We are constantly told that ignorance is no defence legally, morally or in life. You have to inform yourself.

So what then are we to make of the claims by ASIC that the problems with Margin Brokers like Opes Prime and Tricom, plus shorting and stock lending was not as a result of its actions? ‘Not our fault’ was the claim yesterday in the wake of details of a shake up at the regulator.

The only explanation is that ASIC didn’t know what was going on in the markets, that it had been sleeping while the market was booming and all those rorts, such as the Westpoints, Opes Prime, the Tricom situation, stock lending, shorting and egregious examples of failures in disclosure and special dealings, came as a result of its incompetence.

ASIC will deny that, but we have yesterday’s statement, announcing the results of the review.

ASIC said it will not only appoint an external advisory panel drawn from a variety of sectors to provide advice on market developments but additional investment will be poured into market research and analysis, it said, extra resources will be directed to supervising brokers and operators of exchange-traded products and the surveillance of exchange-traded products.

“The review will result in us being closer to the market. We will be more accessible and flexible, and we will be able to take emerging trends into account more quickly,” ASIC chairman and former ASX chief executive Tony D’Aloisio said in the statement.

Now that’s the key admission. Here we have the country’s leading financial regulator promising to upgrade surveillance and information flows about the market, after the biggest boom in Australian history has gone bust.

So was ASIC flying blind during the boom, or was it merely being led by the blind? Or did it reflect the easy money, high pay, bonus culture that flourishes in corporate and public life and grew under the Howard/Costello Government?

We have a Takeovers Panel that is run by a group of individuals from the market chosen for their knowledge in takeover laws and situations to adjudicate on the basis of a lack of conflict of interest.

Now we have ASIC wanting an external advisory panel, hopefully on the same basis as the Takeovers Panel, but with no overlap.

But that begs the question first up, who will be on the panel? Fund managers, advisors, brokers and lawyers will get a look in, but what about representatives of the small investor, who always seems to be last in these matters.

But why does ASIC need people from the markets to help them? Why can’t ASIC go and hire aggressive, clever and talented investment bankers or lawyers, pay them a pot of money and tell them to get on the case of the naughty folk in the market?

It is still hard to believe that ASIC seemingly had little knowledge of the growth of Margin Broking activities of the likes of Opes Prime and Lift Capital; that they didn’t really understand (or try to find out) about covered and naked short selling, and had no understanding of the stock lending rort carried out by super funds and other investors.

The statement yesterday quoted the ASIC chairman, Tony D’Aloisio as saying:

“The review will result in us being closer to the market, we will be more accessible and flexible, and we will be able to take emerging trends into account more quickly.

  • better understands the markets it regulates;
  • is more forward-looking in examining issues and assessing systemic risks;
  • better articulates why it has chosen to intervene and the behavioural changes it wants the market to make; and
  • has a clearer set of priorities (principal priorities being retail investors and insider trading, market manipulation and disclosure).”

That’s actually the list of charges in an indictment of what ASIC wasn’t doing over the biggest boom we’ve had.

And there should be an addendum: sack the ASX from its regulatory role.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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