paying the piper .....
Australian Securities and Investments Commission chairman Greg Medcraft might wish he was in Kuala Lumpur on Wednesday instead of fronting up to the Masonic centre in Sydney's central business district for a Senate inquiry into the performance of the corporate regulator.
The bipartisan Senate inquiry was announced in July after a series of articles in Fairfax Media revealed serious misconduct and a cover-up by Commonwealth Bank's financial planning arm and the failure of ASIC to act promptly.
It was revealed 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.
The inquiry has attracted a near-record number of submissions and a report is expected at the end of May, summing up the regulator's performance, how to improve it, and alternative funding models, including privatising its corporate registries business, which could fetch billions of dollars.
Medcraft had planned to be out of the country on Wednesday to attend meetings with the International Organisation of Securities Commissions, which he chairs, but it clashed with the opening of the inquiry.
Interestingly, the chairman's travel is likely to be a topic of discussion in the first round of hearings. Medcraft spent an estimated 74 days attending meetings overseas or in transit and clocked up a taxpayer-funded travel bill for himself and staff travelling with him of $246,490.
The frequency of his travel has been under attack and came to light after a Fairfax Media investigation late last year, followed by a freedom of information request that coincided with ASIC releasing the travel figures.
One of the most controversial trips was to St Petersburg during a Senate hearing on June 5 that sparked the call for an inquiry into ASIC's performance.
ASIC is under scrutiny over its handling of a string of corporate collapses and financial scandals, including its slowness to respond to a group of whistleblowers inside the Commonwealth Bank who reported misconduct and a cover-up by at least seven financial planners employed by the bank.
Medcraft's trips included Brussels in February, London, Paris and Luxembourg in September, and Wellington in July. It is understood the New Zealand trip did not include a visit to his organisation's counterpart in that country, the Financial Market Authority.
The relationship between ASIC and FMA is necessarily close, given the dominance of Australian-owned financial institutions in New Zealand, and the fact that the two regulators undertake a number of mutual recognition and joint regulatory activities to ensure consistent and harmonious regulatory approaches to avoid arbitrage between the economies.
Running ASIC is not an easy job and many of its staff work tirelessly to try and get the crooks and ensure companies and individuals enforce the law.
As an organisation it has been running for more than 20 years and it is high time to review whether the legislation, culture and structure is still relevant or needs an overhaul.
Having a regulator that is feared is vital for market integrity and ensuring companies and individuals do the right thing. In a recent feature article authored by myself and colleagues Ruth Williams and Ben Butler, some of the criticisms raised in the submissions and off-the-record discussions included it being too slow to act, lacking transparency, being captured by the big end of town, and having a ''glass jaw''.
ASIC attracted criticism over its handling of the David Jones trading scandal, the CBA financial planning scandal and the Reserve Bank currency notes scandal, to name a few. It has also attracted criticism in relation to some high-profile court cases that were lost due to perceived mishandling. The more notable cases include AWB and Opes Prime.
Dean of law at the University of Western Sydney Professor Michael Adams said that, in the AWB case, people were open to corruption and they got the ''tiniest'' slap on the wrist.
Anne Lampe, a former employee of ASIC's media unit, 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,'' she said. ''However, if a corporation or big fish reported a trading irregularity, backsides came off their seats quickly.''
Initial hearings will take place over three days, with witnesses including ASIC, the Law Council of Australia, the Financial Ombudsman Service, Industry Super Australia and CPA Australia's Alex Malley, who has said: ''An effective regulator … is the least investors should expect for their tax dollar. A review of functions, expectations and operations of ASIC is now well overdue and in the public interest.''