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ASIC’s Flawed Bullion Investigation Under Scrutiny 

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At the May/June Senate Estimates, I queried ASIC about their investigation into allegations raised by several whistleblowers regarding a major bullion company charging for sales and storage of bullion it did not hold.

While ASIC did investigate, they allowed the company months to get their affairs in order and provided advanced notice of the audit date, enabling potential moving of bullion to defeat the audit, possibly resulting in multiple counting of the same bullion.  Furthermore, there are allegations that bullion not belonging to the audited investment scheme but belonging to another entity, was included in the audit.

Despite several sessions with ASIC on this matter, none of their responses have addressed the fundamental issues surrounding their flawed investigation. The case has now been referred to another agency and I await the outcome.

Transcript

Senator ROBERTS: It’s now been found that the bullion inspected was the property of three companies operating two investment schemes. Were you aware that your auditor was inspecting bullion belonging to two companies not under investigation?  

Ms Court: I’m unable to comment further on this issue of the bullion company. I haven’t got further information beyond that which—  

Senator ROBERTS: So you’re not saying that you won’t answer; you’re saying that you haven’t got it with you.  

Ms Court: I’m saying I—  

Senator ROBERTS: We’ll put it on notice.  

Ms Court: Perhaps—if you put questions in relation to this issue. I’m assuming that your questions relate to a continuing investigation that Mr Savundra referred to. In those circumstances, it would be appropriate to put those on notice to make sure that we can answer them comprehensively.  

Senator ROBERTS: I’m talking about the audit. I’ll continue with questions on the audit. What steps did your auditor take to ascertain ownership of the bullion being offered as theirs? What steps did the auditor take?  

Ms Court: I think it would be preferable to take those questions on notice. You’re asking for details of an investigation. We have given evidence previously that the matters raised in relation to the bullion company have been extensively investigated. 

Senator ROBERTS: So it should be easy to get answers. Was the theoretical stocking figure provided for the amount of bullion just for one scheme as compared to gold for two? My information is that it was.  

Ms Court: I will take that on notice.  

Senator ROBERTS: The facility that held the bulk of the bullion did not have council approval for secure storage and, in fact, was not a secure storage. Why wasn’t the company prosecuted for charging customers for secure storage that didn’t exist?  

Ms Court: I’ll take that on notice also.  

Senator ROBERTS: Can you answer that now? It’s Senate estimates. The guideline is that you will answer if you can answer it now.  

CHAIR: Senator Roberts, another ASIC inquiry is underway. In relation to operational matters, from time to time, ASIC provides information to senators in another forum where we can be very assured that appropriate structures are put around the information provided, so, when Ms Court says that she’s taking it on notice, that is appropriate in relation to this investigation.  

Senator ROBERTS: This one? Okay. Will you now please set aside your pride, open up the investigation and work out what was done wrong and what action should be taken for misleading ASIC.  

Ms Court: I’ve already said that I’d prefer not to answer further questions. Part of the challenge with answering the questions in the way that you’re putting them is that it assumes the correctness of the proposition in your question, which, of course, ASIC takes issue with. We reject that there has been any misconduct by ASIC in relation to this investigation. It has been conducted extensively over quite some time. As the chair has indicated, to the extent that you could wish us to address you on these issues in camera, then, of course, we would be willing to do that, if the committee seeks that briefing.  

Senator ROBERTS: Okay. Can we do that? I’ll finish with the last question on this issue. I have put in more detailed questions on notice and ASIC has received the information I mentioned today directly, so I look forward to further communication on this matter and will take you up on the offer for the in camera briefing. 

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ASIC Grilled on Banking Code of Practice and Crypto Scandal

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The Banking Code of Practice was originally designed to safeguard consumers from bad banking practices, however since the first code was issued, there has been a continual watering down of these protections, effectively rendering the code meaningless.

Currently, ASIC is conducting a review of the code. During the recent Senate Estimates, I inquired whether certain protections would be included, such as protections against de-banking, ensuring access to cash, and maintaining in-person banking services at branches.

Unfortunately, the responses provided were not encouraging. If this review fails to restore consumer protections to the Banking Code, One Nation will pursue a legislated response by way of a mandatory code.

Additionally, I inquired about ASIC’s handling of the recent crypto scandal, where Australian investors lost hundreds of millions of dollars due to ASIC failing to advise of the risks. This contrasts with the Mayfair scandal, where ASIC’s enforcement action actually caused the company and their investors to undergo a loss that would not have occurred without ASIC’s actions.

Transcript

Senator ROBERTS: Thank you for appearing today. Last estimates I raised a series of concerns regarding the Banking Code of Practice, and Ms O’Rourke was very forthcoming in her answers; thank you for that. At one point, Ms O’Rourke, you said you would update me if there was any progress on the negotiation for the new banking code. Could you provide an update now, please, in respect of these four matters. Is ‘prudent and diligent banker’ still in there? It’s a meaningless phrase.  

