A couple of past statements by Treasurer Scott Morrison now look particularly silly after yesterday’s catastrophic royal commission hearing into AMP.
One was just two weeks ago, when — still in “we don’t need no stinkin’ royal commission” mode — he said the commission had so failed to produce anything the government didn’t know. One wonders if he still thinks that. Did he know that AMP had lied over 20 times to ASIC? That it had a deliberate policy to keep charging clients for advice even when they weren’t receiving any advice, nor was there any adviser to provide it? That AMP knew this was illegal but did it anyway? That the board grossly interfered with an report by a law firm (Clayton Utz, which was apparently fine with the whole process) into the matter that it then presented as “independent” to ASIC? Funny, he stayed awfully quiet about it if he did.
The other is more than a cheap gotcha.
In the government’s failed campaign against a royal commission, Morrison and other ministers insisted that it was unnecessary because the Australian Securities and Investments Commission had the powers of a standing royal commission “and more”. We’ve barely got a couple of months into the hearings and a recommendation to expand ASIC’s powers is already being mooted — specifically, to enable ASIC to direct companies about how to compensate their victims when they pull stunts like AMP and the big four banks have.
The problem goes deeper. AMP evidently thought nothing of lying to ASIC. As teased out at yesterday’s hearing, AMP lied to ASIC over 20 times about charging fees for no service — in particular, trying to convince the regulator it was just an “administrative error” rather than what it was: a deliberate policy undertaken by senior management in full knowledge it was against the law. They even initially lied to the victims when they decided to refund some charges.
The reason some of the most senior people in AMP did this is because they were totally unafraid of ASIC, which lacks both the punitive options to make companies and individual executives and directors fear its wrath, and the willingness to use them. Despite the stunning revelations that had emerged from the royal commission so far, ASIC’s new chairman, James Shipton, appointed by Morrison, is still talking about letting major financial corporations fix their own culture, while the regulator will merely “stand ready” to act. There’s no point in giving a wet lettuce-wielder like Shipton more power if he’s simply not interested in using it.
In the United States, Wells Fargo last week revealed it had to set aside US$1 billion to cover likely fines for selling automotive insurance people didn’t need and other misconduct. That’s on top of the US$185 million fine the bank paid for its fake account scam last year. And the US Federal Reserve took the extraordinary step in freezing Wells Fargo’s balance sheet at end 2017 levels and ordered the bank to sack four directors. By now, more than half the WF board, including its chair and longest serving directors, have been dumped. And in the US, even minor lies to the Securities and Exchange Commission can get you a stint in prison, asset forfeiture and a permanent ban from engaging in business.
In the absence of such powers, AMP’s board should resign forthwith. They have no credibility with regulators, the public or the markets. After all, if you’ve lied to ASIC, who else have you lied to?
Former ASIC chairman Greg Medcraft, who was only a belated convert to the cause of regulatory aggression, at least called for an end to ASIC’s current ability to levy only piddling fines, and wanted to be able to fine banks the entire profit from any dodgy dealing. The regulator needs to be able to come after the likes of AMP and the big banks with billion-dollar fines and the threat that executives and board members could wind up doing a stint behind bars if they’re not forthcoming to investigators. And it needs a chair and an executive that is willing to use such powers.
But then, Scott Morrison already knows that, apparently.