In the 1990s, a major development in Australian public administration was the creation of specialised statutory agencies responsible for financial regulation. Between 1995 and 1998, the Australian Consumer and Competition Commission (ACCC), the Australian Securities and Investments Commission (ASIC), and the Australian Prudential Regulation Authority (APRA) were established under their own Acts. The responsibilities, resources and public profiles of all three regulators have grown appreciably since their creation. This Research Brief examines a specific challenge for each of the regulators, and the regulatory strategies they employ to monitor Australia’s corporate sector.

Richard Grant

Politics and Public Administration Section

ACCC Australian Competition and Consumer Commission

APRA Australian Prudential Regulation Authority

ASIC Australian Securities and Investments Commission

ASX Australian Stock Exchange

BCA Business Council of Australia

CLERP Corporate Law Economic Reform Program

NAB National Australia Bank

PAIRS Probability and Impact Rating System

SOARS Supervisory Oversight and Response System

TPA Trade Practices Act Australia’s Corporate Regulators—the ACCC, ASIC and APRA

This Research Brief is divided into four parts:

These analyses use committee debates and reports from the 40^{th and 41st Parliaments, the agencies’ most recent Annual Reports, and the positions of the major parties and key interest groups on financial regulation in the lead-up to the 2004 Federal Election. Parts II and III give an insight into the current mindset of the regulators. Part IV builds on this discussion, examining the changing perception of the regulators within the media.}

To begin, it is important to understand the challenge the regulators face. This section notes major trends in the markets they oversee.

The ACCC is an economy-wide regulator with a general enforcement role in relation to general competition and consumer protection law. One of the Commission’s key tasks is to ensure the competitiveness of key network industries such as electricity, gas, telecommunications, aviation and airports, waterfront and shipping, rail and postal services. Healthy competition in these utility markets produces—at least in theory—a flow-on effect to the rest of the economy.

The utility industries are not naturally competitive. They require high capital intensity, a high degree of commonality of production facilities, and a reliance on distribution networks.⁶ The small Australian market accentuates these characteristics. The large distances between major commercial centres and a sparse rural population provide the conditions for single service providers to dominate. In broadband internet services, for instance, the ‘incumbent dominant player has control over most of the current telecommunication networks including the copper wire network as well as the major coaxial cable’.⁷ Indeed, Telstra has an estimated 89 per cent of directly connected lines, 81 per cent of local call revenue, and 95 per cent of industry profits. The ACCC’s Chairman, Graeme Samuel, has acknowledged that in many rural areas, ‘there is not sufficient population to warrant two pharmacies, two supermarkets, two petrol stations, or two of anything’.⁸ The Commission has conceded that population is crucial to attract the number of marketplace participants necessary to have effective competition. It also acknowledges that collusive and/or predatory behaviour in the banking, airline, and petrol industry remains of ongoing concern. Despite several recent prosecutions of cartels, however, there is no evidence that anti-competitive conduct has increased in Australia.

The responsibilities of Australia’s financial regulators have never been greater. At one level, this is reflected in the legislative and administrative changes that have strengthened the architecture of financial regulation. These developments in turn reflect the growth and dynamism of financial institutions, the high proportion of Australian citizens active in these markets, governments’ promotion of the superannuation industry, and the risks for investors, depositors and creditors.

There are several indicators of the size and rapid growth of financial institutions in Australia.

The growth of financial institutions partly reflects the growth in individual Australians’ investment portfolios.

Successive federal governments have promoted the size and competitiveness of the superannuation industry.

The innovations in Australian financial markets over the past decade have been a response to international trends, the number of Australians investing, and the associated increase in funds under management. These conditions have allowed investors to pursue greater rewards at higher risk. Peak financial industry bodies have noted the ‘sophistication of Australian investors and their increasing demand for innovative risk management products’.³² For regulators, these trends present major challenges:

This Brief examines the role of the ACCC, ASIC and APRA in light of these trends. Australia’s financial system is rapidly evolving and increasingly important as a source of income for more Australians. Higher levels of participation have encouraged the supply of a wider range of risk management services and products from a wider range of providers. The general enthusiasm for investment opportunities increases the number of under-capitalised new market entrants, the attractiveness of large-scale mergers, and the opportunities for unscrupulous operators to test regulators’ boundaries. The concentration of market power generally is of enduring concern in a market of Australia’s size.

These trends present various regulatory dilemmas for the ACCC, ASIC and APRA. This section analyses a key challenge for each of the regulators over the past few years.

substantial degree of market power from taking advantage of that power for the purpose of damaging a competitor. There have only been three successful prosecutions under the section in thirty years.⁴² The 1974 enactment prohibited a firm that was in a position to ‘control’ a market from taking advantage of its market power.⁴³ The 1986 amendment established a lower threshold test of having ‘a substantial degree of power’.⁴⁴ For the ACCC to prosecute under section 46, the test is now threefold:

The ACCC has publicly criticised the effectiveness of section 46, and advocates further reform to give greater protection to small business from predatory pricing by larger competitors.⁴⁵ The Howard Government has argued that the Act needs to operate more efficiently ‘to protect competition, not competitors. … The act promotes competition by protecting markets from uncompetitive conduct, not by protecting uncompetitive firms’.⁴⁶ The Business Council of Australia (BCA) has argued that any change to the Act threatens to compromise the overall competitive process.⁴⁷

In May 2002, the Howard Government appointed Sir Daryl Dawson the Chair of an independent inquiry to review and make recommendations on the TPA’s competition

provisions.⁴⁸ The Dawson Committee’s Report was released on 16 April 2003. The ACCC strongly supported the Committee’s recommendations:

In June 2003, the Senate referred section 46 to its Economics Committee. The ACCC’s submission to the Committee argued that the Courts had not got the Boral decision wrong, but that Parliament’s 1986 amendment of ‘a substantial degree of power’ was unclear.⁵² The Committee’s March 2004 report agreed, unanimous in its view that the parliamentary intent of section 46 could not be properly exercised by the ACCC in its present form. This was an important rejoinder to the Dawson Committee’s finding, and a breakthrough for small business and the ACCC on the need for reform. The Committee did not support an effects test, but was strongly supportive of the need to clarify the practical meaning of ‘a substantial degree of market power’.

