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Citizens Electoral Council of Australia

Media Release Wednesday, 26 April 2017

Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Email: cec@cecaust.com.au
Website: http://cec.cecaust.com.au
 

ASIC’s gutless pandering to banks is proof Australia needs Pecora Commission, Glass-Steagall

The Australian Securities and Investment Commission (ASIC) describes itself, and is described by the federal government, as the “tough cop on the beat” protecting Australian investors from the depredations of banks and other financial institutions. But a string of exposés by The Australian last week prove conclusively that ASIC has fallen victim to a textbook case of “regulatory capture”, and believes its real job is to shield the banks from the consequences of their misdeeds.

In a series of articles published 19-22 April, based upon documents acquired after a two-year Freedom of Information battle, journalist Ben Butler revealed that from 2006 until at least February 2015 ASIC had been actively colluding with the big four banks, Macquarie and AMP to protect their reputations. This was a period in which scandal after scandal came to light involving the wealth management divisions of the banks preying on unsuspecting customers, for which the regulator should have held them financially and legally responsible. Instead, Butler has exposed how ASIC allowed the banks to “water down … press releases relating to some of the biggest scandals to rock the sector in recent years, including shoddy financial planning that hurt the retirement savings of up to 560,000 CBA and Macquarie customers and sparked calls for a royal commission into the sector.”

Among the more glaring instances of ASIC’s collusion:

  • In 2014, CBA’s chief lawyer David Cohen was apparently “closely involved” in drafting a press release about fresh licence conditions imposed on CBA's notorious financial planning arm after a string of scandals. Despite ASIC reportedly being “furious” at the time that dodgy information provided by CBA had caused ASIC to “inadvertently” mislead parliament on how much compensation CBA paid to its financial planning victims, ASIC allowed Cohen to effectively censor the press release, removing a statement from the original draft that stated that CBA knowingly misled ASIC.
  • Also in 2014, ASIC accepted NAB’s edits to a press release concerning its Navigator digital investment platform, after it was found to have robbed a total of $1.9 million from the superannuation accounts of some 43,000 customers in 2006-12. An employee in ASIC’s media division wrote in an email to colleagues, “This is one of those releases that has been drafted by everyone other than ASIC ha!” That ASIC did not properly hold NAB to account at that time is demonstrated by the fact that in 2015 the bank paid a further $25 million in compensation to 62,000 Navigator clients following a review by PricewaterhouseCoopers.
  • In January 2013 ASIC announced it had accepted a so-called enforceable undertaking (combination cash fine and good-behaviour bond) from Macquarie Group over several years of what it called “recurring compliance failures”, affecting some 160,000 customers, at its wealth-management branch Macquarie Equities Ltd (MEL). This time, the bank didn’t even have to ask: ASIC neutered the press release of its own volition, accepting the results of a review by accounting giant EY over its own investigators’ findings. ASIC Commissioner Peter Kell and executive Louise Macaulay even objected to senior investigator Adrian Borchok’s description of MEL’s compliance efforts as “superficial”. Borchok (who has since left ASIC) fought back, telling Macaulay in an email that “the EY review was a sham therefore they are getting off easy with ‘superficial’”, but he was overridden and the offending word deleted.

End ‘Too Big To Fail’

“Why is ASIC afraid to rock the boat?” asked CEC leader Craig Isherwood today. “The answer is obvious: Like its fellow regulators the Reserve Bank and APRA, along with the federal government, ASIC’s directors have bought into the idea that the big four and Macquarie are Too Big To Fail [TBTF], and must be preserved—at all costs—for the sake of so-called ‘financial stability’. This is a lie.

“In fact”, Isherwood continued, “the opposite is true: the fact that the major banks are TBTF, and thus able to flout the law with impunity, is precisely why they can no longer be allowed to exist in their present form. They need breaking up, and the way to do that is to emulate the 1933 US Glass-Steagall Act, the most successful financial regulation in history, which separated and protected commercial banking from speculative finance for over six decades during which there were no systemic financial crises in the United States.”

Mr Isherwood also renewed his long-standing call for an Australian “Pecora Commission” modelled on the 1933 US Senate investigation led by New York prosecutor Ferdinand Pecora, which set the stage for Glass-Steagall’s passage. “It has been obvious for some time, and these revelations by The Australian confirm, that ASIC is not up to the task assigned it”, Isherwood said. “That is why in 2009 I called for the establishment of a Pecora-style inquiry with the widest possible remit, to investigate and prosecute, in public, the crimes of the banks, and of the officials—elected or otherwise—who have colluded with them.

“The behind-the-scenes fights described in Mr Butler’s articles prove that at least some ASIC employees are capable of, and committed to, upholding the responsibility entrusted to them, were they not stifled by such dismal bureaucratic and Parliamentary leadership”, Isherwood concluded. “Let’s clear out the dead wood, and give them the tools and back-up they need to sort this mess out.”

The CEC has just produced a colour brochure explaining the urgent need for a Glass-Steagall separation of the Australian banking system, called “Australia sleepwalking to economic Armageddon”. Click here for a free copy of “Australia sleepwalking to economic Armageddon” (also order multiple copies to distribute).

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