivity Commission is available on its site, as is its useful summary of the key points made in the submission. ARITA says that the policies in the Policy Positions paper form the key basis of ARITA’s submission to the Productivity Commission.

 


Other link: To the website of the Productivity Commission’s  Business Set-up, Transfer and Closure inquiry.


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Sep 032014
 

The Australian Restructuring Insolvency and Turnaround Association (ARITA) has released its second-round submission (26/8/2014) to the government’s Financial System Inquiry (FSI). ARITA has more than 2,200 members practising in, or interested in, the insolvency and restructuring industry. It’s full 32 page submission can be seen HERE. The Executive Summary from the submission appears below:

ARITA submission Part 1

ARITA-exec-summary-part2

ARITA-exec-summary-part3

 

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Aug 292014
 

Background

In the brief External Administration section of its Interim Report in July 2014 the Financial Systems Inquiry (FSI) aired criticisms of Australia’s external administration regime as it applies to small and medium companies (SMEs), and sought views from interested parties. (See my previous blog on this subject.) Specifically it asked for views on “the costs, benefits and trade-offs of the following policy options or other alternatives: 1. No change to current arrangements. 2. Implement the 2012 proposals to reduce the complexity and cost of external administration for SMEs.” Also, the FSI sought more information in response to the question, “Is there evidence that Australia’s external administration regime causes otherwise viable businesses to fail and, if so, what could be done to address this?” The following is ASIC’s response to these questions, taken from it’s second submission to the FSI  on 26/8/2014:


ASIC logo

 Response by Australian Securities and Investments Commission (ASIC)

(Note: Headings added by author)

CLICK HERE to see copy of full ASIC second-round submission

The anticipated benefits of the 2012 insolvency law reform proposals

(Author’s note: These proposal are in the Insolvency Law Reform Bill 2013 )

Para.468     ASIC welcomes the anticipated benefits of the Australian Government’s 2012 insolvency law reform proposals, which largely aim to harmonise and align the systems of corporate and personal insolvency by introducing: (a) a streamlined model for winding up or restructuring small- and medium-sized enterprises; and (b) a review of current external administration options for restructuring large and complex, financially distressed companies to consider whether Australia could adopt attributes of external administration processes in other jurisdictions to achieve better outcomes.

Para.469     However, we note that these proposals do not fully address the issue of perceived complexity in Australia’s insolvency regime, or the issue of the costs of the regime. The law reform proposals arose out of the 2010 Senate inquiry into the conduct of insolvency practitioners and ASIC’s involvement. The 2010 Senate Inquiry’s terms of reference reflected concerns about registered liquidator conduct and ASIC’s supervision of registered liquidators, rather than more fundamental policy issues.

Para.470      The vast majority of external administrations occur in the small- and medium-sized enterprise market. For these companies, the opportunity exists to consider how the winding up and restructuring processes might be further streamlined to reduce complexity and costs. Initiatives to reduce costs while appropriately remunerating registered liquidators for their work, increasing competition and ensuring consistency in external administration processes would also help maximise the potential return to creditors and help build confidence in the insolvency regime.

Alternative funding models and professional standards

Para.471     ASIC suggests that in considering how the external administration process can be streamlined for small- and medium-sized enterprises, consideration should be given to: (a) alternative funding models, as discussed in ASIC’s main submission to this inquiry and which are the subject of recommendations made by the Senate inquiry into the performance of the Australian Securities and Investments Commission. The funding model affects, among other things, the supervision of registered liquidators and, potentially, their remuneration; and (b) professional standards and regulation, including those relating to investigation and reporting to creditors and to ASIC.

External administration regime and business failure

Para.472     ASIC is not aware of empirical evidence supporting the view that Australia’s external administration regime causes otherwise viable businesses to fail. If empirical evidence supporting the contention that viable companies unnecessarily enter external administration does exist, ASIC believes the Australian Government could consider legislative change that would address this, and that would achieve better outcomes for creditors.

Damage to entity value

Para.473     We are aware, however, of concerns in the market that unnecessary external administrations, which destroy entity value and result in significant cost, are the result of: (a) a lack of a ‘safe harbour’ from what are said to be stringent insolvent trading laws (which can make a director personally liable for a company’s debts); and (b) the positive obligation/duty on directors to appoint an external administrator if their company is insolvent, or might become insolvent.

