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Passing the buck

On the release of the interim report from the banking Royal Commission, Josh Frydenberg has hit the airwaves to slam ASIC.  He must think we have very short memories.

When Tony Abbott cut $120 million from the ASIC budget in 2014, ASIC Chairman, Mr Greg Medcraft, issued a statement saying staffing levels would have to be cut by over 200 and that “our proactive surveillance will substantially reduce across the sectors we regulate, and in some cases stop.”

In 2016, Scott Morrison announced reforms to shift the regulator to a “user-pays” funding model – in which the institutions it regulates are forced to pay for the ongoing cost of their regulation – so taxpayers no longer have to fund its operations.

The user-pays model was slated to begin operation at the start of the 2017-18 financial year, but little detail has been provided by the government to explain how it will work.

Morrison said if the regulator required any extra money in the future, it could claim more money from Australia’s banks.

Then, in May this year, Morrison cut another $26 million from ASIC.

Thomas Clarke, Professor of Corporate Governance at University of Technology Sydney said “At best it’s penny pinching, at worst it is undermining the possibility of regulating the banks and exposing the behaviour we’ve seen at the Royal Commission and prosecuting it.”

“ASIC can only carry out enforcement within its means. If you reduce their resources they may choose to not take any enforcement in some cases, or they take the action and the defendant knows that if they can make it expensive enough ASIC might be more receptive to the soft options,” said UNSW Professor of Law Michael Legg.

“If you have a party in power that does not want a lot of white collar enforcement, it doesn’t have to say it, it can just not fund the enforcer.”

In 2014, the Coalition also sought to wind back Labor’s financial advice (FoFA) laws by scrapping a legal obligation requiring financial advisers to take “any reasonable steps” in their clients’ interests.

Senator Cormann said it was unnecessary as there are other safeguards in place, including six steps prescribed in the Corporations Act.

“That is adequate in order to ensure that financial advisers act in the best interests of their client,” he said at the time.  I wonder if he still thinks so.

Alan Kirkland from consumer group Choice said “The big banks, the heads of the major investment houses, the financial planning industry, will be doing cartwheels in the street because of this deal.  Because this deal delivers for industry, it delivers for the big end of town and that is at the expense of consumer protection.”

In October last year, the Coalition appointed former Goldman Sachs banker James Shipton to replace Greg Medcraft as chairman of ASIC.  Apparently he was considered a better choice than the other applicant, Credit Suisse Australia chairman John O’Sullivan, after Labor argued O’Sullivan’s friendship and fundraising links to Prime Minister Malcolm Turnbull would have conflicted his appointment.  Sound familiar?

Shipton said “Financial markets are ultimately built on trust — trust in the integrity of the market and trust in market participants.  I see ASIC as a guardian of that trust.”

It seems the best way to guard trust has been to cover up wrong-doing.

Frydenberg is grasping the report and trying to throw all the blame at ASIC, but it was his government who set them up for failure by slashing their funding, and it was our current PM who called the banking RC a “populist whinge.”

Nice try Josh but the blame ultimately lies with the political protection racket offered by the Coalition government to their big business mates.

 


19 comments

  1. Kaye Lee

    Meanwhile, our assistant treasurer Stuart Robert – the man who was sacked as human services minister in 2016 for breaching the Statement of Ministerial Standards by having shares in a trust linked to the mining company of a generous Liberal donor who he accompanied on a trip to China unbeknownst to anyone in the government, the man who had to front the Queensland Crime and Corruption Commission regarding his staff running for local elections as supposed independents, the man who accepted a Rolex watch from Chinese billionaire Li Ruipeng – doesn’t know the difference between debt and deficit.

    After being busted taking a selfie on set when he didn’t realise the cameras were on, he then informed Sky News viewers that we now have “the lowest debt in 10 years at $10.1 billion.”

    Actually, gross debt is over $538 billion as of today and net debt was over $336 billion at the end of May. Do you think Sky News viewers will realise he made an oopsy? Or did he do it on purpose because he thinks they are too dumb to know the difference?

  2. New England Cocky

    Senator Conmann “said it was unnecessary as there are other safeguards in place, including six steps prescribed in the Corporations Act.

    If the present six steps in the Corporations Act are effective as safeguards, then why has the RC into Banking discovered the rip-offs and other unprincipled actions by bankers … and insurance companies ….. ?????

  3. Terence Mills

    Thanks Kaye : you really have to be on your toes with these blokes.

    Peta Credlin repeated the debt gaff when talking about the deficit reduction and I thought that she would correct herself but that’s not the way it works at SKY – imagine had the ABC confused debt with deficit !

    It’s worth reminding folks that the government’s net debt when they took over from Labor was $174 billion and, as you have noted, on the most recent published figures it’s in the region of $336 billion (May).

  4. Bronte ALLAN

    Sadly, yet more evidence of these inept, lying, flat earth bloody so-called “liberals” at their “best” (worst?). It seems there is no one in this bloody liberal party that has any brains or ideas that make sense to the regular Australians.The sooner they are gone the better off ALL Australians will be!

  5. Kaye Lee

    Yes Terence. Over the GFC, Labor added $220 billion to gross debt in 6 years (there was $50 billion gross debt when Howard lost). The Coalition, with no GFC to contend with, have added $268 billion in five years.