The report proposed three guides to gauge whether a company was taking advantage of its market power:

Government Senators on the References Committee favoured only eight of the 17 recommendations in the majority report.⁵⁴ The Government Senators’ Report stressed that the consequence of the successful operation of the Trade Practices Act will be to protect firms that, but for anticompetitive conduct, would be competitive.⁵⁵ Their objections to the main Committee were:

On 23 June 2004, the Government tabled its response to the Senate Inquiry, foreshadowing the eight options endorsed by the Government Senators. The Treasurer acknowledged that the courts needed explicit direction to assess anti-competitive behaviour.⁵⁷ The tabled document suggested two key amendments to section 46, alerting the courts to:

The Labor Party and the Australian Democrats strongly supported the 17 recommendations made by the Senate Committee.⁵⁹ Both parties argued that the courts needed more guidance—and the ACCC more power—to properly protect small business from predatory action by big business. On 13 April 2004, the leader of the Labor Party, Mark Latham, promised to increase the powers of the ACCC by:

Latham argued that a Labor government would return the threshold to ‘substantial market power’ from ‘market dominance’.⁶⁰ He claimed that this would give the courts a legislative basis for action, although it is not clear how this would differ from the existing statute.

The BCA has also been a vocal critic of any change to section 46 for fear of its impact on big business. Its argument is that the Senate Committee’s proposals for section 46 reform confuse protection of the competitive process with protecting some sectors of the economy.⁶¹ Whereas the Committee viewed cutting prices below cost as an indication of ‘substantial

The CLERP9 reforms are significant for several reasons. First, they respond directly to the recommendations of the Ramsay and HIH inquiries, and continue the process of financial sector reform commenced by the Wallis Report. The HIH Royal Commission had

recommended a review of executive remuneration ‘as a matter of priority’ (recommendation 1), the extension of liability ‘to all persons’ (recommendation 2), and several measures to address auditors’ independence and international accounting standards.⁶⁹ CLERP9 is a strong response to these concerns.

Despite the Government’s stated preference for promoting best practice rather than legislative requirements, the new rules prescribed in CLERP9 received a negative reaction from business:

A comparison of business reaction to the mandatory CLERP9 regulations and the voluntary ASX Guidelines is instructive. Business clearly dislikes a prescriptive approach. In March 2004, a progress report on the implementation of the ASX Guidelines noted that the feedback from business was generally supportive of the ten principles, and ‘very supportive of the flexibility inherent in the disclosure-based, non-prescriptive approach’.⁷⁹ The Business Council of Australia’s Policy Platform for the 2004 Federal Election similarly supported ‘self-regulation through the ASX Corporate Governance Council … covering a range of corporate governance issues including disclosure, executive pay and shareholder communications’.⁸⁰ It continued:

APRA’s main challenge has been more fundamental than that of the other two regulators. Its short tenure as the national prudential regulator has been defined by the major corporate collapses of HIH, FAI, One.Tel and Ansett in 2001, and the subsequent reforms to the regulator’s structure. Table 2 lists several inquiries and reviews into APRA’s operations dating from October 2000. A common distinction is between APRA ‘pre HIH’ and ‘post HIH’. The reforms to the Authority’s governing structure were certainly significant. What is often overlooked is the scale of the transition in prudential regulation between the establishment of APRA on 1 July 1998, and the liquidation of HIH on 15 March 2001.

These hearings are part of the Senate Estimates reviews of the agencies within the Treasury portfolio. Evidence from these hearings is used in the discussion below.

The HIH collapse changed APRA’s founding premises. The 1997 Wallis report established APRA as a light-handed regulator, viewing all financial institutions as much the same with a view to achieving major efficiency gains.⁹⁰ Post-HIH, APRA is empowered by law with greater investigatory responsibilities, a methodology that critically assesses the financial risk faced by institutions, and an emphasis on effectiveness over efficiency.

Dr John Laker, the APRA Chairman, addressed the House of Representatives Standing Committee on Economics, Finance and Public Administration in May 2004 to outline the major changes to the Authority since HIH. The key changes include:

The APRA Chairman continued by listing the Authority’s priorities. These included a continuing response to the HIH Royal Commission’s 21 recommendations, the implementation of the superannuation licensing regime, applying international financial reporting standards to APRA regulated entities and international capital adequacy requirements to banks.

APRA’s reforms since the collapse of HIH have been tarnished by the National Australia Bank’s unauthorised foreign currency trading losses of $360 million. In February 2004, the NAB Chairman and Chief Executive both resigned. In March 2005, the Bank’s forex head, Luke Duffy, pleaded guilty to charges brought against him by ASIC. Two co-defendants await a court hearing in August 2005, while the case of a third will go direct to trial.¹⁰² APRA was again asked to explain why it had failed to intervene.

However, the NAB losses were no HIH. The financial loss was significantly less, as was APRA’s culpability. The APRA Chairman explained to a parliamentary committee in May 2004 that:

Moreover, the APRA Chairman argued that ‘the problem at the NAB was the NAB’s problem. With HIH we readily accepted that APRA had a responsibility there and could have done better’.¹⁰⁴ Dr Laker gave evidence to the Committee, and in a report published by the ASX, that APRA had told the NAB of its concerns at least six months before the bank began to incur losses. These concerns began in mid 2002 when APRA made an on-site visit. A report based on the NAB’s risk management systems was delivered to the Chairman and the head of risk management in January 2003. It received ‘a fair degree of resistance’ and was not passed on to the board. The Bank took no heed of this warning. It gave a commitment to APRA to meet a timetable for remedial risk management action based on an August 2003 meeting, but again, no action was taken. The trading losses were incurred between October 2003 and January 2004.

The NAB episode does seem to have strengthened APRA’s resolve to affirm its supervisory credentials. In late March 2004, an APRA report criticised the Bank’s management for ‘turning a blind eye to known risk-management concerns’.¹⁰⁵ It imposed higher minimum capital requirements (from nine to ten per cent), ordered the closure of the currency trading business to big corporate clients, and imposed an APRA model for risk management.¹⁰⁶ A financial services executive commented that APRA’s intervention at the NAB was so comprehensive that the next 12 months would be a test of how well APRA could run a bank.¹⁰⁷ Part IV of the paper discusses the media reaction to these announcements.