Para.474     We acknowledge the possibility that the formal appointment of an external administrator can also reduce the value of a company’s business, and note that there is anecdotal evidence to support this view.

Voluntary administration as a ‘quasi liquidation’

Para.475     ASIC’s statistics on voluntary administration and deeds of company arrangement suggest that, for small companies, there is often not a viable business worth saving as many companies that enter voluntary administration end up in liquidation. This is supported by a recent review of 72 sample deeds of company arrangement (85% of which related to what might be described as small company insolvencies). The review found that 72% of these deeds were compromises akin to liquidation and involved no, or very limited, trading on of the business under the deed (although the dividend return paid to creditors was greater than that estimated if an immediate winding up of the company had occurred). In other words, the statistics show that companies often use the restructuring option of voluntary administration as a ‘quasi liquidation’.

Continuation of viable businesses

Para.476      The current insolvency legislation provides for the continuation of a viable business. Where there is a viable business of a company in liquidation, the liquidator has the ability to sell that business. Alternatively, the liquidator can appoint a voluntary administrator to facilitate the company’s restructuring with a view to its continued operation.

Reasons often cited as inhibiting corporate restructuring

Para.477     We note that four main reasons are often cited as inhibiting corporate restructuring in Australia: (a) the perceived stringency of our insolvent trading laws; (b) destruction of value by ipso facto clauses in contracts, which enable creditors to pursue enforcement action or enforce their contractual rights. This issue impacts on the extent of any moratorium on creditor claims during the period of a company’s restructuring; (c) a lack of formal ‘pre-pack sale’ regulation, which allows a sale of the business, or some company assets, to be negotiated prior to the appointment of an external administrator; and (d) the inability to bind third parties.

Para.478      In principle, we consider these matters worthy of further discussion and consultation noting they have proved contentious in the past.

US Chapter 11 style regime

Para.479     In terms of any legislative change, ASIC does not advocate a wholesale adoption of a US Chapter 11 style regime or other processes. However, we note that the US Chapter 11 regime, along with the administration regimes in the United Kingdom and Canada, might be worth examining to identify elements that could address the issues claimed to inhibit effective corporate restructuring in Australia.

Consider different laws for large and small companies

Para.480      We consider that a ‘one size fits all’ approach to the external administration or reorganisation of failed and distressed entities may not be appropriate. The framework for external administration needs to take account of the fact that issues affecting large proprietary and public companies differ from those affecting small- and medium-sized enterprises.

Para.481     Legislative changes to facilitate corporate rehabilitation might therefore consider the different characteristics of large and small companies, and policy settings may need to be specifically tailored for these sectors, in order to promote deregulation, facilitate efficient reallocation of resources and improve competition.


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Jul 172014
 

Is there evidence that Australia’s external administration regime causes otherwise viable businesses to fail and, if so, what could be done to address this?

This is the question being asked about external administrations in the Interim Report of the Financial System Inquiry (FSI) (July 2014). The FSI says it would value views on the costs, benefits and trade-offs of the following policy options or other alternatives:

  • No change to current arrangements.
  • Implement the 2012 proposals to reduce the complexity and cost of external administration for SMEs. [See below for details of these proposals.]

The brief section of the FSI’s report dealing with external administration may be viewed HERE.  (The full report in pdf format is available HERE.)

David Murray

David Murray, FSI chairman. Artwork from bluenotes.anz.com

US Chapter 11 regime?

Adoption by Australia of a US Chapter 11 style form of external administration could still be an option, although the FSI has already given it the thumbs down, as this extract from its interim report shows:

“The Inquiry considers adopting such a regime would be costly and could leave control in the hands of those who are often the cause of a company’s financial distress. Capital would be maintained in a business that is likely to fail, which would restrict or defer the capital from being channelled to more viable and productive enterprises. Adopting such a regime would also create more uncertainty for creditors by limiting their rights. The Inquiry notes that Chapter 11 has rarely enabled businesses to continue as going concerns in the long term. There is little empirical evidence that Australia’s voluntary administration process is causing otherwise viable businesses to fail. The Inquiry would like stakeholders to provide any empirical evidence that supports that view.”

