The Australian Securities and Investments Commission (ASIC) needs a new structure, a parliamentary inquiry is expected to announce this week, with the inquiry's chair recently describing the organisation's culture as "very sick" and that its record on enforcement had made Australia, for some, "a haven for white-collar crime".
On Wednesday the inquiry, chaired by Liberal senator Andrew Bragg, is tipped to release a brutal report into the performance of the corporate regulator and recommend structural reforms to beef up law enforcement, complaints handling and culture as well as look at the size and breadth of its responsibilities.
The inquiry began in October 2022 and set out to investigate why ASIC, as a law enforcement agency, has so many critics in relation to its effectiveness in enforcing Australia's corporate law.
Over 20 months the inquiry has heard concerns that ASIC has cultural problems, is slow to act on tip-offs and most importantly raised questions about the relatively small number of investigations referred to the Commonwealth Director of Public Prosecutions (CDPP).
It prompted Bragg to make the comment in February that there were too few criminal convictions achieved for breaches of corporate law. "For some people, Australia is a haven for white-collar criminals," he noted.
A similar point was made in 2014 by Greg Medcraft when he was the chair of ASIC. Back then his comments created a stir among the Abbott Coalition government, which tried to argue that ASIC was a tough cop on the beat.
A decade on, criticism continues to dog the regulator.
Bragg has made no secret that he thinks ASIC is failing to do its job, and has claimed previous parliamentary inquiries into its effectiveness didn't go far enough.
In February Bragg said: "The biggest takeaway is very clearly that the structure [of ASIC] is way too big and the culture is very sick."
The latest figures show that in the year to June 2023, ASIC made 35 referrals to the CDPP and in the year to May 2024 it made 12 referrals. Of these four were made in the past six months. This is in contrast to 86 referrals in 2019.
"These figures signal that ASIC has made Australia a haven for white-collar crime. ASIC has given up on their sole obligation to enforce corporate law," Bragg has said.
Numerous submissions, devastating cases
The current inquiry has been a boil ASIC can't wait to lance.
The regulator has responded to hundreds of questions on notice, lodged numerous submissions in its defence and spent hours preparing for appearances and committee meetings.
The inquiry has aired some devastating cases such as ASIC's handling of Nuix, one of Australia's most disastrous share market floats in years, and the collapse of Dixon Advisory.
ASIC chairman Joe Longo's mantra has been that the regulator is doing just fine and when it comes to its culture, there are "great aspects", even though a survey in 2023 showed issues with motivation, satisfaction, role clarity and a poor score in areas such as customer service focus.
The brutal reality is ASIC's perception of success has rarely matched that of the public's.
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Controversial recommendations are expected
There is no doubt the inquiry's final report, spearheaded by Bragg, will be controversial. Even in his own ranks of the Liberal Party, not everyone sees it the way Bragg does. Senator Paul Scarr, who has made various comments in support of ASIC and the job it is doing, is one.
It is yet to be determined whether there will be any dissenting reports.
However, it is widely anticipated the report will look at ASIC's architecture, with a view to making its roles and responsibilities clearer. The report is also expected to address law enforcement and how to improve complaints handling as well as consider how to provide better protection for whistleblowers and how to incentivise them.
ASIC's handling of whistleblowers has been a blight on the regulator as far back as the Commonwealth Bank financial planning scandal and its whistleblower Jeff Morris, who gave information to ASIC about serious misconduct inside the bank's financial planning unit, but the regulator failed to act for 16 months. It showed little improvement in the more recent Nuix whistleblower tip-off fiasco.
The inquiry is also expected to consider how best to incentivise ASIC to enforce the law to protect consumers and pursue civil actions.
Under the current arrangement, revenue raised from penalties goes straight to the Commonwealth.
To put that into perspective, ASIC raised $1.8 billion in 2023 from penalties, annual company registration fees and company searches, all which went to the Commonwealth.
In return, ASIC received a budget of less than $500 million, to help fund the wages of the almost 2,000 staff and other expenses including legal actions. (It's budget was increased in May by $236 million over four years and an extra $69 million in 2024-25 but most of it is for one-off projects such as fighting scams, cyber security, promoting sustainable finance markets and modernising digital assets and payments regulation.
It is still a far cry from the $1.8 billion golden egg ASIC lays each year for the government each year, making our regulator a cash cow.
With its IT systems in dire need of an upgrade and an ever-broadening remit, something has to give.
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Recommendations will be hard-hitting and radical
Australia's army of financial advisers, some of them small businesses, have pinned a lot of hope on the inquiry's report.
They pay a levy to ASIC, which they argue is creating a financial burden on their businesses, which they have to pass on to consumers.
They are also required to pay a levy to help fund the Compensation Scheme of Last Resort (CSLR) — a scheme overseen by ASIC and set up after the royal commission into banking as a means of protecting the so-called forgotten people who fall through the regulatory, legal and external dispute resolution cracks through no fault of their own.
Bragg dropped more than a hint about his recommendations regarding these levies in a recent social media post:
"As chair of the Senate Economics Committee, I understand financial advisers are under huge pressure. Next week, I will be addressing some of the pain points with ASIC levies in the final report of the Senate Economics Committee inquiry into ASIC investigation and enforcement … I thank all the advisers who have contacted my office with your concerns. I understand them and we are working on it."
The final report promises to be hard-hitting and some of its recommendations radical. It is also likely to get caught up in politics. The government has looked at the Reserve Bank and Productivity Commission.
The findings of the parliamentary inquiry will make clear that ASIC should be next.
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