An October 2002 survey by the Australian Chamber of Commerce and Industry gives a sense of this unease. The survey results were presented to the Dawson Inquiry to voice business concerns of the ACCC’s role. It showed ‘only 36 per cent within business believe the ACCC has an adequate understanding of the commercial environment which it is asked to regulate’.¹¹⁰ The survey also indicated a ‘high level of concern’ within the business community over the powers of investigation given to the ACCC under section 155 of the TPA. Forty per cent believed the request for information was unreasonable. The Chamber of Commerce and Industry’s submission tempered its support for fair competition and a strong TPA with concern over the regulator’s intrusiveness:

The informal relationships between the financial regulators and the business community do matter. The Uhrig Report rightly notes the need for regulators to have the support and respect of the regulated community.¹¹² Mechanisms for enabling business to raise their concerns with regulators, and for business to understand the priorities and strategies of the regulators, are both important. Australian National University Professor John Braithwaite’s widely accepted regulatory design—ascending from voluntary compliance to verbal warnings, the cancellation of licences, and prosecution as a last resort—is not simply a tool to structure the regulator’s actions and finances.¹¹³ It is also a basis on which to explain their requirements to the regulated community.

This announcement received a mixed reaction. The BCA and the Queensland Premier, Peter Beattie, supported the proposal. The Federal Labor leader, Mark Latham, criticised the approach:

The cost and likelihood of a prosecution are also factors the Commission must consider. In November 2003, the Senate Economics Legislation Committee inquired into the ACCC’s process for assessing the likely legal costs of a case. The ACCC’s CEO, Brian Cassidy, explained that the Commission does ‘make some sort of estimate of just what is involved in particular cases’, noting that section 46 cases are invariably complex and expensive.¹²⁰ He explained that the Commission’s future strategies would depend partly on the Government’s funding (see Appendix 2 and 3), although many of the Commission’s responsibilities—such as assessing merger proposals under section 50—were non-discretionary. In February 2004, Samuel sought to put the cost of recent High Court cases in perspective:

More recently, the Commission has defined its enforcement strategy through its focus on breaking cartels. Its approach is based on leniency for ‘whistleblowers’, publicity and selective enforcement. In 2003, the ACCC introduced a leniency policy for cartel ‘whistleblowers’ to expose cartels and indicate areas of the economy where others might exist.¹²² Information on wider cartel use has been volunteered by some business people in return for reduced penalties.¹²³ For example, a whistleblower tipped off the ACCC on the Amcor case, which concerned allegations of a cartel forcing up cardboard box prices.¹²⁴ According to Graeme Samuel, whistleblower immunity has produced ‘high quality information’. As of March 2005, the Commission had 25 cartels under ‘serious investigation’, more than half of which resulted from the leniency policy.¹²⁵

The leniency policy has been accompanied by a publicity campaign aimed at raising corporate stigma of being associated with a cartel, and explaining to the public the impact they have on consumers. Samuel has acknowledged that this campaign has heightened public expectations for action on cartel prosecutions. These expectations have intensified since the announcement of proposed criminal penalties for cartel activity. These new powers—which include provisions for jailing those found guilty of ‘hard-core’ cartel activity—will require the ACCC to work more closely with the Department of Public Prosecutions.¹²⁶ It is expected they will be introduced on 1 July 2005. The current interest within the business community is whether the ACCC’s new power of criminal sanctions will increase its vigilance detecting and prosecuting cartel activity. Alternatively, the deterrent of a jail term may lead the regulator to place more emphasis on its immunity clause. While Samuel is promising legal action on cartel activity, he has also stressed the importance of avoiding ‘blind alleys’—investigations that do not lead to prosecutions.¹²⁷

ASIC’s Chairman, Jeffery Lucy, has described the Commission’s regulatory task in terms of a pyramid divided into three layers.¹²⁸ At the bottom of the pyramid are those who comply with the law. For this group, ASIC’s role ‘is to provide guidance to help them continue to comply’. The middle band contains opportunists who are ‘prepared to bend the rules if they think they can get away with it’. ASIC’s strategy is to influence their views and conduct. At the top of the pyramid is the smallest layer—those who engage in improper and illegal behaviour. ‘ASIC uses its full enforcement strength to regulate this group’.¹²⁹

ASIC emphasises enforcement as ‘an essential part of effective regulation’.¹³⁰ In contrast to the ACCC’s interpretation of the TPA, the ASIC Act is relatively unambiguous and uncontested. The rules governing the conduct of companies and the operation of investment schemes have not produced divisions between big and small business. The standards apply equally to all, and relate to charges of fraud and misconduct. In contrast to the APRA Act, ASIC is not expected to give the same kind of attention to the financial viability of regulated institutions.¹³¹ The Commission’s prosecution strategy is determined in consultation with the Director of Public Prosecutions. If the Director’s advice is of there being strong prospects for criminal prosecution within an acceptable timeframe, ‘it is ASIC’s policy to prefer the laying of criminal charges’.¹³² Its Annual Reports prominently cite successful criminal and civil prosecutions with reference to ‘protecting the public’ and ‘saving investors’ (see Table 2). The most recent, and arguably the most significant prosecution, was the jailing of former HIH Directors Ray Williams and Rodney Adler in April 2005. In the wake of these prosecutions, ASIC chairman, Jeffrey Lucy, encouraged criminals to ‘plead guilty and do it early’.¹³³ Lucy

argued that refusing to cooperate with ASIC might sound like a good legal strategy, but ‘the lawyer is not the one who might end up [with] a jail sentence’.¹³⁴

ASIC has acknowledged that enforcement actions ‘will only ever catch a relatively small number of offenders, often after the horse has bolted’.¹³⁷ Its long-term strategy is to inform the financial services sector of recent legislative changes and ‘to promote public awareness about scams and frauds as part of our consumer education strategy’.¹³⁸ These consumer and industry information campaigns serve to enhance the effectiveness of ASIC’s existing enforcement measures and compensate for the lack of resources to widen the regulatory net.

The Commission’s 2001–02 Annual Report noted ‘a massive increase in public requests for our assistance’.¹³⁹ As Part I of this paper flagged, several factors might explain this increase and the associated need for a public education strategy:

The Commission has also been active in explaining and enacting the provisions of CLERP9 and the Financial Services Reform Act 2003. In May 2004, ASIC released a guide on companies’ continuous disclosure obligations in advance of CLERP9. The guide explains the operation of new infringement notices for breaches of the continuous disclosure guidelines under Chapter 6CA of the Corporations Act. Similarly, the Financial Services Reform Act’s licensing requirements required detailed explanation to the financial services sector of the process for obtaining a licence and the penalties for offering financial advice without one. Over the two year transition period to March 2004, ASIC considered hundreds of applications for relief from the law and answered several hundred enquiries through its Project Office and Frequently Asked Questions on its website.¹⁴⁵ This process has continued in 2005.

