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Prohibitive ASIC fees the enemy of corporate transparency

The government charges exorbitant fees for members of the public to access information about companies and their directors. Jeffrey Knapp, a lecturer in accounting at UNSW, says the result is not nearly enough scrutiny on our corporate citizens.

In an open and transparent democracy such as ours, anyone can access information about public companies through the ASIC register. Anyone, that is, with deep pockets — and the fees have just gone up again.

I am an accounting lecturer at the Australian School of Business at the University of New South Wales. My research interests are in corporate regulation and disclosure, and I regularly buy company financial reports and other public information about companies from the database maintained by the Australian Securities and Investments Commission (ASIC). But there is something fishy about the so called “search fees” I have to pay ASIC in order to get this information. Something is not quite right every time I pay the equivalent of nearly $2 per page to get a PDF document delivered by email.  The marginal cost of ASIC sending this information to me cannot be more than a few cents. Why am I being price gauged to access public information about companies?

The search fees bolstered the government bottom line for the year to June 30 this year by tens of millions of dollars, and on July 1 they increased again, supposedly in line with the annual CPI. A document that cost me $18 to buy on June 30 now costs $19 from July 1, or 5.5% more.

Malcolm Turnbull in a recent interview said: ”To be frank with you, I think it is really regrettable that ASIC’s data is behind a paywall.” Here is a politician who has his head screwed on straight.

Staying informed about a company is going to cost you big time. Say, for example, you are a creditor or employee of Greyhound Australia Pty Ltd, a near-monopoly provider of interstate bus services that has received state government assistance for running some bus routes. The company’s most recent financial report available from ASIC for the year to June  30, 2012, disclosed revenues of $99 million, assets of $61 million and 550 employees.

Want to know who the directors of Greyhound Australia Pty Ltd are? Pay ASIC $9 please. Want to know who the past directors or past shareholders were? Another $19 . Want to trace the persons who have an interest in the shares of Greyhound Australia Pty Ltd through a web of other companies? That’s another $76 at least. Want to be confident and informed about Greyhound Australia Pty Ltd by viewing its last financial report for 2012? That’s another $38, and an additional $38 if you want to view the financial report for 2011 as well.

What have you learnt from the $180 you’ve given ASIC? Firstly, ANZ bank was a shareholder of Greyhound Australia Pty Ltd but appears to have sold its shares to a company associated with Mark Korda and Mark Mentha of Korda Mentha fame. Mark Mentha is a current director of Greyhound Australia Pty Ltd. In December 2007, at a time the bank was being investigated by ASIC, through its appointed receivers McGrath Nicol ANZ appears to have sold a winery business to a private company associated with the then-chairman of ASIC.

You’ll also learn the directors’ report of Greyhound Australia Pty Ltd for 2012 indicates that the company’s auditor is indemnified by the company against any liability in the performance of their duties.

In the case of a public company listed on the Australian Securities Exchange (ASX), stakeholders do relatively better on the information front because financial reports and other company announcements can be accessed from the ASX website free of charge.  Nonetheless you may still have to pay your way for certain other relevant information.

Now consider my personal example. I wish to conduct a research project using the financial reports of 1500 Australian private companies over three years. In order to do the research, I would have to pay a bill of $171,000 to ASIC. I want to do research that helps inform public policy debate about accounting by private companies in Australia, but I am required to take a second mortgage on my home to do it.

On any objective basis, the prices charged for information on ASIC’s public register are excessive and unreasonable. Why should any member of the public have to pay through the nose for public information about a company in which they have an interest? In contrast, the Companies House in the United Kingdom and the Companies Office in New Zealand make the annual accounts of companies available for a notional charge of one pound or one New Zealand dollar respectively. The Companies House website notes that the agency has recently moved to make financial data on companies available free of charge, thereby “increasing transparency and making data analysis more efficient”.

Meanwhile in Australia, our federal government seems to be hooked on the cash flow it gets from charging prices for public information that are stratospherically beyond the cost of providing the service.

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  • 1
    My Comment
    Posted Thursday, 10 July 2014 at 2:26 pm | Permalink

    At the moment, ASIC is charging these fees, however…

    Back in February, the National Commission of Audit recommended to the Government that: “ASIC’s registry functions transfer to the Australian Taxation Office, which already has registry responsibilities, to streamline business reporting requirements” (Appendix to Report, Volume 2) source: http://www.ncoa.gov.au/report/appendix-vol-2/10-18-rationalising-and-streamlining-agencies-and-boards.html

    However, in the May 2014 Budget, the Government announced funding for a scoping study into the possible privatisation of various Government bodies, including ASIC’s registry functions. (Budget Paper No.2, page 117)

  • 2
    Robert Marie
    Posted Thursday, 10 July 2014 at 2:42 pm | Permalink

    This is 100% true. The Australian financial system is far from transparent. ASIC is captive to the larger players and its methodology and regulatory guides are increasingly working against new entrants. This is driving up costs for retail and wholesale investors due to lack of competition.

    The FOFA roll back will only accelerate this process as the larger vertically integrated Banks and AMP will further dominate the market.

    Overseas markets are becoming more attractive for governance and commercial reasons. Australia’s aim to be the asia pacific financial hub is looking less and less likely.

  • 3
    Graeski
    Posted Thursday, 10 July 2014 at 3:33 pm | Permalink

    But hang on - if it was cheaper to access this information then more people could track what the big end of town was doing, couldn’t they?

    And we wouldn’t want that, eh? After all, it’s supposed to be a free market - free for them to do whatever they bloodywell like without public surveillance!

  • 4
    Luke Hellboy
    Posted Saturday, 12 July 2014 at 12:10 pm | Permalink

    With ASIC’s generally poor performance in investigating and prosecuting (CBA fraud just the latest example), it’s budget being further cut and it’s legislated powers being weakened, investigation by journalists and academics is our last line of defence against corporate excess and criminal activity. Chipping away at this last bastion of accountability is just another example of the government’s war on transparency…

  • 5
    P J Keenan
    Posted Tuesday, 15 July 2014 at 3:12 pm | Permalink

    Malcolm Turnbull expressed regret that ASIC’s data is behind a pay wall. But did he say he wanted the pay wall taken down? Most people would accept that the user pay principle should apply, but the question is, how much should the user pay.

    The search fees that researchers and investigators must pay originated in the pre-computer era, when staff were needed to locate physical folders, find documents within folders, then photocopy and dispatch them. With all these tasks now computerised, fees should not be rising as much as they are. Unfortunately, what appears to happen is that fees are increased across the board in line with inflation, without giving any thought to the actual costs involved or the principles being threatened. In other words, I don’t think there is any conspiracy or hidden agenda is ASIC charging you $2 a page for a pdf file.

    What concerns me now is the serious talk in government and business circles about selling ASIC’s database of information to a private, profit-making enterprise. If this happens, will the government’s ability to control search fees disappear?

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