Watchdog chained while corporate crime runs wild
UPDATE 24/10: ASIC chairman Greg Medcraft has been forced into a rapid backpedal in his comments, after being grilled by finance minister Mathias Cormann.
“We need to be careful that... we're not seen as a haven and, therefore... we need to make sure that our penalties are consistent with the rest of the world,” Medcraft told a Senate committee hearing.
Mr Medcraft pointed out that the maximum civil penalty for charges including insider trading and inappropriate advice is $200,000.
Internationally, fines in Canada and Hong Kong can hit $1 million, in the US the penalty is three times the benefit gained, and fines in the UK are unlimited.
ORIGINAL: Australia’s chief of corporate regulation says Australia is too soft on corporate criminals and under-resourced to deal with rampant white collar crime.
The Australian Securities and Investments Commission (ASIC) chairman, Greg Medcraft, spoke at a Walkley Foundation function this week, and used his time to unleash on the weak legislation and lack of resources behind the group that is meant o catch cheats of the highest order.
“Australia is a paradise for white collar crime,” Mr Medcraft said.
“[In] most countries the penalties are two to three times the amount gained or lost,” he told attendees.
“Often [in] Australia it's actually worthwhile breaking the law to do the trade. You can't have that.”
The ASIC boss said corporate criminals all feared going to jail, not losing money, and penalties for breaking financial laws should be changed in response.
“Frankly it's very important in a globalised market that you have penalties that actually match other jurisdictions or you run the risk that we could potentially be picked off,” Mr Medcraft told the ABC in a later interview.
“You've got to lift the fear to suppress greed in the white collar area.”
ASIC’s recommendations to recent Senate inquiries and the Financial System Inquiry called for penalties on corporate crimes to be increased.
“If we want investors and issuers in Australia to have confidence and trust in our market then what they want is to make sure that those who intentionally breach the law will be severely dealt with,” Mr Medcraft said.
“In many of the cases the penalties are not indexed to inflation, some of them are twenty years old.”
He said that in the US corporate tax cheats go to jail, but not in Australia, and the tougher criminal penalties such as jail sentences had brought results.
ASIC has been hit by cuts in recent times, dropping 200 staff from its 1,500 strong workforce this year, with another 100 to go next year.
Incredibly, the corporate regulator has just 20 officers to regulate 54,000 financial planners.
Some have accused ASIC of playing on the poor state of Australian financial advice in a bid for more funding.
In his Walkley talk, Mr Medcraft also argued for more resources, provided by a user-pays system.
“I think it's important that those that generate the need for the use of our resources should pay for those resources,” he said.
“That we have a market priced signal for the use of resources, I think that is a fairer system.”
He says financial planners should have to sit an exam and be registered more rigidly.