Ms O’Rourke: Yes, we had that discussion at the last hearing, about the code of practice. I’m happy to update in relation to the discussions we’ve been having. To step back a moment—  

Senator ROBERTS: On those specific four points: is ‘prudent and diligent banker’ still in there?  

Ms O’Rourke: I think, prior to that particular question, you said, ‘What’s the state of play?’ The state of play is that there’s not yet a final code that has been finalised by the ABA to put to us for approval. The answer is that it’s not yet determined whether or not that phrase ‘prudent and diligent’ will or will not be in the final code. Can I give a little bit more detail?  

Senator ROBERTS: Sure.  

Ms O’Rourke: It is in the existing code. In the draft code published by the ABA last year, in relation to which we’ve had a consultation process, there was a proposal to narrow the application of ‘prudent and diligent’ to very specific circumstances and for other circumstances to rely on other legal provisions. That has been something through the consultation process we have had submissions in relation to, and it is something we have been speaking to the ABA about. The ABA is still considering its position, and there isn’t a final outcome.  

Senator ROBERTS: Is there a guarantee of face-to-face banking services?  

Ms O’Rourke: That is not in either the existing code or the proposed code from the ABA. Like I say, there is no final position in relation to what the final code will look like but that’s one that’s not been proposed, nor was it particularly raised in the submissions we received.  

Senator ROBERTS: This is not a comment aimed at you, Ms O’Rourke, but we’re not interested so much in whether or not something was in there or will be in there; we’re interested in—purely, that’s something we believe is necessary. Is there a guarantee of access to the King’s currency of cash?  

Ms O’Rourke: The current code does not have that, nor does the proposed code. 

Senator ROBERTS: Is there a guarantee not to debank a customer for competitive or social reasons like, ‘We don’t agree with your politics’?  

Ms O’Rourke: That’s not in the current code nor is it proposed to be in the revised code.  

Senator ROBERTS: I believe you took on notice the debanking issue, but the response only answered ‘other matters’. Has ASIC considered the debanking issue? It’s a device by which the banks harm the business of their competitors and manipulate the markets to their financial advantage—as they have, for example, with cash in transit. This says misuse of market power to me. Has ASIC considered the debanking issue?  

Ms O’Rourke: ASIC has been part of discussions around the cash-in-transit issue you referred to. I’m not sure whether you’ve had an opportunity to speak to other agencies, including the RBA, Treasury or others involved on the government side, or, indeed, if you’ve had opportunities to speak to the ABA or others. We’re more interested observers than participants in relation to cash in transit. We don’t have any regulatory hooks or provisions that particularly go to the provision of cash or its transportation.  

Senator ROBERTS: What about debanking?  

Ms O’Rourke: Similarly, there is no requirement to bank or to take steps in relation to debanking in relation to which we could take action.  

Senator ROBERTS: On the crypto scam: Senator Hume asked some very fine questions today. Your testimony was that you were aware of this scam for quite some time, yet the scam companies Infinity CapitalG, Topmarketcap, Iron Bits and Richmondsuper were added to the scam list just yesterday. Why did it take so long to get those companies onto the scam list?  

Ms Court: As I said in my answers to Senator Hume, when that information came in to us it was for the purposes of a continuing criminal investigation at that time. At that time, in August 2023, we didn’t have up and running the investor alert list we have now; that commenced in November 2023. We hadn’t received any reports of misconduct or any indication that any of those entities referred to in the article—that consumers were continuing to invest or lose money as a result of investments in those entities. However, following the media reporting, we went back and had a look at those entities, and I think we took a decision that we would put four out of the five—even though we had no information about continuing losses to investors—on the investor alert list, for completeness.  

Senator ROBERTS: Thank you. On Mayfair 101: ASIC went after a company that appears to have been trading *legally. Mayfair 101 were up-to-date with repayments to lenders and, as demonstrated over the last three years, had financial resources as they fought your action. ASIC considered Mayfair’s advertising misrepresented their investment product and took immediate action to freeze the company’s asset. By doing that, ASIC almost cost 500 Australian investors $200 million but the company has survived. ASIC’s actions have, however, caused a lot of damage to investors and the company for no good reason we can see. One Nation, I must mention, as I previously stated, is one of those investors. This matter has been dragging on for three years and now ASIC is going for another round. What’s the state of play now?  

Ms Court: I gave quite a long answer to Senator Bragg earlier, when you weren’t in the room, about the status of Mayfair—  

Senator ROBERTS: Okay; we’ll leave it. I want to get on. Thank you for that. Your actions were ostensibly to protect investors, yet the investors in Mayfair have not had access to their funds or a return on their investment since you started your action, despite the entity they invested in still being viable. Why are you hurting the people you profess to protect?  

