ASIC calls for greater penalties and stands up for its staff

 ASIC, Australian Senate 2013-14, Corporate Insolvency, Official Inquiries, Regulation, White collar crime  Comments Off on ASIC calls for greater penalties and stands up for its staff
Feb 192014
 

In today’s opening statement to the Senate inquiry into the performance of the Australian Securities and Investments Commission (ASIC), the Chairman of ASIC, Mr Greg Metcalf, has called for greater penalties for breaches of corporate law and has strongly defended ASIC staff.

Greg Metcalf

Greg Metcalf, ASIC Chairman

On Penalties

“On the topic of penalties, I would like to say a little more.

There is an expectation among the public that we will take strong action against wrongdoers – and doing this will send a message that shapes future behaviour. However, one of the barriers we face to achieving this is the inadequacy of penalties.

We have outlined some of these inadequacies in our main submission. They include the fact that:

  • some comparable criminal offences currently attract inconsistent penalties
  • civil penalties:
    • are currently set too low
    • are not available for a sufficiently wide range of misconduct
  • lastly, we require a more graduated set of penalties to provide an effective enforcement response in a wider range of cases.

We consider that this includes the greater availability of infringement notice powers.

It is frustrating – both for us and the public – when the penalty available to respond to misconduct is much less than the profit someone made in the process.  If this is so, then rational players in the market will routinely take that risk.  If the thinking of law-breakers is a tussle between fear versus greed, then we need penalties that amplify the fear and smother the greed.

We need penalties that create a fear that overcomes any desire to take risks and break the law.”;

On ASIC staff

“Chairman, one disappointing thing about some of the submissions was the inflammatory tone of criticisms made – particularly about ASIC staff.

ASIC has exceptional employees. They are men and women who work at ASIC for good reason. This is because they believe in the public interest. They are skilled and committed to their work. Considering the difficult job they do, they should receive appropriate respect.

Our people have diverse backgrounds – they have experience in law, accounting and financial services. Many have invaluable industry or consumer advocacy experience. This means they understand how markets work and the issues facing investors, consumers and the wider industry.

ASIC employees also undertake ongoing internal training and have access to industry secondment programs, which further develop their skills.

All of these things make our people highly sought after by the private sector and internationally by other regulators.”

ASIC logo
 SOURCE: These are extracts from an ASIC document dated 19 February published on the ASIC website.  The subtitle is “Speaking notes from Greg Metcalf, Chairman, ASIC”.  To see CLICK HERE.

Most reports of director misconduct are shelved

 ASIC, Insolvency Laws, Offences, Regulation, White collar crime  Comments Off on Most reports of director misconduct are shelved
Nov 042010
 

89% of the initial offence referral reports sent to Australia’s corporate regulator by liquidators and other external administrators end up consigned to oblivion.  Of the remaining 11%, approximately 66% receive a similar fate.

This data is revealed in the latest annual report by the Australian Securities and Investments Commission (ASIC), tabled in Parliament on 28 October 2010. 

Unfortunately ASIC’s annual report does not offer any explanation for the result, which is that the vast majority of offence allegations are dropped or rejected.

It would be instructive to know, for example, whether a lot of statutory reports of “misconduct and suspicious activity” are badly prepared, inadequate or unjustified; and/or whether ASIC regards a lot of the alleged misconduct and offences as minor or trivial.

The official ASIC analysis chart – “Statutory reports 2009-10” – is shown below, after my own description of what the chart means.  (This is my second post on this subject.)

What the ASIC chart means 

In the 2009/10 financial year ASIC received 9,074 reports from liquidators, administrators and receivers (external administrators).  Of these 6,509 (71.7%) contained allegations of “misconduct or suspicious activity”.

Normally ASIC does not act upon an external administrator’s allegations of misconduct or suspicious activity unless the allegations are supported by a detailed report by the external administrator.

ASIC refers to this detailed report as a supplementary report, since typically it supplements or expands upon an initial report by the external administrator.

Usually a supplementary report is put together at the request of ASIC.

In 2009/10 ASIC received 5,748 initial reports alleging misconduct or suspicious activity.  Presumably all of these were “analysed and assessed”.  Out of these 5,748 reports ASIC selected 11% (632) as worthy of further attention by way of a supplementary report. 

The end result for the other 89% of initial reports (5,116) was to be “recorded”.  This probably means that nothing worth mentioning was done about them.

The same fate befell 66% of the 761 supplementary reports alleging misconduct or suspicious activity.  Of the other 34%, ASIC referred 23% (175) “for compliance, investigation or surveillance” and referred 10% (76) “to assist existing investigation or surveillance”.  ASIC concluded that 1% of the reports (8) did not actually identify offences.

There is no data in the chart on how many reports by external administrators led to prosecutions for offences.

_________________________________________________________________

The ASIC chart

ASIC’s notes to chart

“Initial reports are electronic reports lodged under Schedule B of Regulatory Guide 16.  Generally, ASIC will determine whether to request a supplementary report on the basis of the initial report.  Supplementary reports are typically detailed free-format reports, which detail the results of the external administrator’s inquiries and the evidence to support the alleged offences.  Generally, ASIC can determine whether to commence a formal investigation on the basis of a supplementary report. “

 ASIC ‘s official summary

“Liquidators, administrators and receivers (external administrators) are required to report to ASIC if they suspect that company officers have been guilty of an offence or, in the case of liquidators, if the return to unsecured creditors may be less than 50 cents in the dollar. As part of our response to the GFC (Global Financial Crisis), ASIC committed to increasing action on reports alleging misconduct from insolvency practitioners, following a 25% increase in insolvency appointments in 2008-09.  This year, a significantly increased proportion of supplementary reports (33% compared with 24% in 2008-09) were referred for compliance, investigation or surveillance.  Fewer reports failed to identify any offence.”

——————————————————————————————————————

The comments and materials contained on this blog are for general information purposes only and are subject to the disclaimer.