Second round of submissions to FSI

Submissions in response to the Interim Report are due by 26 August 2014. Submissions can be lodged online using the Financial System Inquiry special facility,  or may be lodged by email or post: fsi@fsi.gov.au or Financial System Inquiry,  GPO Box 89,  Sydney NSW 2001.

Insolvency reform proposals of 2012

The 2012 insolvency reform proposals to which the FSI specifically refers in its request for second round submissions concern:

  1. Registration and discipline of insolvency practitioners (See note 1 at end of post for more information).
  2. Specific rules relating to external administrations (note 2).
  3. Regulator powers and miscellaneous amendments (note 3).

The Explanatory Material issued with the Insolvency Law Reform Bill  on 19 December 2012 can be viewed HERE.

“Thought leadership”

The Australian Restructuring Insolvency & Turnaround Association (ARITA) (previously known as the Insolvency Practitioners Association) says it has embarked on “a major project to drive thought leadership around our insolvency regime”.  It is asking insolvency practitioners who want to make a submission to FSI to work with the professional association:

“ARITA has embarked on a major project to drive thought leadership around our insolvency regime.  Along with some of ARITA’s excellent previous work, significant new work has already been completed and ARITA members will soon be asked for comment on key aspects of our policy positions. This work is, obviously, well timed to support the FSI request for submissions. ARITA will actively work to represent the views of its membership and the profession to the FSI. We would urge all members and their firms to work with ARITA on providing strong and consistent representation to the FSI. If you or your firm is looking at making its own submission, please let ARITA know so that we can collaborate with you.”  ARITA Press Release 15/7/2014



NOTES re Proposals in December 2012 Insolvency Reform Bill:

Note 1: Registration and discipline of insolvency practitioners

Common rules regarding:   the physical registers of insolvency practitioners;  registration and disciplinary Committees.

Note 2: Specific rules relating to external administrations

Common rules regarding: •

  • Remuneration and other benefits received by the insolvency  practitioner;
  • The handling of administration or estate funds;
  • The provision of information by insolvency practitioners during an external administration or bankruptcy;
  • The meetings of creditors during an external administration or bankruptcy;
  • Committee of inspection formed as part of an external administration or bankruptcy; and
  • The external review of the administration of an estate or insolvency.

Note 3, part (a): Regulator powers and miscellaneous amendments

Provide ASIC with further powers to assist it in its oversight of the regulation of registered liquidators. In particular, the Bill amends the ASIC Act to:

  • enable ASIC to require the provision of information and books as part of an ASIC proactive surveillance program;
  • enable ASIC to provide administration information to a person with a material interest in the information; and
  • improve the transparency of ASIC oversight of the corporate insolvency industry.

Note 3, part (b): Regulator powers and miscellaneous amendments

Amend the Bankruptcy Act to enable ITSA to provide information relevant to the administration of the corporate law to ASIC.

Note 3, part (c): Regulator powers and miscellaneous amendments

A range of miscellaneous amendments, including:

  • amending the Acts to strengthen the penalties for breach of a bankrupt’s or directors’ obligations to provide a report as to affairs (RATA), or the books of the company, to an insolvency practitioner;
  • amend the Corporations Act to provide a process for the automatic disqualification of directors that have failed to provide a RATA, or the books of the company, to a registered liquidator until they have complied with those obligations; and
  • amend the Acts to enable the assignment of an insolvency practitioner’s statutory rights of actions.

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Jun 272014
 

Recommendation 17 of the Senate Economics References Committee final report (26/6/2014) on the performance of the Australian Securities and Investments Commission (ASIC) is:

“… that  ASIC,  in  collaboration  with  the Australian  Restructuring  Insolvency  and  Turnaround  Association  and accounting  bodies,  develop  a  self-rating  system,  or  similar  mechanism,  for statutory  reports  lodged  by  insolvency  practitioners  and  auditors  under  the Corporations  Act  2001  to  assist  ASIC  identify  reports  that  require  the  most urgent attention and investigation.” (Page 244, para. 15.66)

Source: Final report of Senate Economics References Committee on Performance of the Australian Securities and Investments Commission, 26/6/2014 

Committee’s comments preceding this recommendation

Before making recommendation 17 the Senate Committee’s Report looks at “Reports from industry professionals”  including external administrators. It states as follows (note: I’ve removed its footnotes):

 

External administrators

15.55  The  Corporations  Act  also  places an obligation on liquidators, receivers and voluntary  administrators  (external  administrators)  to  report  suspected  breaches  of the  Corporations  Act  to  ASIC….

