Australia’s corporate and financial watchdog has ‘comprehensively failed’ to fulfil its regulatory obligations, according to a damning report by a Senate economics committee.

The committee this week released its final report on the capacity of the Australian Securities and Investments Commission to investigate and enforce breaches, and whether it’s meeting the expectations of government, business and the community.

ASIC was established to investigate and take enforcement action when corporate misconduct occurs. However, it’s been criticised for years for being a toothless tiger.

“Evidence to this inquiry has made clear the deep flaws in ASIC’s approach to investigation and enforcement” the report finds.

“Too often, ASIC fails to respond to early warnings of corporate misconduct and does not routinely use the full extent of its powers to achieve strong enforcement outcomes.

“This approach fails to deliver justice to the victims of corporate crimes, undermines economic productivity and does not deter future poor behaviour.”

‘Significant structural issues’

The report says ASIC’s capacity to respond to corporate misconduct is compromised by significant structural, resourcing and cultural issues, and it is currently operating with a staff of less than 200.

It notes ASIC has received an increase in funding from $607 million in 2016–17 to $861 million in 2021–22 but says this hasn’t resulted in any significant improvements in performance.

We need to have a country where people have confidence that the laws that are made by the parliament will be enforced by the agencies.

Committee Chair Andrew Bragg

In 2021–22 ASIC received more than 230,000 reports of alleged misconduct, including allegations of serious unlawful conduct. However, the watchdog took no further action in 66 per cent of the reports received.

And when it did investigate, the process was’marred by delay and inefficiency’, the report says.

ASIC is also able to refer serious cases for prosecution to the Commonwealth DPP, however these referrals are dropping. In 2022–23, 41 referrals were made to the CDPP, down from 86 in 2018–19.

‘Failed regulatory experiment’

The committee calls for change and says it’s time to step away from the failed experiment of positioning ASIC as a ‘do everything’ corporate regulator.

It makes a number of recommendations, including separating ASIC’s functions into a companies regulator and a separate financial conduct authority.

It also calls for an overhaul of whistleblower protections including establishing a financial incentive for whistleblowers to come forward.

“Clearly, exercising ASIC’s responsibilities needs to be done better and it needs to be done differently,” the report concludes.

“Continually assigning ASIC more duties and powers will simply deliver more of the same result: an overburdened and monolithic regulator that fails to meet expectations.”

Damning data

Committee Chair Andrew Bragg said he was surprised at how damning the data about ASIC’s activity was.

“We need to have a country where people have confidence that the laws that are made by the parliament will be enforced by the agencies,” Senator Bragg told the ABC.

“I think it’s too big, and that’s why we’re recommending that the two agencies created after ASIC is no longer operating, cleaner lines between corporate law enforcement and financial law enforcement services, will mean that you have a more effective and efficient law enforcement operation.”

An ASIC spokesperson said ASIC was taking time to consider the report.

“Throughout the inquiry we have shared our strong enforcement record on behalf of Australian consumers and investors,” the spokesperson said.

“ASIC is in court almost every day pursuing wrongdoing and in the last 12 months alone launched around 180 new investigations.”

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