APRA’s 2002–03 Annual Report notes the Authority has ‘substantially upgraded its risk assessment capabilities and has significantly increased the intensity of its supervision over the past two years’.¹⁴⁶ In October 2002, it developed a risk-rating system which classifies supervised financial institutions according to the probability they are unable to honour their financial promises to depositors and investors. The Probability and Impact Rating System (PAIRS) is based on the inherent risk of the institution, its management and controls, capital support, and the potential impact of the institution’s failure on the financial system.¹⁴⁷ APRA Insight explained the logic of PAIRS:

27 Australia’s Corporate Regulators—the ACCC, ASIC and APRA

APRA’s powers on reporting standards are set out in Part 3, Division 2 of the Financial Sector (Collection of Data) Act 2001.¹⁵⁴ Section 13 of the Act establishes APRA’s power to set standards for a wide range of reporting documents, and the timeframe within which these are to be supplied. It allows different reporting standards to be set for different authorities. Section 14 requires financial entities’ chief executive officers ‘to notify the entity’s governing body of a failure to provide reporting documents to APRA’.¹⁵⁵ This requirement does not apply to superannuation entities.

Newspapers’ editorial comment on the ACCC was more guarded of the Fels agenda, and the influence of his style. In March 2003, The Australian’s editorial argued:

The Australian Financial Review’s praise was similarly qualified:

Historically, the perception of ASIC was as a fairly passive regulator, burdened with a huge administrative responsibility.¹⁶⁸ In 2002, Christine Parker, then a senior lecturer in Law at the University of New South Wales, observed: ‘on the whole, ASIC has not yet managed to create the image of invincibility in tough enforcement action that can motivate preventative self-regulation’.¹⁶⁹ Parker noted that the Commission’s preference for civil, rather than criminal action, meant that it failed to cast a threatening shadow in the way that the ACCC’s price-fixing cases had done.¹⁷⁰ However, the April 2005 jailing of HIH founder, Ray Williams, and former HIH Director, Rodney Adler, led to strong media support for a more proactive stance from the Commission. Several sources made mention of ASIC’s 93 per cent prosecution success rate, but noted its reluctance to follow through with their cases.¹⁷¹ The Australian Financial Review commented that Adler’s maximum four and a half year sentence:

Bryan Frith wrote of the judgement in the Weekend Australian that not only are the courts ‘catching up with public opinion’, but ASIC is now much more vigorous in its pursuit of corporate crime.¹⁷³ Elizabeth Knight argued that while the convictions were ‘nowhere near as onerous as some had been expecting’, ASIC had done as much as it could to gain the maximum possible prosecution.¹⁷⁴ Knight reasoned that ‘if any jail term is a good deterrent, then ASIC has done its job’: others, including Labor’s corporate governance spokesperson, Senator Penny Wong, questioned why some charges against Adler had been dropped.¹⁷⁵ Certainly, ASIC continues to be confronted with the public perception that white-collar crime tends to go unpunished. Accordingly, although criminal prosecutions account for a small portion of ASIC’s activities, there will be strong interest in the remaining HIH prosecutions.¹⁷⁶

The media coverage of APRA has generally been critical of its inaction. The media widely explained the high-profile corporate collapses of the early 2000s in terms of regulatory failure. The media tended to connect the HIH, One.Tel, Ansett, FAI Insurance and NAB failures to APRA, rather than ASIC. Its critique was often damning. In November 2002, for example, the Australian Financial Review commented on what it saw as APRA’s mishandling of the HIH case:

The same month, when APRA announced its remedial action for the NAB, the commentary was quite different. The Australian Financial Review noted banking and finance circles were ‘agog’ at the extent of APRA’s action. In May, the paper reported that ‘APRA’s punishment was the most severe given to a financial institution since the prudential regulator was constituted in 1998’.¹⁸⁰ In August 2004, the Australian reported BCA chief Hugh Morgan’s claims that ‘we’re dripping in regulatory madness’ and observed:

1. Commonwealth of Australia, The Financial System: Towards 2010, Department of the Treasury, at http://fsi.treasury.gov.au/content/downloads/FinalReport/overview.pdf (accessed 18 April 2005).

3. Australian Prudential Regulation Authority, Submission to the HIH Royal Commission, cited in ‘The failure of HIH Insurance’, The HIH Royal Commission, 2003, p. 201.

4. See J. Perkins, The Wallis Report and the Australian Financial System, Melbourne University Press, Melbourne, 1998, p. 18. The Financial System Inquiry is available at http://fsi.treasury.gov.au/content/FinalReport.asp

6. G. Samuel, ‘Some thoughts on economics and regulation’, Economics Papers, vol. 23, no. 1, March 2004, p. 17.

7. Parliament of the Commonwealth of Australia, ‘Review of the ACCC Annual Report’, House of Representatives Standing Committee on Economics, Finance and Public Administration, June 2004, p. 22.

8. Official Hansard, Melbourne, 5 March 2004, p. 15. See also Parliament of the Commonwealth of Australia, ‘Review of the ACCC Annual Report 2003’, House of Representatives Standing Committee of Economics, Finance and Public Administration, June 2004, p. 26.

9. Australian Financial Markets Association, 2004 Australian Financial Markets Report, January 2005, at http://www.afma.com.au/afmawr/pdf/2004afmr_overview.pdf (accessed 18 April 2005).

11. See Australian Prudential Regulation Authority, ‘APRA statistics reveal superannuation assets close to $650bn’, APRA Media Release, 11 January 2005.

12. Australian Prudential Regulation Authority, ‘Superannuation Trends, September Quarter 2004’, APRA Statistics, January 2005, p. 5.

