The Australian Securities and Investments Commission (ASIC) has been evaluating evidence of unethical conduct and breaches of the law by corporate cowboy Kristofer (Kris) Ridgway for more than a year without an outcome.
The regulator sat on its hands until a promotion for an investigation by reporters Adele Ferguson and Naomi Shivaraman into the Brisbane businessman’s dealings was broadcast by the Herald and 60 Minutes last Wednesday night. The following morning, ASIC issued a press release announcing Ridgway had been permanently banned from having any involvement in financial services. The timing would be comical if not so cynical.
ASIC’s investigations have a glacial slowness and, faced with potentially embarrassing media exposure, Australia’s corporate regulator may have wanted to appear ahead of the game. But the reality is that ASIC is a watchdog few fear.
Ridgway used his position at the Brisbane office of Shaw and Partners as a middleman in a global investment scheme to lure unsophisticated investors to buy shares in unlisted companies with the expectation that they would soon be listed and would deliver a windfall. Years later, the companies remain unlisted and investors have not received a cent. Our investigation uncovered other Australian financial advisers using their trusted positions to convince clients to buy the same dubious investments right under ASIC’s nose.
Former NSW Nationals senator John Williams, who played a major role in triggering the banking royal commission, said ASIC’s tardiness was an invitation for a free-for-all. “Have no fear in doing the wrong thing. We can siphon off commissions, break the law, siphon money, have no respect for the person whose money we’re investing for them because there’s no fear of punishment,” he said.
The regulator’s enforcement track record has long been criticised, particularly its use of administrative and negotiated sanctions as primary enforcement. The final report of the royal commission into banking and financial services in 2019 savaged ASIC over its “ineffective enforcement culture” when it came to policing the financial services sector. Commissioner Kenneth Hayne said at the time: “If, over the coming years, it becomes apparent that ASIC is not sufficiently enforcing the laws within its remit, or if the size of its remit comes at the expense of its litigation capability, further consideration should be given to developing a specialist agency of the type I have described.”
ASIC’s continued failures were exposed again just last month in a report that said evidence of alleged wrongdoing is being declined by an automated system and that the commission pursues less than 3 per cent of such reports for further action.
It is clear ASIC has too much to do. When it started in 1991, there were less than 1 million companies registered in Australia; last year, the number topped 2.56 million. Staff numbers have not grown correspondingly. At the same time, its responsibilities expanded from general corporate regulation to include regulation of stock market participants, managed investments, trustee companies and the massive areas of consumer protection in financial services (which includes banking, insurance and superannuation) and consumer credit regulation. Yet governments routinely failed to provide adequate funds to allow it to do its job adequately.
It must be of concern to the Albanese government that ASIC’s continuing “ineffective enforcement culture” towards policing white-collar crime sits in stark relief against the robo-debt scandal when another arm of government hounded some of the poorest and most vulnerable members of our society for money without proper regard for the consequences.
Treasurer Jim Chalmers is considering a review of the Reserve Bank of Australia’s processes and culture and is expected to release the government’s initial reaction before next month’s budget. ASIC’s future should be addressed too. It has dropped the ball so frequently it is no longer fit for purpose. A parliamentary inquiry should look into replacing a tired and ineffectual watchdog.