Ms Court: As I said in my response to Senator Bragg earlier, ASIC acted quickly in relation to the Mayfair matters for the purposes of protecting future investors. The matter’s been before the court, and Mayfair has been found to have engaged in misleading conduct. The court has imposed a $30 million penalty on Mayfair, which I understand remains unpaid. There are still several matters currently before the courts, and the courts are testing ASIC’s claims and the defences to those claims. That is an appropriate place for them to be determined now. 

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ASIC Confirms Fees for No Service Still Problematic

ASIC is a failed agency that instead of holding the banks accountable has let them get off scot-free.

I asked questions about fees for no service at estimates and wasn’t reassured.

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ASIC Offers Some Hope for Banking Fairness

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Recently, supervision of the Banking Code of Practice moved from the Australian Prudential Regulation Authority (APRA) to the Australian Securities and Investments Commission (ASIC), who have initiated a thorough review of the code. This first draft of the new code has many shortcomings, and I asked about these. From their answers, it is clear that ASIC are across the shortcomings in the code and I felt they are serious about making the new code a better document that provides stronger protections for customers. A lot of protests have quite rightly occurred around the closure of bank branches.

The truth is that banks are allowed to do that because the banking code contains no provision requiring the banks to provide face to face banking. Also missing from the new code is a guarantee of access to cash and a guarantee of banking services. Currently banks are de-banking competitors like bullion dealers and crypto exchanges. They are also closing bank branches and ATMs to reduce access to cash which they can’t easily monitor or control.

I was encouraged by the answers from Deputy Chair, Sarah Court of ASIC and I look forward to the next draft of the 2024 Banking Code of Practice. Bank customers deserve better protections than APRA have provided in recent years.

Transcript

Senator ROBERTS: Can I start by confirming our meeting will occur on 19 March on the subject of the security of companies offering bullion storage and sales services in Australia. 

Ms Court : That’s right. 

Senator ROBERTS: I look forward to that. Total compensation for the ‘fee for no service’ scandal was $4.7 billion. Since those compensation payments, do you believe financial institutions have fixed their systems and this practice is no longer happening? 

Mr Longo : I’ll ask Deputy Chair Court to comment on that. I think it’s a truism that systems and processes of the banks are always in need of improvement and enhancement, so one can never be certain that those systems will be fixed forever. We certainly think a lot of progress has been made coming out of the royal commission. I know Deputy Chair Court has done some work in this area as well. 

Ms Court : I don’t think I’d ever presume to say that the issues of fees for no service or the compliance and legacy systems of large financial institutions have been completely fixed. I think there’s been progress made. As you say, there have been billions of dollars of remediation. There have also been multimillion-dollar penalties applied by courts in relation to that conduct. We continue to have cases where fees for no service are being alleged, and we are continuing to investigate them and take court action where it’s appropriate. 

Senator ROBERTS: That’s pleasing. Do you think the amount of compensation, $4.7 billion, met or exceeded the revenue that was illegally obtained by financial institutions for the ‘fee for no service’ scam? 

Ms Court : I think you’d have to ask that question of those institutions. The remediation figure is eye watering. 

Senator ROBERTS: I will turn now to the new mandatory Banking Code of Practice that ASIC will consider recommending to the minister. The Australian Banking Association, led by former Labor premier Anna Bligh, has extended coverage to include buy-now pay-later providers by including them in the phrase, ‘Each bank will exercise the care and skill of a diligent and prudent banker.’ Does that phrase provide a quantifiable legal protection to customers, or is it utterly meaningless? 

Ms O’Rourke : I’m happy to assist in relation to the banking code. I might just clarify. In your introduction, you referred to it as a mandatory code, and you also referred to it being taken to the minister. Industry codes aren’t mandatory. You’re right that the banking industry has developed one. The approval process is also one that, if chosen by the industry association, comes to ASIC. It’s an ASIC approval process, not a ministerial one. 

If I come to your particular question about the terms of the code, the code that exists now commenced in 2018. I think, as you’re alluding to, the Australian Banking Association, who wrote the code, and its members, who signed up to it, have been going through a process of updating the code and have proposed to bring it to ASIC for additional approval—for approval under the statutory scheme. One of the issues that are live in that process is the question of the inclusion of the phrase ‘prudent and diligent banker’, which you’ve called out. In the existing code, the one that exists now that was approved in 2018—and there have been some revisions approved since—that phrase is included. In the proposed code, the draft code that’s been prepared, there’s a question about whether it can come out on the basis that it’s duplicative of the responsible lending obligations that already apply to bankers. So that’s the issue. 

