ASIC before the Senate – no more scalps, goodness will prevail; complaints in the “thousands”; and the ASIC database

Senate questioning of ASIC does provide some useful information at times.

In the inquiry into ASIC’s 2015 annual report by House of Representatives Standing Committee on Economics, on 14 October 2016, issues came up about:

  • ASIC’s enforcement focus on getting “scalps”;
  • its new behavioural economic focus on “what ‘good’ looks like” in the sectors it regulates;
  • the “thousands of reports from liquidators and auditors”; and
  • the ASIC registry tender, about which ASIC could, understandably, say nothing while a decision by the government is pending.   

“Scalps”, or “what good looks like”

A question was asked by the Senate Committee about the tendency of “Australian regulators”, or perhaps of ASIC, “to manage their success in enforcement using proxies for ‘scalps’” noting that ASIC’s 2015 annual report (the 2016 one is due out imminently), contained “lists of civil actions, prosecutions, fines and undertakings and so on”.

ASIC was asked whether anything in its “legislation or instructions from government” forced it “to report in that sort of way …. ?”

The response from ASICwas that in light of the government’s focus on enhanced performance reporting by regulators, ASIC’s 2016 annual report will show a different approach taken.  In “changing the narrative”, rather than talking about ‘scalps’, and in obvious deference to ASIC’s new found application of principles of behavioural economics – including the “nudge” concept – ASIC said it is now giving a more positive message:

‘Here is what “good” looks like, here is where “good” is being achieved and here is how people are falling short of what “good” looks like’.

Indeed ASIC’s first new look bulletin to liquidators contained two bright shiny apples.red-green-apple

 

Liquidators are ‘good’ if they: 

  • direct actions to ensuring cost-effective, timely and appropriate outcomes for creditors
  • act independently and competently, and
  • perform their role in accordance with proper standards of professional conduct.

Misconduct reports

As to complaints made to ASIC, or “reports of alleged misconduct”, ASIC gets upwards of 10,000 a year; on top of that, ASIC receives “thousands” of reports from liquidators and auditors, some of it including conduct for which ASIC is not responsible.  As I have explained, that is what the Corporations Act requires.

Financial services issues comprise roughly 35 to 40% of these reports, corporate governance and insolvency type matters are in a similar range; with the remainder being about the markets generally. 

ASIC registry tender, and UK Companies House

As to the ASIC registry competitive tender, the final bid closed on 29 August 2016. While ASIC said it knew the final bidders, it could not reveal them given there was a commercial tender process in train.  The broad proposal is that the government will retain any ownership of the data, with the successful tenderer managing that data. It would comprise all of the data in the corporate registry – the details of companies, their directors, their addresses and public filings; and in the business names register.  ASIC politely referred further questions from the Committee to the Department of Finance.

In the meantime, the UK’s Companies House has just released one of its regular surveys on the quality of its official statistics, “to enable users to judge whether or not the data are of sufficient quality for their intended use”. It notes that “Companies House’s statistics are available free of charge to the end user on the Companies House website”.

Other topics

Some other issues raised by the Senate Committee included audits of small business entities and individual professionals, including a particular focus on unlawful phoenix company activity, “of which small business tends to be the victim, and, in some cases, the perpetrators”; ASIC’s claimed “bullying culture”, referring to an AAT decision concerning an ASIC staff member, now on appeal to the Federal Court; ASIC budget cuts, as well as the 200 extra staff ASIC will recruit from promised additional funding; and of course, life insurance and banks.

2016 Annual Report

This report is imminent. It will be reported under the Public Governance, Performance and Accountability Act 2013. The PGPA Act establishes a performance reporting framework for all Commonwealth entities and companies.  Section 46 sets out the annual reporting requirements in relation to Commonwealth entities, including ASIC; s 97 applies to Commonwealth companies. 

Importantly, the PGPA Act requires all agencies to use and manage their resources efficiently, effectively, economically and ethically.  

When the 2016 annual report is released, we will see what ASIC’s new approach “looks like”.  

Its later reports will need to address a change made by the Insolvency Law Reform Act 2016, that ASIC’s annual report should contain information about ASIC’s exercise of its powers, and performance of its functions, under Chapter 5 of, or Schedule 2 to, the Corporations Act: s 136 ASIC Act.

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