There are now several government inquiries into ASIC, directly or indirectly, perhaps indicating either the breadth of ASIC’s remit, or some concern about its work, or “other”.
PJC corporate insolvency inquiry
The current PJC corporate insolvency inquiry gives some general focus to ASIC in the terms of reference as to the operation of the existing legislation and its regulatory arrangements, including small business restructuring and simplified liquidation, the unlawful phoenixing laws under which ASIC has significant powers, and the operation of the PPSA. As a regulator of liquidators, the role, remuneration, financial viability, and conduct of corporate insolvency practitioners is also under review, calling for inquiry into ASIC’s role and that of industry bodies in regulating liquidators, and monitoring their financial viability. That latter issue came into question during the downturn in work during COVID-19.
The inquiry is looking at the role of government in the corporate insolvency system, including the role and effectiveness of ASIC as the corporate insolvency regulator, generally. Within this would also come the ATO, the ASBFEO and FEG.
PJC’s new inquiry into ASIC’s capacity and capability to respond to reports of alleged misconduct
This was set up on 27 October 2022 and is to report by June 2024. The terms of reference Terms of Reference – Parliament of Australia (aph.gov.au) refer to the “capacity and capability of [ASIC] to undertake proportionate investigation and enforcement action arising from reports of alleged misconduct, with particular reference to” a series of examples including ASIC’s ability to assess market distortions, policy settings and market efficiency, and its enforcement tools and range of available penalties. The terms ask whether “ASIC is meeting the expectations of government, business and the community with respect to regulatory action and enforcement”, assuming those are realistic and informed expectations. ASIC’s resources in enabling it to “ensure investigations and enforcement action progresses in a timely manner” are also under review. One relevant item for insolvency is the range of opportunities to reduce duplicative regulation, for example between personal and corporate insolvency.
Financial Regulator Assessment Authority
ASIC is now also reviewed by the new Financial Regulator Assessment Authority, tasked with independently reviewing ASIC’s and APRA’s effectiveness and capability. Its 2022 report assesses a range of ASIC’s features, including ASIC’s strategic prioritisation, planning and decision making.
One, odd, insolvency issue raised with the FRAA is that applicants for registration as a liquidator “felt ASIC was unwilling to engage”, that “there could be more sharing of non‑sensitive information to assist in educating [applicants] and to improve the efficiency of the process”. ASIC’s response reportedly focused on the application process itself, saying in part that such matters should be raised in writing.
Also, “industry stakeholders suggested the licensing process could be improved by making more use of discussions with applicants. Stakeholders noted that verbal discussions would assist ASIC to gain a better understanding of applications. One stakeholder recounted a positive experience where the ASIC analyst telephoned the applicant, discussed the matter and then followed up with a tailored, written request for information. The stakeholder noted this was an efficient way for ASIC to obtain targeted information, instead of requesting a wide range of documents without a discussion as was their more typical experience with ASIC” – footnotes omitted
Without commenting too much on what is third hand reporting, the registration process is set out in the law and decisions made under it are reviewable. Informal communications can present problems. And it is the committee that decides on registration, including any requests for further information, not ASIC; ASIC is but one person of a three-person independent committee. That is also the case with the personal insolvency committees and AFSA.
Insolvency Law Reform Act 2016 review
That joint registration (and regulation) process was introduced into corporate insolvency by the Insolvency Law Reform Act 2016, which also gave “industry bodies” a co-regulatory role over liquidators and trustees – these include the various accounting and law associations around the country. There is nothing to indicate they take the oversight role as anticipated under the ILRA and their role, including in bankruptcy, should be reconsidered in any review of the ILRA changes.
Oversight of ASIC, the Takeovers Panel and the Corporations Legislation
Then there is the on-going parliamentary committee giving “Oversight of ASIC, the Takeovers Panel and the Corporations Legislation …”, set up under s 243 of the Australian Securities and Investments Commission Act 2001. Its next hearing date is 25 November 2022.
Whether all these different inquiries into ASIC are warranted is for others to assess. Their potential for overlap, and concern about submission fatigue of interested parties, should be kept in mind.
We will do our best ….