13. Australian Bureau of Statistics, Managed Funds Australia, ABS Cat No. 5655.0, December Quarter 2004.

14. Australian Securities and Investments Commission, Annual Report 2003–04, 2004, p. 45.

15. Australian Prudential Regulation Authority, Annual Report 2003–04, 2004, inside cover.

16. Australian Prudential Regulation Authority, Annual Report 2003–04, 2004, p. 29.

33 Australia’s Corporate Regulators—the ACCC, ASIC and APRA

17. Australian Stock Exchange, ASX Share Ownership Study 2003—Highlights, 3 February 2004, at http://www.asx.com.au/shareholder/pdf/SOSHighlights03.pdf (accessed 18 April 2005).

18. Australian Stock Exchange, 2004 Australian Share Ownership Study, February 2005.

20. Australian Securities and Investments Commission, Annual Report 2003–04, 2004, p. 44.

21. Australian Bureau of Statistics, ‘Survey of Employment Arrangements and Superannuation’, ABS Cat. No. 6361.0, June 2000. The Survey of Employment Arrangements and Superannuation was conducted for the first time in 2000. The ABS will conduct a similar survey in 2005.

22. Australian Prudential Regulation Authority, ‘Superannuation Trends, September Quarter 2004’, APRA Statistics, January 2005, p. 4, at http://www.apra.gov.au/Insight/Home.cfm (accessed 18 April 2005).

23. Australian Prudential Regulation Authority, APRA Insight, 3^{rd Quarter 2004, p. 18, at http://www.apra.gov.au/Insight/Insight-3rd-Quarter-2004.cfm (accessed 18 April 2005).}

24. J. Laker, Appearing before the House of Representatives Standing Committee on Economics, Finance and Public Administration, House of Representatives Standing Committees Budget Estimates, Debates, 10 May 2004.

25. See Department of the Treasury, A more flexible and adaptable retirement income system, Department of the Treasury, Canberra, 25 February 2004, at http://demographics.treasury.gov.au/content/_download/flexible_retirement_income_system/flexible_retirement_income_system.pdf (accessed 18 April 2005).

26. See C. Field, ‘Retirement Savings Accounts Bill 1996’, Bills Digest, no. 80, Parliamentary Library, Canberra, 1997, at http://www.aph.gov.au/library/pubs/bd/1996-97/97bd080.htm (accessed 18 April 2005).

27. G. Selleck, ‘Superannuation Laws Amendment (2004 Measures No. 2) Bill 2004’, Bills Digest, no. 170, Parliamentary Library, Canberra, 22 June 2004, at http://www.aph.gov.au/library/pubs/bd/2003–04/04bd170.pdf.

28. See B. Dunstan, ‘Brough defends super stance’, Australian Financial Review, 22 March 2005, p. 5.

29. G. Selleck, ‘Superannuation Laws Amendment (2004 Measures No. 1) Bill 2004’, Bills Digest, no. 169, Parliamentary Library, Canberra, 21 June 2004, at http://www.aph.gov.au/library/pubs/bd/2003–04/04bd169.pdf.

30. See L. Nielson and R. Webb, ‘The Future Fund’, Research Note, no. 43, Parliamentary Library, Canberra, 2004–05, April 2005, at http://www.aph.gov.au/library/pubs/rn/2004-05/05rn43.pdf.

31. C. Wright, ‘Multibillion-dollar fund fight’, Weekend Australian Financial Review, 11–12 September 2004, p. 12.

32. D. Kent, Australian Financial Markets Report, Australian Financial Markets Association, 2003, at http://www.afma.com.au/afmawr/pdf/2003afmr_overview.pdf (accessed 18 April 2005).

34 Australia’s Corporate Regulators—the ACCC, ASIC and APRA

33. A derivative is a financial instrument, the price of which is based on the value of one or more underlying pricing indices (eg: securities, shares, commodities). A credit derivative is a contract to transfer the risk of the total return on a credit asset falling below an agreed level, without transfer of the underlying risk. See http://en.wikipedia.org/wiki/Credit_derivatives (accessed 18 April 2005).

34. T. Boyd, ‘Risk of a slip-up in derivatives’, Australian Financial Review, 5 November 2003. See also D. Lascelles, ‘Banana Skins 2003: The CSFI’s annual survey of risks facing banks’, Centre for the Study of Financial Innovation, September 2003, at http://www.csfi.org.uk/ (accessed 18 April 2005).

35. Australian Financial Markets Association, 2004 Australian Financial Markets Report, January 2005, p. 44, at http://www.afma.com.au/afmawr/pdf/2004afmr_overview.pdf (accessed 18 April 2005).

38. M. Pearson, Appearing before the Senate Economics Legislation Committee, Senate Standings Committee Budget Estimates, Debates, 6 November 2003, E123.

39. Australian Prudential Regulation Authority, ‘Superannuation: Do It Yourself?’, APRA Insight, 1^{st Quarter 2004, at http://www.apra.gov.au/Insight/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=7094 (accessed 18 April 2005).}

43. B. Bailey, ‘Protecting Small Business from the Misuse of Market Power’, Research Note, no. 15, Parliamentary Library, Canberra, 27 October 2003.

44. Trade Practices Revision Bill 1986.

45. See the comments of ACCC Chairman Graeme Samuel in ‘Business laws a flop, says ACCC’, Herald Sun, 21 June 2004, p. 24.

46. Senator George Brandis, Letter to the Editor, ‘We all agree on competition reform’, Australian Financial Review, 10 March 2003, p. 52.

47. See G. Costa, ‘Canberra acts on competition laws’, The Age, 24 June 2004, p. 3.

48. Review of the Competition Provisions of the Trade Practices Act, Review Committee, January 2003. The Chairman was Sir Daryl Dawson. Ms Jillian Segal and Mr Curt Rendall were also appointed to the Committee.

35 Australia’s Corporate Regulators—the ACCC, ASIC and APRA

49. Australian Competition and Consumer Commission, ‘Dawson Report—Preliminary response: criminal sanctions major step forward for competition policy’, Press Release, no. 74, 16 April 2003, at http://www.accc.gov.au/content/index.phtml/itemId/347733 (accessed 18 April 2005).

50. The Hon. Peter Costello, ‘Commonwealth Government response to the review of the competition provisions of the Trade Practices Act 1974’, Commonwealth of Australia, at http://www.treasurer.gov.au/tsr/content/publications/TPAResponse.asp (accessed 18 April 2005).

