Andrew Bragg’s Senate probe calls for ‘failed’ Australian Securities and Investments Commission to be split

A Coalition-dominated Senate committee has called for the Australian Securities and Investments Commission to be broken up amid claims it has failed to do its ever-expanding job.

In a report accusing ASIC of being “reluctant or unwilling to commence investigations” and attacking its track record, the senators call for greater transparency with investigation and enforcement results.

The Coalition team, led by outspoken ASIC critic Senator Andrew Bragg, says the Federal Government should consider setting up a companies authority and a separate financial conduct enforcer.

They call for a reversal of Coalition and Labor governments continually piling more regulatory and administrative responsibility on an agency created in 1991 when States handed company regulation to the Commonwealth.

ASIC now covers companies, markets, insurance, consumer credit, financial services, a variety of professions dealing with financial products and key aspects of Australia’s $3.5 trillion-plus superannuation industry.

“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,” the Coalition team said in their report.

“ASIC’s capacity to respond to corporate misconduct is now compromised by significant structural, resourcing and cultural issues.

“Exercising ASIC’s responsibilities needs to be done better and it needs to be done differently.

“ It is clear ASIC has failed.”

They quote submissions from academics and former ASIC bosses about the agency’s unclear and ever-expanding responsibilities, including claims by James Shipton that its enforcement ability had been harmed by its budget not increasing with its remit.

“It is being asked to do too much with too little,” said Mr Shipton.

A dissenting report filed by Labor senators accuses their Coalition foes of reducing significant evidence provided over two years to “little more than a headline” and claimed ASIC’S remit had been the subject of various inquiries and reviews.

The Labor senators said Senator Bragg’s report did not further the longstanding debate because it “because it lacks detail on any potential model for separating the markets, corporations and financial services functions” or when and how this might be achieved.

“It also does not properly weigh evidence presented to the inquiry in favour of ASIC’s broad remit,” the Labor team said.

The Coalition team’s report effectively recommends the dismantling of the twin peaks financial model created by Treasurer Peter Costello in 1998.

This model features the Australian Prudential Regulation Authority and ASIC, whose name was changed from Australian Securities Commission in line with a broader remit.

ASIX took over the regulation of public-facing actions by insurers, superannuation funds and banks, while APRA became responsible for the administration of key aspects of their financial strength. A variety of agencies were scrapped or sidelined.

The Coalition Senate report says the twin peaks model was never intended to operate with ASIC “administering such an extensive set of responsibilities”.

The inquiry’s recommendations to break-up ASIC go against the recommendations of the Hayne Royal Commission, which concluded in 2019 that ASIC’s problems were with its culture rather than the size of its remit.

The Coalition report highlights criticisms by University of Wollongong academic Andy Schumlow, who argued in a submission that Commissioner Kenneth Hayne “missed the point”.

Pointing to the shortcomings of the twin peaks model, Dr Schmulow said Australia does not have does not have a dedicated financial-industry prudential regulator and a financial-industry conduct regulator.

“Instead, what we have is a dedicated financial-industry prudential regulator and a financial-industry-and-every-other-industry-and-everything-to-do-with-licensing-reporting-corporate-governance-(generally)-insolvency-money-commerce-business-and-the-economy-except-partnerships conduct regulator,” Dr Schmulow said.

While handing in the Coalition team’s report, Senator Bragg said too many Australians had been hurt by ASIC’s persistent failure to enforce the law and win prosecutions.