15.56  Reports  made  pursuant  to  these  sections  are  referred  to  as  statutory  reports and  are  an  important  source  of  information  about  possible  breaches  of  the  law….

15.57  Liquidators  also  have  the  discretion  to  lodge  further  reports  if,  in  their opinion, it is desirable to draw the matter to ASIC’s attention.

15.58  In 2012–13, external administrators lodged 9,788 reports with ASIC. Of this number,  initial  external  administrators  accounted  for  95  per  cent  or  9,254  reports. ASIC recorded  that 81 per cent of the initial reports  involved  companies with fewer than  20  employees.  The  construction  industry  was  subject  to  the  highest  number  of reports  accounting  for  just  over  24  per  cent.  Of  the  initial  external  administrators’ reports, receivers lodged one per cent under section 422; administrators lodged 3.8 per cent under section 438D; and 95 per cent of the reports were submitted by liquidators under section 533.

15.59  Importantly,  external  administrators  alleged  misconduct  in  more  than two-thirds of reports  (6,761)  involving an overall possible 16,562 breaches. Although this  number  accounts  for  an  average  of  between  two  and  three  breaches  per  report, almost  30  per  cent  of  reports  or  2,493  recorded  no  misconduct. ASIC  asked  the external administrator to prepare a supplementary section 422, section 438D or section 533  report  for  677  of  the  6,761  reports  that  identified  possible  misconduct. In its analysis of the statistics, ASIC explained  that its request for an additional report is  a  function  of  its  assessment  of  risk  based  on  a  number  of  factors,  including,  but not limited to:
*   the nature of the possible misconduct reported;
*   the amount of liabilities;
*   the deficiency suffered;
*   the availability of evidence;
*   prior misconduct; and
*   the advice of the external administrator that the reported possible misconduct warranted further investigation.

15.60  In  a 2007 report, the Australian National Audit Office (ANAO)  observed that given  the  large  number  of  statutory  reports  received  by  ASIC  each  year  that  allege offences  against  the  Corporations  Act,  it  was  appropriate  that  ASIC  had  systems  in place  to  prioritise  its  regulatory  action,  through  risk  scoring.  It  found  that  ASIC’s recording of statutory report information was accurate to  a high degree. The ANAO recognised  that  ASIC  could  use  a  wide  variety  of  possible  remedies  to  deal  with offences identified in statutory reports or other deficiencies that warranted some sort  of regulatory action. They ranged from warning letters to directors for the less serious offences  to  prosecution  and  potentially  imprisonment  for  more  serious  offences. It noted that where ASIC identified  that a statutory report raised  issues of regulatory significance,  it  sought  further  information  about  the  matter  from  the  external administrator.

15.61  According to  the ANAO  report, ASIC  did  not always obtain that additional information.  Based on its sample, it found that in 40 per cent of instances,  ASIC did not obtain additional information that it had requested. The ANAO concluded:

… the  small  number  of  statutory  reports  subject  to  regulatory  action  by ASIC  each  year  indicates  that  there  is  opportunity  for  greater  regulatory action on these reports.

15.62  Mr  David  Lombe,  President  of  the  Australian  Restructuring  Insolvency  and Turnaround Association  (ARITA)  was of the view that  ANAO’s  2007  findings  were still  relevant  and  applicable. He  noted  the  thousands  of  reports  lodged  with  ASIC each  year  but  not  acted  upon.  In  Mr  Lombe’s  view,  there  was  a  ‘general  perception within  the business community that, if you do certain things at a certain level, there will be no effective review’. He explained further:

“The difficulty that we have as official liquidators is that you get a matter off the  court  list  and  often  that  matter  has  no  funds  in  it,  so  there  are  no available assets. Often that is a process by which directors have deliberately done that—it has been a deliberate course of action. If you report the matter to ASIC and there is no assistance from that space, there is not much  you can do. If you felt really aggrieved by it or you felt that it was a matter that was  of  sufficient  importance,  you  may  be  able  to  persuade  a  firm  of solicitors to act on a pro bono basis, but that is very difficult. I found myself in  that  sort  of  situation  with  Babcock  &  Brown,  where  I  had  inadequate funds to be able to pursue a proper investigation. The only thing that was available to me was to ask creditors to fund me, which they did, which then allowed me to do a public examination, which brought out the conduct of directors and other stakeholders in that company. If you do not have funds in a matter, the courses are very limited.”