As to its progress, I’ll give you some further information. The ABA had done a consultation process to develop the draft code. We now, at ASIC, are doing a consultation process associated with our consideration of approving it because of the importance of these codes to all banking consumers—all Australians. These codes really matter, and making sure that they are suitable in their content and meet the statutory requirements is something we take very seriously. We are undertaking a consultation process. That particular question is one of the ones we’re seeking submissions on and very carefully considering. 

Senator ROBERTS: I think I’ll be coming back to that, Ms O’Rourke. I’ll move quickly because the chair’s needing to hurry. 

CHAIR: I’m staring at you, Senator Roberts, but thank you for proceeding quickly. 

Senator ROBERTS: I raised the fee for no service earlier for a reason. The clause in the proposed Australian Banking Association code, chapter 12, No. 31, used to read that the bank ‘will make sure we have your agreement’ on charging a fee for a new service. That clause has been removed from the new code, meaning the bank does not need to get a customer’s permission before charging them a fee for a new service. If a bank doesn’t get my permission, under the new code can they simply start charging me for services that I did not agree to or may not know I’m being charged for? Are they unwinding your good work on the fee for no service? 

Ms O’Rourke : I’m not particularly aware of that proposed deletion. I think I might take on notice any background relevant to that. The general answer is that there are provisions widely in the code that would be relevant to whether fees for no service can be charged, and indeed I think my colleagues have spoken to the important work ASIC has taken to ensure that that sort of activity does not occur. 

Senator ROBERTS: Can you show me in the draft code where it provides a guarantee of face-to-face banking services that means access to a bank branch? 

Ms O’Rourke : I think that in both the existing code and proposed code the question around branch closures, which is what I think you’re alluding to, is covered by reference to a protocol that exists about the provisions that a bank will consider on decisions as to whether or not it provides banking services in particular communities. It’s not framed, as far as I’m aware, in the way that you’ve framed it: as a right. I can’t point to that, if that’s what you’re seeking. 

Senator ROBERTS: Debanking is proving to be a real problem across businesses that are alternatives to the bank system. Banks are debanking bullion dealers, crypto brokers and third-party cash transit companies. Is there anything in this code of practice that guarantees banking services for customers who use cash, bullion or cryptocurrency? 

Ms O’Rourke : I’m going to have to take that on notice. 

Senator ROBERTS: Is there anything in this draft that guarantees access to the King’s currency—cash? 

Ms O’Rourke : Not that I’m aware of, but I’m happy to take it on notice. 

Senator ROBERTS: Can you show me where it says something like, ‘We undertake to not terminate your banking services for your political views unless a criminal conviction has resulted,’ or similar? As written, the code gives no protection for a customer who exhibits wrongthink on social media, for instance. This is a problem. 

Ms O’Rourke : I think that’s a statement. 

CHAIR: Last question, thank you, Senator Roberts. 

Senator ROBERTS: Why is the sentence, ‘We will engage with you in a fair, reasonable and ethical manner,’ being replaced with ‘efficient, honest and fair’? Is there no room for ethics in modern banking, and is the term ‘efficiency’ used so that the bank can say it’s not efficient for them? 

Ms O’Rourke : I think you’re right to point out that that’s one of the important distinctions between the existing code and the proposed one, and therefore it’s one of the areas that we are consulting on to understand stakeholders’ views on that proposed change. I’m agreeing with you that it’s an important issue for us to explore to understand the basis for the proposed change and what the consequences would be. 

Senator ROBERTS: Are you aware that the Consumer Action Law Centre describes the new code as offering no overall improvements in consumer protection? Do you, ASIC, agree with this characterisation, and will ASIC add extra protections yourself before forwarding the code? 

Ms O’Rourke : As I referred to, we’re right in the middle of a consultation process which includes listening to stakeholders about their perspectives on the new code. We’re taking careful consideration of all the issues that are raised before we move to the decision point that I described earlier. 

Senator ROBERTS: Thank you. I must say that I appreciate the direct and immediate answers. 

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ASIC and the Case of the Missing Gold

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ASIC received a significant, detailed complaint of misconduct concerning a company that sells gold, silver and palladium to the public, and then stores the bullion on behalf of their customers.

The complaint suggested the company was selling bullion it did not own, failed to purchase that bullion and had a storage vault incapable of holding the volume of bullion they were minding. Further, that customers are having trouble getting their purchased bullion and there are questions around council approvals and the suitability of their “vault”.

ASIC investigated and found nothing wrong, however there is doubt around the veracity of the audit.

ASIC offered to brief me on this matter, which I accepted.

Transcript

Senator ROBERTS: Thank you. I will move to another topic quickly. As per ASIC’s response to questions on notice, ASIC conducted an investigation involving a precious metals business in financial year 2022-23. This was in response to a complaint regarding the company not holding the precious metals it was supposedly charging storage for. The questions relate to that. Can ASIC describe the nature of the investigation? Was ASIC investigating whether the bullion was fake or missing? What was the purpose of your investigation?

