Inquiry into ASIC too little too late for victims, whistleblowers

The corporate regulator has canvassed 10 policy reform proposals as part of a 200-page submission into a Senate inquiry that will scrutinise its performance, powers and structure and the perception that it is a toothless and lazy tiger.

The bipartisan Senate inquiry was announced in July after a series of news articles in Fairfax Media revealed serious misconduct and a cover-up by Commonwealth Bank's financial planning arm and the failure of the Australian Securities and Investments Commission (ASIC) to act promptly.

The latest submission, which is yet to be lodged, will look at the various tools available to the regulator for enforcement and guidance as well as ways to improve its performance.

This includes making a number of policy reform suggestions including calling for a mandatory national exam for all advisers, beefing up its policy on whistleblowers and looking at its policy on the definition of an official investigation and what it can and can't discuss due to legislative restrictions.

It will also look at how it chooses its cases. It has opted not to discuss alternative funding models such as hiving off its corporate registries business or replacing its funding with a levy on various industries, similar to the $14 million a year it raises from stockbrokers.

Submissions officially closed on Monday but a number of people and organisations, including ASIC, have requested an extension. Senator Doug Cameron is also expected to write to the big end of town requesting various organisations, including accounting body CPA Australia and the Australian Securities Exchange (ASX), to be part of the inquiry.

There are currently more than 100 submissions, but most are from mums and dads who have been fleeced by a financial institution and felt that the regulator was missing in action.

Interestingly, there is a glaring absence of submissions from the banks, lobby groups or associations, despite repeated criticism over the years about the quality of the regulator. It raises questions why they have decided to steer clear of commenting on ASIC or how it might become more effective.

One of the more interesting submissions came from Anne Lampe, a former journalist and former employee of ASIC's media unit, who criticised the regulator for "springing into action" when the number of complaints by investors reached "tsunami" levels. "When small investors lost money ASIC seemed incapable of action or didn't think it necessary. However, if a corporation or big fish reported a trading irregularity, backsides came off their seats quickly. I will have more to say about that later."

She said negotiating enforceable undertakings instead of taking legal action was the preferred course of action. "These undertakings were discussed and fought over, over months, by armies of lawyers in secret behind closed doors and few details ever emerged about how the damage to investors was done, how many investors were affected, or even whether the undertaking was adhered to. In some cases the companies involved undertook to write letters to affected clients asking them to come in and discuss their concerns. Whether these letters were sent, how they were worded, whether they were replied to or what compensation was offered stayed secret."

In the case of the CBA financial planning scandal, which resulted in the banning of seven planners who controlled hundreds of millions of dollars of clients' money, ASIC extracted a two-year enforceable undertaking in October 2011.

This was despite being tipped off in late 2008 by a group of CBA insiders who wrote to ASIC warning them what was going on, including that files were being "cleaned up" and the whistleblowers detailed three locations where the files could be found and provided a list of the major players inside CBA.

It was also despite knowledge by CBA of some of the goings on inside the financial planning arm at the time. The executives at CBA were never punished. Indeed, some continue to work at CBA or are now working in senior roles at a stockbroking firm in Sydney, or other banks and wealth management operations.

ASIC has completed its submission but wants to withhold it until it has had a chance to see all submissions so that it can respond - if necessary.

ASIC made an initial submission to the inquiry in early August, admitting it had made mistakes in its handling of the CBA scandal and that it should have acted faster.

The expose into CBA revealed that a group of CBA insiders including Jeff Morris first contacted the regulator in October 2008 with detailed information about the goings on at the bank's financial planning arm. It took ASIC 16 months to launch an official investigation into the bank.

It is understood that it has had five people working full-time on its submission to the inquiry, which promises to put the blowtorch on ASIC in relation to its performance as a corporate regulator and protector of ordinary Australians.

Senate hearings will call up senior regulatory and banking executives, past and present, as well as scrutinise the regulator's structure, culture and powers. It will also track down some of the banned planners, including Don Nguyen who has failed to respond to questions and phone messages.

But for some victims and the whistleblowers it is too little too late.