15.63  By  way  of  example,  Mr  Lombe  expanded  on  his  concerns  citing  the requirement  to  lodge  a  section  533  report,  which  deals  with  offences  committed  by directors.  He explained that for the liquidator to understand what has happened,  he or she  needs  to

  ‘review the books and records, determine the transactions, try to find out what assets are there, look at insolvent trading and look at preference payments and all those sorts of things’.

  The liquidator is  required to file that report,  which  takes  time. So, according to Mr Lombe,  the reports involve both  time and money, and often  with official liquidations there are no assets at all and, if there are, creditors are effectively paying for the report.  He noted that thousands of  such reports  are lodged  with ASIC but  most  of  them  come  back  ‘no  further  action’.  In  his  view,  it  is  frustrating  for liquidators because they feel, ‘Why am I bothering to do it?’ Mr Lombe concluded that ‘you  can  understand  someone’s  frustration,  where  they  have  reported  offences  and nothing happens’.

15.64  When asked whether liquidators, in their  statutory  reports,  could assist ASIC to  distinguish  the  very  serious  breaches  from  the  less  so,  ARITA  indicated  that  it ‘might be a useful reform’. After considering the matter further, ARITA informed the committee that if it were consulted, it could assist ASIC to determine a risk scoring profile. It explained further, however:

“But we consider that the decision on how the information required by s533 is ‘risk-scored’ for action is ultimately one for the regulator and its decision and  methods  should  not  be  publicly  disclosed.  For  one  thing,  this  would appear to give the  ‘green light’ to the  commission of certain offences that are deemed not serious enough to warrant action by ASIC.”

15.65  ARITA  also  stated  that  ‘a  more  co-operative  approach  between  ASIC  and liquidators  should  also  be  pursued’.  The  committee  believes  that  ASIC  and  ARITA should  work  closely  together  to  develop  a  more  effective  and  efficient  reporting mechanism that would assist ASIC to identify the alleged  serious  breaches from the less so.”


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Interim report issued by Senate Committee inquiring into ASIC’s performance

 ASIC, Australian Senate 2013-14, Corporate Insolvency, Official Inquiries, Regulation  Comments Off on Interim report issued by Senate Committee inquiring into ASIC’s performance
May 292014
 

The Senate Economics References Committee has tabled a short interim report outlining its reasons for seeking an extension of time to present its final report on its inquiry into the performance of the Australian Securities and Investments Commission. The Committee was due to report by 30 May 2014 but has asked for an extension to 26 June 2014. In its interim report the Committee says, amongst other things:

“This is an important inquiry. The size and growth of Australia’s financial sector and the fact that millions of Australians are involved in it, not least because of compulsory superannuation, makes it essential that modern and adaptable regulations are in place and regulators such as ASIC are at the top of their game…. Many of the people who wrote to the committee recounted their experiences of receiving bad financial advice, of unknowingly being placed in high-risk investments, of having documents forged and signatures used improperly. They referred to serious financial losses and difficulties in having their complaints addressed. In their view, the regulatory framework and the regulator had failed to protect their interests…. The committee was well advanced in preparing its report, when on 16 May 2014, ASIC and the CBA advised the committee that there were inconsistences in the way in which the compensation arrangements for CFP clients had been applied. This revelation suggested that, for some time, the CBA had not kept either the committee or ASIC fully informed about the compensation process for clients affected by serious misconduct within CBA’s businesses (see attachments)…. The latest information that ASIC and the CBA provided to the committee in order to correct the record was sketchy and left many key questions unanswered…. Concerned that it may still not have a correct understanding of what has happened, the committee has sought additional information and clarification from both ASIC and the bank on this matter of central importance to the committee’s inquiry and report.”

Sources and links

Email of 28 May 2014 from Committee to all submitters and witnesses.

Copy of the interim report in pdf format.

Committee webpage with full details of its inquiry into ASIC


 

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