Ms Court: Senator, that’s right. As you say, ASIC has had a complaint. I think as we’ve advised the committee previously, if I talk broadly in relation to gold bullion—

Senator ROBERTS: I thought it mentioned a company name. That’s fine.

Ms Court: Sitting here today, I’m not sure if we have mentioned that company name publicly or not. I’m certainly very familiar with the matter—

Senator ROBERTS: Okay, good.

Ms Court: that you are referring to.

Senator ROBERTS: Let’s assume we both know the name.

Ms Court: Yes. We received a report of misconduct in relation to that company in April last year, 2022. We have been investigating that carefully. We’ve done a very thorough—

Senator ROBERTS: What was the aim of the investigation? Was it to investigate whether the bullion was fake or whether it was missing?

Ms Court: At a high level, Senator, the aim of our investigation is to ascertain whether or not there has been a breach of the ASIC Act or the Corporations Act, which is—

Senator ROBERTS: So it was both, was it?

Ms Court: Which is what we administer. I’m cautious about how much I say publicly. We certainly took the allegations very seriously. We did ascertain the extent of the holdings, if I could put it in that broad term, to make sure—

Senator ROBERTS: How many clients it has and how much gold it is supposed to have?

Ms Court: Yes, indeed, we did. Indeed, part of the reason that it has taken us some time to conclude that investigation, Senator, is that we have engaged experts in that area to do a physical check, if you like, to ascertain those holdings. We had a significant detailed complaint. We’ve taken that complaint very seriously. We have expended considerable resources on that investigation over the course of the last 18 months.

Senator ROBERTS: How much advanced notice did ASIC provide the company before conducting a physical site inspection?

Ms Court: I would have to take that on notice.

Senator ROBERTS: Okay. I understand that ASIC gave the company sufficient time so that it created an opportunity to alter its business affairs before a physical site inspection was allowed—in other words, move gold in.

Ms Court: Senator, as I say, I will take that on notice. I should put on the record that I highly doubt that is the case.

Senator ROBERTS: Thank you. The complainant had reports that a large quantity of gold was moved into storage to perhaps make the books balance, a feat that was possible because of the long notice that was provided. Why didn’t you just get a search warrant and turn up for a surprise check?

Ms Court: Senator Roberts, I dispute that characterisation of what has taken place.

Senator ROBERTS: Did you get a search warrant?

Ms Court: I’m not going to comment on our investigatory process in relation to a particular company. Of course, we’re very happy to give you a briefing, Senator.

Senator ROBERTS: If you could, and a time line?

Ms Court: Yes, indeed. We can take that on notice, Senator.

CHAIR: Last question, Senator Roberts.

Senator ROBERTS: The company claims to have tens of thousands of storage clients. I would like to know whether you confirmed the clients as well as the amounts of gold that are supposed to be there? Why did ASIC use taxpayer money to test the authenticity of the physical bullion rather than charge the subject?

Ms Court: Senator, I will take all those questions on notice. They do involve a particular investigation. We are conscious that a range of allegations have been made and continue to be made about this matter. As I said earlier, we have focused significant resources in getting to the bottom of these issues. We will finalise our investigation shortly. I’m very happy to give you a briefing in relation to that and to take your questions on notice, Senator. Please be assured that we have treated this with the utmost seriousness.

Senator ROBERTS: Could your office contact my office to arrange a time for a briefing? We are going to be in Canberra quite a bit in the next couple of months?

Ms Court: Yes, indeed.

Senator ROBERTS: That would be good.

Ms Court: We’ll go through the appropriate processes and do that, Senator. We would be very pleased to assist you with that information.

Senator ROBERTS: Thank you very much. Thank you, Chair.

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ASIC and Senate Lock Horns Over Accountability

Earlier this year the Senate failed to pass my proposal for confidential document discovery. The stoush currently underway between Senator Braggs’ Committee of Inquiry into ASIC and ASIC themselves confirms the need for confidential document discovery. Had this been available, the Committee would have the information they are after already.

Public officials have an obligation to allow scrutiny of their performance and the Senate must allow agencies due process. I am not convinced either is happening the right way in this stoush between ASIC and Senator Bragg.

Having said that, Senator Bragg’s diligence in trying to introduce accountability to Australia’s corporate watchdog, the Australian Securities and Investment Commission (ASIC), is much appreciated. The Senate serves the people and this Inquiry which began last October came about as a result of complaints about ASIC from everyday Australians, and is on behalf of the people of Australia, including investors and small business.

As I outline in this video, there are broad community concerns and systemic issues with ASIC’s investigations and enforcement capabilities.

