Insolvency findings misrepresent ASIC's work
This article by ASIC Chairman Tony D'Aloisio originally appeared in the Australian Financial Review on 16 September 2010.
The Senate Reference Committee this week released its long-awaited report in to the Australian insolvency industry. The report made 17 recommendations that I am not in a position to discuss. That is a matter for the Government.
However, the 190-page report devoted an entire chapter to attacking ASIC and I think it is incumbent on me, on behalf of ASIC's 2100 employees, to defend the organisation and clarify the public record.
The report criticises ASIC on four points.
First, it says ASIC relies on complaints instead of proactive profiling of the insolvency industry.
This is simply incorrect. In our submission, we said that since July 2006, ASIC had undertaken 179 insolvency-related investigations which examined practitioners' independence, their remuneration or reporting matters. Critically, more than half of these reviews – 56 per cent – were originated by ASIC’s own market intelligence.
Of the 179 matters, 14 were referred to Deterrence for further action with eight practitioners either banned, suspended or surrendering their registration. Five matters are pending.
ASIC continues to undertake a program of compliance visits for insolvency practitioners. This is standard practice. Our forward plan involves expanding our existing industry examination in response to our own intelligence gathering as well as complaints. Over the coming 12 months, we will follow an extensive program of surveillance visits – scheduled and unscheduled - to insolvency practices around the country.
The Senate report also attacked ASIC over its alleged slowness in responding to complaints.
Each year ASIC receives some 650,000 calls and 13,500 written complaints and enquiries. Every complaint is acknowledged within two business days and we try to respond fully within 28 days. All complaints get the same level of attention, whether they are from a large or a small company and whether the complainant is well resourced or the matter comes from an everyday member of the public.
Those matters which are investigated are often complex and require greater resources, and this involves securing evidence – not hearsay or rumour - and taking the evidence through the court system.
Also, ASIC’s inquiries are conducted confidentially. We do this for a few reasons – to avoid prejudicing those inquiries, to avoid "tipping off" subjects, and to ensure undue media coverage does not prejudice the investigations and any subsequent prosecution.
But running confidential investigations makes it difficult to keep a complainant informed up to the minute about how the matter is progressing. Everyone would like the process to be faster but the reality is ASIC operates within the legal framework we have and this can take time.
The report also had concerns with the information and guidance ASIC provides the insolvency industry.
Anyone visiting the ASIC website can access information about the insolvency process including 11 plain-English information sheets. These give directors, employees, creditors and shareholders a basic understanding of the most common insolvency procedures — liquidation, voluntary administration and receivership.
What is more, over the past 10 years we have issued a number of regulatory guides and consultation papers that help practitioners with their responsibilities and give stakeholders clarity about liquidator’s obligations.
These were all referred to in ASIC's Senate submission.
Last, the Senate report raised issues about the adequacy of ASIC's funding to monitor the insolvency industry.
Resourcing is ultimately a policy issue for Government. However, as I told the inquiry in June, I believe we are resourced sufficiently to regulate the insolvency industry.
ASIC maintains a core group of specialists in the Insolvency Practitioner and Liquidator team supported by our Deterrence, Chief Legal Office and specialist complaints assessment staff.
So while we have a separate insolvency unit, these people are able to draw on the very substantial expert resources in other parts of the ASIC organisation. In other words, ASIC's scale provides a significant regulatory advantage.
Last calendar year, ASIC received 1647 insolvency related complaints. Of these about 8 per cent related to inadequate disclosure or excessive fees and 3 per cent were allegations of fraud. I am not suggesting this shows everything is alright. There is no question there are some bad apples in the industry and we are committed to doing everything that needs to be done to track these people down and kick them out.
Over the coming weeks ASIC will carefully assess the Senate inquiry, determine where we can make improvements and work with the Government in implementing any response it has to the inquiry's recommendations.
Tony D'Aloisio is Chairman of the Australian Securities and Investments Commission.