When the ASIC bot answers but there’s no follow up

In what is proving to be a rough week for the Australian Securities and Investments Commission (ASIC) another Parliamentary Committee inquiry report has found the regulator falling short in its handling of insolvency issues, including using software to respond to report and then not following up.

The Parliamentary Joint Committee on Corporations and Financial Services report on Corporate Insolvency pointed to the obligations and costs imposed on liquidators in reporting to ASIC and questioned whether they were receiving value for money.

The committee report’s critical assessment of ASIC follows on from an earlier critical report of the regulator’s handling of the transfer of Australian Financial Service License transfers.

“The committee is concerned about the time-consuming ASIC reporting requirements for liquidators and that, in some cases, automatic software is responding rapidly to reports with no subsequent follow-up,” the report said.

“The committee is concerned that unnecessary costs may impact liquidator business models. The committee, like many stakeholders, is left wondering whether better outcomes would be achieved if there were far fewer forms being lodged, but those that were required were dealing with far more material issues.”

With the section of the committee report dealing with the regulatory agencies, it noted that “a range of witnesses commented on the frequency and nature of matters on which ASIC pursues enforcement action. Acknowledging that ASIC is required to respond to a broad remit on scarce resources, a number of inquiry participants expressed dissatisfaction with ASIC’s responsiveness to serious matters reported to it.”:

“The Australian Restructuring Insolvency and Turnaround Association (ARITA) said that very few of the 10,000 suspected cases of illegal director activity that are reported to ASIC by liquidators are ever prosecuted,” the report said. “It raised questions about ASIC’s enforcement priorities, stating ‘ASIC has notably taken more action recently against directors who make false statements on forms lodged with it to voluntarily deregister their companies than directors reported by liquidators’.”

“Some inquiry participants stated that they knew personally of cases where suspected serious misconduct had been reported by liquidators to ASIC, but no enforcement action had followed.”

Amongst its recommendations for change, the committee suggested “the Government and ASIC consider whether any timely changes can be made to the regulations on reporting thresholds, and ASIC’s response to insolvency practitioner reports”.