VIDEO: Damning inquiry finds ASIC failed to stop financial crime

SARAH FERGUSON, PRESENTER:  Adele Ferguson, welcome back to 7.30.

ADELE FERGUSON, ABC INVESTIGATIONS:  Good to see you.

SARAH FERGUSON:  Now, look, we've got a report here that says the regulator, ASIC (Australian Securities and Investments Commission), is reluctant or unwilling to commence investigations. After all we've been through with ASIC, how did we get to this point that that's what report finds now?

ADELE FERGUSON:  Well, that's the big question. This has been going on for decades. We've had a number of these inquiries. 

In 2014, we found that the regulator was so ineffective that it called for a royal commission into the Commonwealth Bank because ASIC wasn't capable of doing its job. 

Fast forward to 2018, we have a royal commission. It is scathing of ASIC. Nothing happens. We're here in 2024 and here is another report.

SARAH FERGUSON:  So what's at the heart of this? Are they not properly funded, do they not have the appetite to regulate the business community? What is at the heart of the failures that this report has found?

ADELE FERGUSON:  It's all of those things. Its remit is way too wide. So over the years, as it has been seen to be ineffective, timid too slow, Treasury has been giving it more and more things to look at - consumer law, banking, insurance - all these things have been loaded onto this regulator. 

Its budget has been increased a bit but when you look at it in the perspective, it raises $1.8 billion a year. Its budget is about $500 million. It doesn't have enough money and then it's got a culture that is toxic. The staff aren't properly motivated, according to a survey that was released recently, so there's a lot of problems with this regulator.

SARAH FERGUSON:  What would be the purpose, as the report suggests, of splitting ASIC in two? What difference would that make?

ADELE FERGUSON:  Right now, it's doing two things. It's looking at compliance of how companies in the market operate, and it's also meant to be an enforcer. 

It's not doing the job as an enforcer properly. That's one of the big problems with ASIC. So the suggestion is if you split it in two and have a separate enforcement agency, then maybe it will do its job better.

SARAH FERGUSON:  You used a very strong term before. You said the culture inside ASIC is toxic. So would the kind of solutions that are being called for in this report, fix those internal culture problems, do you think?

ADELE FERGUSON:  I think what needs to happen is you need to have a proper, the Senate inquiry can only do so much. You need to have experts really look at how a new-look regulator should look, have a look at whether the governance is correct, the leadership is correct.

Should the governments be picking the chairs, or should it be done in a different way? 

So, there's many ways that need to be looked that this report hasn't gone into that I think needs to happen but it's so important that it's done properly.

SARAH FERGUSON:  Now tell me about that because one of the findings of the inquiry is that ASIC itself rarely operates with a severity permitted by its own mandate. Why is it so reluctant to use the powers it already has?

ADELE FERGUSON:  Well, I guess, that gets down to the culture. If you have a culture that isn't to use the powers that you have, then you're not going to use those powers and that's been going on for decades. It's not just a recent phenomenon. 

During the royal commission, some of the horrifying things that came out were that it was letting companies read draft press releases before they released them, and the commissioner Hayne said the regulated is dictating what the regulator says.

SARAH FERGUSON:  Now as we know the Government's just received this report. They'll take some time to look at it but if you had a message for them about what they should focus on, what the most important thing to do to transform ASIC, what would you, Adele Ferguson, say?

ADELE FERGUSON:  I would say we need a proper enforcement agency. Too many people have lost too much money over the years from companies that have done the wrong thing, and the regulator has been missing in action. So, we really need to have a better regulator.

SARAH FERGUSON:  Now, of course, as an investigator, you have spent time with the individuals because in the end this is about ordinary Australians who lose money because of the failure of this organisation. That's right, isn't it?

ADELE FERGUSON:  Absolutely. There have been so many victims. I get emails every day from people who have been done over by insurance companies, banks, franchise companies, and the regulator. There's a common theme, where is the regulator?

SARAH FERGUSON:  Adele Ferguson, always a pleasure to have you in our studio, nearly in our studio. Thanks for joining us.

ADELE FERGUSON:  Thank you.