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.