‘Can’t get to everything’: ASIC pressed on dismissed complaints

As he noted, there had been 10,711 reports of misconduct made to ASIC around corporations and financial services from the public during 2020-21, although the actual total could be larger as the regulator merges reports that overlap on the same entity and issue.

A tenth of these complaints revolved around credit issues, 5 per cent were around general licence obligations and 17 per cent were about a provider giving financial services or operating an unregistered managed investment scheme without a licence.

While ASIC referred 15 per cent of the total reports for action and resolved 9 per cent, 65 per cent of the matters were analysed and assessed for no further action.

Of those reports that were dropped, 48 per cent were said to have insufficient evidence.

Around a tenth (9 per cent) of the 10,711 issues were outside of ASIC’s jurisdiction and 2 per cent of the cases involved no breach or offences.

“Can ASIC please explain why so many complaints are resulting in no further action, 65 per cent seems quite high,” Senator Rennick questioned.

Warren Day, chief operating officer at ASIC responded that there would be a wide range of matters across the 10,711 complaints, which would have no standing.

“They are effectively allegations of misconduct that often don’t have the evidence, or maybe are out of jurisdiction, or may actually be for another regulator, or maybe out of time – whole range of things at play there,” he said.

Further, the complaints add to breach reports from industry. There were 1,174 breach reports from auditors during the 2020-21 year, in addition to 2,435 from Australian Financial Services (AFS) licensees and managed investment schemes and 817 whistleblower disclosures.

Of the auditor and AFS reports, 89 per cent had been analysed and assessed for no further action.

But as Mr Day explained, ASIC has limited resources. There are around 70 to 80 staff dedicated to managing its complaints and they effectively act as a “triage” unit, deciding which matters should be prioritised.

“I think it’s a hard and difficult comparison to say the number of investigations we’ve taken and the number that we’ve completed, against the number of reports of misconduct that we will get from the general public,” Mr Day said.

“Because then on top of that we’ve got the number of breach reports that we get from industry. On top of that again, we’ll get the number of reports that we will get from insolvency practitioners as well.

“And so with ASIC’s resources, we’ve got to decide which of those is the higher priority because we can’t get to everything.”

Mr Day also reported that a number of complaints could involve people within companies with vendettas against each other – at which point ASIC would tell them to seek legal advice and resolve it themselves.

But Senator Rennick pointed to prior inquiries, including the banking royal commission, which had suggested that ASIC has a “reactive culture” and doesn’t take adequate action in response to corporate misconduct.

“Doesn’t the 2021 annual report suggest that ASIC hasn’t learned any lessons in the past decade?” the senator quizzed.

ASIC chair Joe Longo defended the watchdog, claiming that it was a “misreading of the annual report”.

“Even before I started, ASIC was an active litigator, and a lot of our matters are actually litigated or prompted by our own action,” Mr Longo said.

“I haven’t been asked the last 10 months or so about our approach to enforcement. I think it’s active, targeted, credible. We’re probably one of the most active regulatory litigators in the country.

“There isn’t a day that doesn’t pass when ASIC isn’t in court, either a civil court or a criminal court, and I’m not talking about magistrates courts, I’m talking about superior courts all around the country.”

The regulator’s processes around its industry levy calculation and estimates have also copped recent scrutiny, after aggregators were recently hit with a spike in fees.

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