51. Editorial, ‘Fels: section 46 needs overhaul’, Australian Financial Review, 6 June 2003, p. 3.

52. See Australian Competition and Consumer Commission, ‘Market Power’ Definition Needs Legislative Clarification: ACCC’, Press Release, no. 193, September 2003, at http://www.accc.gov.au/content/index.phtml/itemId/363639/fromItemId/378016 (accessed 18 April 2005).

53. Senate Economics References Committee, ‘The effectiveness of the Trade Practices Act 1974 in protecting small business’, Debates, March 2004, Chapter 2, pp. 7–28. See also B. Bailey, ‘Small business success on section 46 of the Trade Practice Act’, Research Note, no. 48, Parliamentary Library, Canberra, at http://www.aph.gov.au/library/pubs/rn/2003–04/04rn48.htm (accessed 18 April 2005).

56. See also G. Brandis, Senate Economics References Committee Report, Debates, 1 March 2004, p. 20,345.

57. The Hon. P. Costello, Press Conference, Parliament House, 23 June 2004, at http://www.treasurer.gov.au/tsr/content/transcripts/2004/073.asp (accessed 18 April 2005).

59. M. Latham, ‘Restoring Innovation and Success—Labor’s plan to reform the Trade Practices Act’, ALP News Statements, 13 April 2004. Senator A. Murray, ‘Senate report offers small business some real TPA protection’, Media Release, 1 March 2004.

61. See H. Morgan cited in G. Costa, ‘Canberra acts on competition laws’, Australian Financial Review, 26 June 2004, p. 3.

62. T. O’Loughlin, ‘Call for fair go for small firms’, Australian Financial Review, 2 March 2004, p. 3.

63. Editorial, ‘Senate misses point on TPA’, Australian Financial Review, 3 March 2004, p. 54.

64. F. Brenchley, ‘Minor changes tipped for act’, Australian Financial Review, 21 July 2004, p. 3.

65. See S. Dudley, T. John and J. Davidson, Trade Practices Legislation Amendment Bill 2004, Bills Digest, no. 23, Parliamentary Library, Canberra, 2004–05, at http://www.aph.gov.au/library/pubs/bd/2004-05/05bd023.htm (accessed 18 April 2005). Also, see K. Murphy, ‘Dawson dawdle is over’, The Australian, 22 October 2004, p. 25.

36 Australia’s Corporate Regulators—the ACCC, ASIC and APRA

S. Dudley, ‘Corporate Law Reform Program (Audit Reform and Disclosure) Bill 2003’, Bills Digest, no. 166, Parliamentary Library, Canberra, 2003–04, 21 June 2004, at http://www.aph.gov.au/library/pubs/bd/2003–04/04bd166.pdf (accessed 18 April 2005).

67. The Hon. Peter Costello, ‘Corporate disclosure: Strengthening the financial framework’, Commonwealth of Australia, September 2002, p. iii, at http://www.treasury.gov.au/documents/403/PDF/Clerp9.pdf (accessed 18 April 2005).

69. The Hon. Justice Owen, HIH Royal Commission, op. cit., lxv–lxvii, at http://www.hihroyalcom.gov.au/finalreport/ (accessed 18 April 2005).

70. See J. Arbouw, ‘Looking through the hourglass’, Company Director, August 2003, pp. 6–10.

71. S. Wilson, ‘All hail Clerp9 – but no resting on our laurels’, The Australian, 29 June 2004, p. 25.

72. ASX Corporate Governance Council, ‘Principles of Good Corporate Governance and Best Practice’, Australian Stock Exchange, March 2003, at http://www.shareholder.com/visitors/dynamicdoc/document.cfm?documentid=364&companyid=ASX (accessed 18 April 2005).

74. See The Hon. Peter Costello, ‘Financial Sector Advisory Council Review of the outcomes of the Financial System Inquiry’, Press Release, 2 August 2004, at http://www.treasurer.gov.au/tsr/content/pressreleases/2004/062.asp (accessed 18 April 2005).

75. See A. Fabro and J. Moullakis, ‘Regulation can go too far: report’, Australian Financial Review, 3 August 2004, p. 3. The original quote comes from Financial Sector Advisory Council, ‘Review of the Outcomes of the Financial System Inquiry 1997’, August 2003, p. 9, at http://www.treasury.gov.au/documents/860/PDF/FSAC%20Final%20Report.pdf (accessed 18 April 2005).

76. F. Spencer, ‘CLERP9 reforms add too much complexity’, Australian Financial Review, 20 August 2004, p. 54.

77. D. Kitney, ‘Compliance crunch hits the boardroom’, Australian Financial Review, 7 September 2004, p. 1.

79. ASX Corporate Governance Council Implementation Review Group, ‘Principles of good corporate governance and best practice recommendation’, IRG Report to ASX Corporate Governance Council, 31 March 2004, at http://www.asx.com.au/about/pdf/IRG_Report_to_ASX_CGC_final.pdf (accessed 18 April 2005).

80. Business Council of Australia, Policy Platform for the 2004 Election, at http://www.bca.com.au/upload/BCA_Policy_Platform_for_the_2004_Federal_Election.pdf (accessed 18 April 2005).

37 Australia’s Corporate Regulators—the ACCC, ASIC and APRA

82. The Hon. Justice Owen, ‘The collapse of HIH: reasons, circumstances and responsibilities, Volume 3’, The HIH Royal Commission, p. 368. Also available at http://www.hihroyalcom.gov.au/finalreport/Chapter%2024.HTML (accessed 18 April 2005).

84. Editorial, ‘A tragedy of APRA errors’, Australian Financial Review, 13 November 2002.

85. The Palmer Report was commissioned by the APRA Board to provide an independent and impartial review of APRA’s actions and inactions with respect to HIH. See J. Carmichael, ‘APRA: the way forward’, Speech, 22 November 2002, p. 4.

89. Editorial, ‘After HIH, what to do with APRA’, Australian Financial Review, 15 January 2003.

90. J. Phillips, ‘APRA doesn’t escape due criticism’, Australian Financial Review, 22 April 2003, p. 71. APRA’s Chairman, John Laker, denies that the Wallis Report got ‘the premise of APRA wrong’. See House of Representatives Standing Committee on Economics, Finance and Public Administration, House of Representatives Standing Committee Budget Estimates, Debates, 10 May 2004, p. 1.