Unfortunately, not only has ASIC has refused to cooperate with the Senate, displaying contempt for the process of review, Freedom of Information documents reveal ASIC was in contact with unknown people within parliament in an attempt to secure a watering down of terms of reference and to try to block disclosure.

In seeking to squash this inquiry into itself ASIC has this government using public interest immunity. This government is also showing contempt for the people of Australia.

The Albanese government is setting a world record for how fast they broke their promise of accountability and transparency.

Transcript

As a servant to the many different people who make up our one Queensland community, I thank Senator Bragg very much for his hard work trying to introduce accountability to Australia’s corporate watchdog, the Australian Securities and Investments Commission. I’ve watched his diligence, his patience, his commitment and his determination, and I admire and acknowledge all of that.

Last October the Senate referred an inquiry to the Economics References Committee into the capacity and capability of the Australian Securities and Investments Commission, ASIC, in particular to answer the question: did ASIC meet the expectations of government, business and the community with respect to regulatory action and enforcement? A simple question.

This inquiry was prompted by complaints from everyday Australians and small business that ASIC was not doing its job. ASIC’s job is to ensure a level playing field and, where a company has engaged in corrupt conduct, ensure prosecutions occur. The evidence received has indicated that there are broad community concerns and systemic issues with ASIC’s investigation and enforcement capabilities. That mirrors what I have perceived. The committee has sought information surrounding a small number of closed investigations in order to understand how ASIC conducts investigations and understand its prosecution approach. The closed cases concern Nuix, ALS, super insider trading and Magnus, where there were serious allegations of commercial misconduct. Unfortunately, ASIC have shown contempt for the committee process, making public interest immunity claims to get out of handing over this information. ASIC were given one last chance to comply with this order, and here we are now. ASIC have again refused to cooperate with the Senate.

This should not be the end of the matter. The Constitution gives the Senate extreme powers of investigation and penalty on individuals for refusing to follow the instructions of the Senate. I’ll say it again: the Constitution gives the Senate extreme powers of investigation and penalty on individuals for refusing to follow the instruction of the Senate. That reflects the Constitution’s intent in making sure that the Senate serves the people, and I remind everyone that is the case. These powers should be considered in this case.

To say that ASIC have been dragged kicking and screaming into this inquiry is an understatement. Freedom-of-information documents obtained by Adams Economics reveal ASIC were in contact with unknown persons within the parliament to secure a watering down of the terms of reference or to deny the numbers entirely, to squash the inquiry. This is why we are here. How dare ASIC interfere to avoid review by the house of review on behalf of the people of Australia! One Nation rejected ASIC’s public interest immunity claims over materials concerning closed investigations into misconduct. ASIC’s reliance on public interest immunity claims to block disclosure has been an ongoing issue obstructing the committee’s ability to conduct a proper investigation on behalf of the people of Australia—this is not the Senate; this is on behalf of the people of Australia—the people who pay ASIC’s salaries, the people whom ASIC is supposed to serve. Public interest immunity is being used by a government that has nothing but contempt for openness and transparency.

Only today I discovered, by chance, that the industry groups the government are showing their new IR bill to are being required to sign a confidentiality agreement so that they can’t say what is in the bill. That shows contempt from this government for the people of this country. What sorts of nefarious provisions are in that bill that they require a cloak of secrecy? Every government is elected with a promise of transparency, and every government then breaks that promise. The Albanese government is, however, setting a world record for how fast they broke their promise and setting a world record for arrogance towards the people of Australia. This request from the Senate goes to a small number of closed cases. They cannot possibly effect an ongoing investigation. There’s no down side to revealing this information other than embarrassment, or worse, for ASIC management and the responsible minister.

I have received a report from a third party regarding ASIC senior executives using private phones for official business, and I look forward to further information around that issue. If a Commonwealth government agency spends $200,000 of taxpayers’ money on a secret investigation into allegations against ASIC’s deputy chair, the Senate has a right and a duty to ask what that was about. It’s our role as a Senate to do that, and we would be deficient in our duties to the people of Australia if we did not do so. This matter places the career interests of bureaucrats against the sworn duties of a senator and of the whole Senate. One Nation is betting on the Senate ultimately discharging its duties without fear or favour. ASIC has refused to disclose its correspondence in relation to public interest immunity claims with the minister. The committee has formed a view that ASIC’s refusal to provide the information sought is obstructing the committee’s ability to conduct this inquiry. That, by the way, is an offence. ASIC appear to be all lawyers. Let me say: you should know better, ASIC.