  6. paul walter

    Dishonesty of the very worst kind. He would know better than anyone that the system was designed to fail.

    It is at the same level as blaming Guthrie for Milne and Fifield for not destroying someone just doing their job.

    They know full well, as in most things, what they have done, which is paradoxical since they are medievalist lunatics

  7. Diannaart

    Number 9 on the IPA wishlist to create its wet-dream plutocracy is as follows:

    Abolish the Australian Competition and Consumer Commission

    Which, of course, is in keeping with the neo-conservative agenda of defanging any regulatory government body, such as ASIC. Because less protection government is somehow more efficient.

    The IPA, always trying to be consistent in working towards such results as we are witnessing in the RC into banking, with its “profit rules”, “winners are grinners”, “money talks, bullshit walks” mantras for the chronically mindless – the last refrain I have always found rather contradictory given how much shite is generated by flagrant greed.

  8. Kaye Lee

    I have been trying to understand the new rules where industry funds ASIC rather than the government. It’s REALLY complicated and they haven’t got any money yet – invoices will be issued in January next year. They are apparently expecting to recover costs of $246.4 million. For people who say they want to cut red tape. this process is a nightmare.

  9. Matters Not

    Just wait until ‘security’ (including police presumably) have to recoup costs from protestors at demonstrations. I suspect the trade in Teehan masks of various types will bloom.

    Young Danny Teehan is just the person we need to lead us into the coming years. As soon as he graduates from pre-school.

  10. Lawrence Roberts

    Kaye,
    Did I dream it but didn’t The Abbott government make redundant 500 tax inspectors, allowing them to become tax advisors to would be avoiders.

    Was there not also by Hockey, Immediately after the election when The Labour Party were still in a favourite pose of shocked introversion a pay out to Murdoch’s and Stoke’s empires of a considerable sum of money for I can’t remember what.

  11. John Lord

    Their cutting doesn’t match their spending.

  12. Kaye Lee

    Lawrence,

    “A cut to the Australian Taxation Office’s headcount reaching 4600 in four years has left remaining staff struggling and the agency under-resourced, Labor says.

    Agency annual reports show the magnitude of its recent downsizing under Coalition efforts to reduce the number of public servants.”

    https://www.smh.com.au/public-service/ato-cuts-4600-jobs-in-four-years-as-labor-points-to-it-woes-consultancy-spend-20171219-h078sa.html

    Rupert Murdoch’s media group received a $882m tax rebate from Australia last year. The Australian Tax Office wanted to challenge the claim but was overruled by the Federal Court of Appeal in July last year, The refund amounted to one of the largest ever faced by the ATO but a decision over whether to appeal against the ruling came amid the build-up to the federal election with News Corp’s Australian titles launching a series of attacks on the then Labor government.

    The ATO decided not to appeal the case after consideration by “senior officers and after seeking legal opinion”.

    https://www.theguardian.com/media/2014/feb/17/rupert-murdoch-receives-882m-tax-rebate

  13. James Cook

    Thanks Kaye. I always share your columns with as many friends as possible and , in return, receive many thumbs-up. You must have a very comprehensive file of crap created by these LNP f-wits. Either that, or a fantastic memory! Your posts always give me more ammo to use as arguments against some of my Tele-reading mates … and they are normally silenced!

  14. Kaye Lee

    James,

    I don’t keep any files. I do have a good memory (much to my husband’s chagrine at times). All this information is out there – and over the years I have learned where to look to remind myself. That’s the luxury we have here at the AIMN – the time to go back and remind people. And I don’t even have to get out of my jammies 🙂

  15. Kaye Lee

    VERY interesting article, BC.

    October 2014

    Greg Medcraft, the chairman of the Australian Securities and Investments Commission, may well be regretting his since-retracted statement this week that Australia was a “bit of a paradise” for white-collar crime.

    Medcraft has been pushing for months for tougher penalties in this area. In February, he told a Senate committee that Australia’s penalties were inadequate, with the criminal sanctions inconsistent and civil fines set too low.

    In March, ASIC unveiled an 80-page report comparing the sorts of punishments overseas regulators can demand compared to what is available in Australia – with Australia’s options at times looking paltry by comparison.

    When it came to deterring white-collar crims, Medcraft said, “you have to lift the fear and suppress the greed”.

    “The thing that scares white-collar criminals is going to jail, and that’s what scares them everywhere in the world.

    “The penalties, particularly civil penalties, in Australia for white-collar offences are basically not strong enough, not tough enough.”

    At a Senate estimates hearing the next day, he said he wanted to “correct” the comments as reported, having received a phone call from Finance Minister Mathias Cormann expressing his concern.

    “I think the comments were out of character from the chairman,” said John Brogden, the head of the Financial Services Council. “They don’t reflect the conversations we’ve had with him … I don’t think Australia is a paradise for white-collar criminals at all. We have strong laws, we have strong regulations.”

  16. Bracket Creep

    Shooting the messenger is very popular these days;especially if the powerful and greedy do not like it’s message.

  17. Kaye Lee

    So it seems. Just ask Gillian Triggs.

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