91. For an explanation of (and background to) the Act, see I. Ireland, ‘General Insurance Reform Bill’, Bills Digest, no. 21, Parliamentary Library, Canberra, 2001–02, at http://www.aph.gov.au/library/pubs/bd/2001-02/02bd021.pdf (accessed 18 April 2005).

92. J. Laker, Senate Economics Legislation Committee, Debates, 6 November 2003, p. 89.

93. See the comments of The Hon. Joseph Hockey in Associated Press, ‘Up to 50 insurers to be forced out’, Canberra Times, 10 August 2001.

94. For an explanation of (and background to the Act), see D. Walsh, ‘Superannuation Safety Insurance Act 2004’, Bills Digest, no. 83, Parliamentary Library, Canberra, 2003–04, at http://www.aph.gov.au/library/pubs/bd/2003–04/04bd082.pdf (accessed 18 April 2005).

96. Australian Prudential Regulation Authority, Superannuation: Licensing and registering a superannuation entity, July 2004, p. 6, at http://www.apra.gov.au/Superannuation/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=7189 (accessed 18 April 2005).

97. S MacKenzie, ‘APRA fears a licence take-up bottleneck’, Australian Financial Review, 10 March 2005, p. 7.

98. J. Laker, House of Representatives Standing Committee on Economics, Finance and Public Administration, House of Representatives Standing Committee Budget Estimates, Debates, 10 May 2004, p. 1.

100. The Hon. Justice Owen, ‘The failure of HIH Insurance’, The HIH Royal Commission, Sydney, 2003, p. 208.

38 Australia’s Corporate Regulators—the ACCC, ASIC and APRA

101. Commonwealth of Australia, Australian Prudential Regulation Authority Amendment Bill 2003, at http://scaletext.law.gov.au/html/ems/0/2003/0/2003060503.htm (accessed 18 April 2005).

102. O. Galacho, ‘Sting in ASIC’s tail’, Herald Sun, 29 March 2005, p. 25.

103. J. Laker, House of Representatives Standing Committee on Economics, Finance and Public Administration, House of Representatives Standing Committee Budget Estimates, Debates, 10 May 2004, p. 14.

106. S. Oldfield, ‘Forex fallout: NAB raises $3bn to appease regulator’, Australian Financial Review, 12 May 2004, pages 1 and 55.

107. T. Boyd, ‘It could have been tougher’, Australian Financial Review, 26 March 2004, p. 73.

108. J. Uhrig, Review of the Corporate Governance of Statutory Authorities and Office Holders, Commonwealth of Australia, June 2003, p. 51, available at http://www.finance.gov.au/governancestructures/docs/The_Uhrig_Report_July_2003.pdf (accessed 18 April 2005).

110. Australian Chamber of Commerce and Industry, ‘Business Concerns about ACCC’s Understanding of the Commercial Environment: Supplementary Submission to Trade Practices Act Review, Results of a Survey of Australian Business’, Press Release, 29 October 2002, p. 2.

113. See P. Grabosky and J. Braithwaite, Of Manners Gentle: enforcement strategies of Australian business regulatory agencies, Melbourne University Press, Melbourne, 1986.

114. Editorial, ‘Samuel must bark and bite’, The Australian, 14 August 2003, p. 10.

115. See T. O’Loughlin et al., ‘Samuel’s grand vision: a world without regulation’, Australian Financial Review, 12 August 2003, p. 4.

117. T. O’Loughlin, ‘Competition regulator has lost its hard edge: dossier’, Australian Financial Review, 4 June 2004, p. 29.

120. B. Cassidy, Appearing before the Senate Economics Legislation Committee, Senate Standings Committee Budget Estimates, Debates, 6 November 2003, p. 113.

39 Australia’s Corporate Regulators—the ACCC, ASIC and APRA

121. ‘ACCC sets sights on Cartels’, Inside Business, ABC Television, 15 February 2004, at http://www.abc.net.au/insidebusiness/content/2004/s1045295.htm (accessed 18 April 2005). See also, G. Samuel, Official Hansard, 5 March 2004, Melbourne, p. 26.

122. Inside Business, ibid. See also Maddocks Trade Practices Update, ‘ACCC submission to the Dawson Inquiry’, July 2002, at http://www.maddocks.com.au/download/trade-july-2002.pdf (accessed 6 February 2005).

123. F. Brenchley, ‘Samuel on a mission to bust cartels’, Australian Financial Review, 26 June 2004, p. 7.

124. F. Brenchley, ‘Soft-speaking Samuel now has a big stick’, Weekend Australian Financial Review, 5–6 February 2005, p. 6.

126 The ACCC’s July 2002 submission to the Dawson Review noted that ‘the draft policy would assist the ACCC eliminate hard core cartels operating in Australia that harm consumers’. See Australian Competition and Consumer Commission, ‘Draft leniency policy to break hard core cartels issued’, Press Release, at http://www.accc.gov.au/content/index.phtml/itemId/88120 (accessed 18 April 2005). The Dawson Review endorsed the Commission’s proposal of jail terms for cartel members, subject to a suitable definition of ‘hard core cartel behaviour’. The government also wanted clarification of the term ‘hard core’. The term is not used in legislation, but receives occasional use in the press.

130. D. Knott, Australian Securities and Investments Commission, ‘ASIC Annual Report 2002–03’, Commonwealth of Australia, 2003, at http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/annual_report2002-03.pdf/$file/annual_report2002-03.pdf (accessed 18 April 2005).

132. Australian Securities and Investments Commission, ‘ASIC Annual Report 2002–03’, Commonwealth of Australia, 2003, p. 6.

134. J. Lucy cited in F. Buffini, ‘Integrity is paramount, says ASIC’, Australian Financial Review, 16 April 2005, p. 13.

135. Editorial, ‘More than credibility on the line for ASIC’, Australian Financial Review, 12 December 2001.

40 Australia’s Corporate Regulators—the ACCC, ASIC and APRA

136. See Editorial, ‘Canberra gets in on the Act’, The Australian, 21 May 2004, p. 6.

137. Australian Securities and Investments Commission, ‘ASIC Annual Report 2002–03’, Commonwealth of Australia, 2003, p. 5.

139. Australian Securities and Investments Commission, ‘ASIC Annual Report 2001–02’, Commonwealth of Australia, 2002, p. 5.

140. Institute of Financial Services Australia, IFSA industry statistics, at http://www.ifsa.com.au (accessed 18 April 2005).

