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'Tough cop' ASIC too timid on enforcement: Allan Fels - Ruth Williams - APRIL 15, 2016 - SMH Australia's corporate watchdog lacks a strong culture of law enforcement and is "too cautious" when it comes to pursuing wrongdoing by companies, says former senior regulator Allan Fels. Professor Fels said the Australian Securities and Investments Commission [ASIC] needed to be more "courageous" in pursuing litigation and had relied too heavily on negotiated settlements – known as enforceable undertakings [EUs] – struck between ASIC and companies that have transgressed. Professor Fels, the former chairman of the Australian Competition and Consumer Commission, said that if a parliament had passed legislation outlawing something, the job of the regulator was to ensure those laws were complied with – not to strike EUs where there had been serious breaches of the law. "A law enforcement body needs to have an unconditional commitment to upholding the law without fear or favour," he told a Melbourne Press Club lunch on Thursday. He said that ASIC's culture had been lacking for "many years" and that while it was starting to improve, "there is a long way to go." Professor Fels said ASIC had also struggled with its roles that required it to enforce corporate laws while "facilitating" business. "One involves a strong commitment to tackling business malpractice, the other involves leaning over to be business friendly as far as possible. There's a serious tension between the two." His comments stand in contrast to Treasurer Scott Morrison's recent description of ASIC being a "tough cop on the beat". Mr Morrison has tried to head off calls for a royal commission into the financial services sector by arguing ASIC already has strong powers to investigate the banks. Calls for the royal commission have mounted after Fairfax Media exposed wrongdoing at the Commonwealth Bank's financial planning and life insurance businesses, National Australia Bank and IOOF and after the bank-bill swap rate rigging scandal embroiled Westpac and ANZ. The federal Opposition last week announced it would hold the royal commission if it won the upcoming election, and some members of the Coalition have also backed the idea. But there has been speculation that the government will instead instruct ASIC to conduct an inquiry into the banking industry – an idea Commonwealth Bank whistleblower Jeff Morris, who also spoke at the lunch, said was "ludicrous".
Mr Morris tipped ASIC off to wrongdoing and a cover-up within the Commonwealth Bank's financial planning arm. But it took ASIC 16 months to act on the information. "It's a ludicrous suggestion, that ASIC should investigate the past failings of ASIC," Mr Morris said. ASIC chairman Greg Medcraft admitted in May 2014 at a senate inquiry into its performance that the regulator had been "too trusting" of the Commonwealth Bank. That inquiry later found that ASIC was a "timid, hesitant regulator, too ready and willing to accept uncritically the assurances of a large institution".
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