I’ve got some notes in front of me that I’ll divert to briefly. We are inquiring through the committee into the ability and, indirectly, the intent behind ASIC’s behaviours—the intent. The government is digging a deeper hole when it comes to the intent, because as Senator Brockman and Senator Bragg have pointed out in detail, the government is covering up, and that makes it even worse. If it was innocent, the government should welcome the disclosure. If it had something to hide or something to protect in ASIC, then it would shut down, and that’s what we see. I’ll go to the terms of reference:

… whether ASIC is meeting the expectations of government, business and the community with respect to regulatory action and enforcement …

It’s also not meeting the expectations of parliament. ASIC has failed persistently to enforce the law and investigate complaints of misconduct. Small business and consumers across Australia, who are tired of ASIC’s persistent failure to enforce the law and investigate complaints of misconduct, are the customers we serve. They’re the customers ASIC serves. The evidence received so far has indicated that there are broad community concerns and systemic issues with ASIC’s investigation and enforcement capabilities, and my personal concerns are similar.

The committee has sought information surrounding a small number of closed investigations. I’ve listed them, as have Senator Bragg and Senator Brockman. The government has a choice: release the documents and remove suspicions if you have nothing to hide, or, if you have something to hide, hide and stoke the suspicions. A private briefing is not adequate because that would be just ASIC giving selective disclosure. The executive government should support an inquiry to end white-collar crime in Australia and strengthen inquiry in our financial sector. Instead, the Labor government has defended ASIC at the expense of the work of the Senate, arrogantly keeping people in the dark. I ask the question: is ASIC protecting criminals or is it protecting its own incompetence or its own lack of intent to hold criminals accountable? Who watches over the regulator? We, the Senate, do, and the people watch over us. I call on the minister to stop obstructing the Senate, and I call on ASIC to rethink their obstruction to this inquiry.

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MEDIA RELEASE – ASIC Failings Deserve Inquiry

Economist John Adams has released a report questioning the way in which the Australian Securities and Investments Commission (ASIC) has used their powers to investigate and prosecute ‘white collar’ crime.

Five years ago 2% of suspected offences reported to ASIC were investigated. In 2020 this is down to just 0.7%

Only 1 in 50 of these investigations result in a prosecution.

Ninety-one percent of reports by corporate whistleblowers resulted in no action being taken.

Senator Roberts said:

“The effectiveness of Australian Securities and Investments Commission has already been questioned following the failure to prevent the Sterling First managed investment fund scandal in Western Australia.”

“ASIC provided incorrect guidance on the security of Sterling First to potential investors. Many investors lost their life savings as a result.”

“I note Liberal Senator Bragg and Labor Senator Pratt have both confirmed the need for an inquiry into the performance of ASIC.”

“I join in calling for an inquiry and look forward to a start date before the end of the year.”

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ASIC keeping banks in line – Government trying to soften them up

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The government is set to try and ram through destructive changes to responsible lending rules. This axing will mean banks can go back to the bad days of over-lending to people who will never pay their loans back. We cannot go back to the bad days of equity theft where banks lent to people who couldn’t afford it just so the bank could later sell their house for a profit.

ASIC and AUSTRAC have been doing a good job in slapping fines on banks after the Royal Commission, racking up just over $2.2 billion in enforcement. Its proof that we need heavy fines for bank wrongdoing and that ASIC can do a very good job keeping banks in line.

The government’s proposed changes take away power from ASIC to do the job they have been doing very well. This can’t be allowed, and I won’t allow this government to use the cover of the pandemic to ram through cushy rule changes for their banking mates.

Transcript

Senator Roberts

[Senator Malcolm Roberts] Thank you. And thank you for attending today. Firstly, to ASIC, congratulations on your recent enforcement action against AMP for fees for no service, and charging fees to dead people. I hope that goes well. I know that’s a comment without a question, but I appreciate that. In your most recent ASIC Enforcement Actions Bulletin to December 2020, you list 11 actions still pending from the Hayne Royal Commission. With AMP now underway, is that now reduced to 10, and can we expect further enforcement actions for bad banking behaviour?

I haven’t got the statistics in front of me. Perhaps, Commissioner Armour, the…

I think, yeah Commissioner Hughes might be the best able to answer that.

Yeah, thanks. Thanks Cathie. Senator, good afternoon. We can take that one on notice. I think your assumption is probably correct because we have been netting down. If I can put it that way the number of matters as we’ve gone through. So if I’m going to make this point we had 13 matters referred to us by the Hayne Royal Commission. And we are, as I say, going through all of those matters, as well as 32 case studies that were examined by the Royal Commission, which we took on. But we will give you a specific answer on your question about it. I think you’re correct but I just want to be crystal clear on that.

[Senator Malcolm Roberts] Thank you. Do you have a dollar figure for the total cost to Australian ADI’s, that’s banks, for bad banking behaviour in the last five years as a result of asset enforcement action?