141. J. Lucy, ‘Significant regulatory issues facing ASIC and Australian business’, Australian Securities and Investments Commission, Presentation to the Australia-Israel Chamber of Commerce, 4 August 2004, p. 5.

142. Australian Securities and Investments Commission, ‘ASIC launches financial services consumer education strategy’, Media Release, no. 378, 25 October 2001, at http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/consumer_ed_strategy.pdf/$file/consumer_ed_strategy.pdf (accessed 18 April 2005).

143. Australian Securities and Investments Commission, ‘Financial Literacy in Schools’, Discussion Paper, 30 June 2003, at http://www.fido.asic.gov.au/asic/pdflib.nsf/LookupByFileName/FinLit_schools_DP.pdf/$file/FinLit_schools_DP.pdf (accessed 18 April 2005).

144. J. Lucy, ‘Significant regulatory issues facing ASIC and Australian business’, Australian Securities and Investments Commission, Presentation to the Australia-Israel Chamber of Commerce, 4 August 2004, p. 9.

145. Australian Securities and Investments Commission, ‘ASIC’s approach to Financial Sector Reform Act following the transition’, Media Release, IR 04–05, 23 February 2004.

148. Australian Prudential Regulation Authority, ‘APRA’s risk of superannuation funds: PAIRS’, APRA Insight, 1^{st Quarter 2004, p. 19.}

149. For a detailed explanation of this calculation, see ‘APRA’s risk rating of superannuation funds’, APRA Insight, 1^{st Quarter 2004, pp. 20–25.}

150. J. Carmichael, ‘APRA: the way forward’, Australian Prudential Regulation Authority, Speech to CEDA, 22 November 2002, p. 4.

151. John Laker, Opening Statement appearing before the House of Representatives Standing Committee on Economics, Finance and Public Administration, House of Representatives Standings Committee Budget Estimates, Debates, 10 May 2004, p. 1.

154. Financial Sector (Collection of Data) Act 2001, at http://scaleplus.law.gov.au/html/pasteact/3/3469/pdf/FinanSectorCollData2001.pdf (accessed 18 April 2005).

41 Australia’s Corporate Regulators—the ACCC, ASIC and APRA

156. Australian National Audit Office, ‘APRA’s Prudential Supervision of Superannuation Entities’, Audit Report no. 6, 2003–04, Commonwealth of Australia, at http://www.anao.gov.au/WebSite.nsf/Publications/0EC3543C99FB257DCA256D9C007FE71F (accessed 18 April 2005).

157. Joint Committee of Public Accounts and Audit, Review of Auditor-General’s Reports 2003–04, First and Second Quarters, p. 38, at http://www.aph.gov.au/house/committee/jpaa/agfirst-sec03_04/chapter4.pdf (accessed 18 April 2005).

158. Australian Prudential Regulation Authority, Superannuation Reporting Standards, at http://www.apra.gov.au/Statistics/Superannuation-Reporting-Standards.cfm (accessed 18 April 2005).

160. Senate Economics Legislation Committee, Debates, 6 November 2003, E97.

161. Australian Prudential Regulation Authority, ‘Prudential Supervision of Lenders Mortgage Insurance’, Proposed reforms, Discussion Paper, August 2004, p. 2.

162. See comments of Federal Court Judge Peter Heerey, ACCC V Exxon Mobil, BP and Shell, 1997. See also the comments of Federal Court Judge Paul Finn, ACCC V Electricity Supply Association of Australia, 2001.

164. F. Brenchley, Allan Fels: A Portrait of power, John Wiley and Sons, Milton, 2003, pp. 278–9.

165. Editorial, ‘Fels failure must end era at ACCC’, The Australian, 31 March 2003, p. 8.

166. Editorial, ‘Changing the ACCC guard’, Australian Financial Review, 2 April 2004, p. 62.

168. See A. Ferguson, ‘ASIC: The watchdog no one fears’, Business Review Weekly, vol. 22, pp. 58–64.

169. C. Parker, ‘Regulating self-regulation: The ACCC, ASIC, Competition Policy, and Corporate Regulation’, in S. Bell (ed.), Economic Governance and Institutional Dynamics, Oxford University Press, Melbourne, 2002, p. 258.

171. For example, R. Bromby, ‘Jailings make market ‘safer’’, Weekend Australian, 16 April 2005, p. 36.

172. Chanticleer, ‘ASIC should chance its arm some more’, Australian Financial Review, 15 April 2005, p. 92.

173. B. Frith, ‘Corporate crims have to account’, Weekend Australian, 16 April 2005, p. 36.

174. E. Knight, ‘As for the corporate cop’s plea, it did the best it could’, Sydney Morning Herald, 15 April 2005, p. 19.

175. See V. Carson, ‘Corporate criminals will pay: Costello’, The Australian, 15 April 2005, p. 4.

42 Australia’s Corporate Regulators—the ACCC, ASIC and APRA

178. Editorial, ‘A tragedy of APRA errors’, Australian Financial Review, 13 November 2002.

179. Editorial, ‘APRA has a lot to learn’, Australian Financial Review, 25 March 2004, p. 78.

180. S. Oldfield, ‘Forex fallout: NAB raises $3bn to appease regulator’, Australian Financial Review, 12 May 2004, p. 55.

181. R. Gluyas, ‘Watchdog gets off the leash’, The Australian, 30 August 2004, p. 37.

Source: Trade Practices Act 1974, Australian Prudential Regulation Authority Act 1998, Australian Securities and Investments Commission Act 2001. See http://scaleplus.law.gov.au/

Source: Statement of Financial Performance, APRA, ASIC and ACCC Annual Reports. 2003–04 and 2004–05 estimates are taken from Appropriation Bill No. 1, Budget Statement No. 4, Agency Resourcing, 2004–05. * Appropriation Bill No. 2 (equity injections) # APRA’s funding comes from Special Appropriations.

44 Australia’s Corporate Regulators—the ACCC, ASIC and APRA

Source: Australian Competition and Consumer Commission, Annual Report 2002–03, Annual Report 2003–04; Australian Prudential Regulation Authority, Annual Report 2002–03, Annual Report 2003–04; Australian Securities and Investments Commission, Annual Report 2002–03, Annual Report 2003–04; Commonwealth Budget 2003–04, Budget Paper No. 2, p. 259.

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