We don’t have a total cost of the behaviour Senator, what we would be able to provide to you on notice is the total amount of civil penalties and other regulatory outcomes that we’ve achieved over the period since the Royal commission.

[Senator Malcolm Roberts] That, that in fact Mr. Hughes, is what I’m asking for. So thank you. So

So Senator I might just add one other aspect to the cost measurement would be the remediation payments as well which we know collectively now are well above $10 billion.

[Senator Malcolm Roberts] Okay. Thank you. To confirm, you currently have 11 enforcement actions before the courts for credit misconduct. Is that correct?

That’s my understanding Senator.

[Senator Malcolm Roberts] And that’s for breaches of responsible lending laws?

Oh no. Sorry. I thought you meant, Senator, in relation to the matters arising from the Royal Commission. I didn’t hear you correctly.

[Senator Malcolm Roberts] No

Not it’s not physically in relation to credit.

[Senator Malcolm Roberts] It just happens to be the same number, 11 in both cases. This is for credit misconduct. I think you have a total of 11, and that’s before the courts?

I’m going to have to check those numbers. I’m sorry, Senator. I don’t have whatever it is whatever it is you’re referring to in front of me.

[Senator Malcolm Roberts] Okay, I have ASIC enforcement update July to December 2020, page seven. There’s a table there.

Can I take that on notice, Senator?

[Senator Malcolm Roberts] Sure. Thank you. I appreciate you valuing accuracy. Have you changed your enforcement since the Hayne Royal Commission?

I don’t believe that we would say we have changed our enforcement. What we have done is prioritised matters that give rise to significant consumer detriment or hardship or which relates to egregious misconduct including matters that might undermine confidence in the market. So there has been a refocus or a swinging of our prioritisation of matters, specifically to address those strategic enforcement priorities. We obviously receive a vast number of reports of misconduct, which my colleague Mr. Day could talk to you about, but Senator, we couldn’t possibly resource every single matter. So we, we put them through a process by which we identify those matters which meet our strategic priorities. And it would also prioritise enforcement matters that might relate to other priorities or thematic priorities such as misbehaviour in the OCC derivatives market those matters, or matters that involve predatory lending or misconduct involving indigenous or remote communities. So we have a number of filters, which we apply in deciding which matters to take to enforcement.

[Senator Malcolm Roberts] So it sounds like ASIC is doing its job and you’re policing responsible lending provisions, correct?

We’re enforcing the laws as they exist today, Senator. We’re very mindful, of course, as Senator McKim was asking me earlier that there are reforms before this chamber in relation to responsible lending. And we will be interested to see the passage of those reforms, if that is indeed what takes place. But where the law is settled then we will pursue those matters where we identify misconduct and there is an actionable bridge that we can pursue.

[Senator Malcolm Roberts] So in a briefing with Treasury, which didn’t involve me but my staff were involved. As were Senator Hanson’s staff, Treasury advised my staff that the reason for the decision to move Responsible Lending Regulation from ASIC to APRA was based in large part, apparently, on the actions of ASIC in tightening lending regulations. Have you tightened the legislation or regulation in respect of Responsible Lending since the Hayne Royal Commission? If so, how? I got the impression,

No

[Senator Malcolm Roberts] No, you haven’t?

No, Senator, ASIC does not have the power, the legislative basis or any legislative basis to change the law or regulations. Prior to the completion of the Royal Commission, ASIC updated its guidance response, its guidance number two zero nine, regulatory guide two zero nine, in December 2019, which provided further examples of the sorts of conduct and considerations that responsible lenders should take into account when making lending decisions. But as I said to Senator McKim, that guidance does not have the force of law, and we have not changed the rules or imposed any new obligations since the Hayne Royal Commission.

Thank you The only thing that has happened since the Hayne Royal commission Senator – sorry to cut you off is that the full federal court handed down its decision in the Westpac matter.

[Senator Malcolm Roberts] Thank you. Is it true to say that any tightening in bank lending practises is the decision of the banks, not of ASIC?

Well, we don’t make decisions on individual loan applications, Senator. Those are entirely matters for the banks. They will have regard obviously to Prudential Standards, administered by APRA. They will have regard to their obligations under the Consumer Credit Act administered by ASIC. And they’ll also have regard to the decisions of courts and of APRA. But the decision to advance a line to any particular borrower, consumer or business is entirely that of the bank, not its regulators.

[Senator Malcolm Roberts] Minister, could you agree that it would be possible for some people to categorise the stripping of Responsible Lending Regulation from ASIC to be a penalty for your enforcement act, for its enforcement action against the banks?

No, I think that’s an unfair characterisation, Senator Roberts.

[Senator Malcolm Roberts] I just want to go on record saying I appreciate the directness and the quality of the responses from ASIC. So thank you very much.

Thank you, Senator Roberts.

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