Regulator was right to bring James Hardie case to court
Letter by ASIC Chairman, Tony D’Aloisio, published in the Australian Financial Review, p43 on Wednesday 22 December 2010
I wish to correct errors in your editorial “ASIC culture under a cloud” (December 20). These are:
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That ASIC erred in bringing proceedings for breach of s180 (1) of the Corporations Act against the non-executive directors. The draft ASX market release was misleading (both the trial judge and Court of Appeal held that). There was a clear case to answer on the approval of the release which was in the public interest to bring. No error of judgment was made by ASIC in bringing these proceedings.
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That ASIC was ‘sneaky’ in conducting its case. This is incorrect and is not what the Court of Appeal said. As I have explained in detail in an opinion piece which is available on our website. ASIC has at all times complied with the Model Litigant rules. In essence we played by the rules as they existed before the Court of Appeal’s ruling. We did not understand that the law required us to call the legal adviser. We did make his draft statement available to all defendants.
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It is not correct to say that after the James Hardie case we would push the regulatory rules to the limit against directors. I have said that ASIC’s job is to enforce the law as is given to it by Parliament. When asked if we would seek changes to the law, I have said we will only go to Parliament for additional powers after we have shown that we have pushed the existing regulatory regime to the limit. In other words, not to seek to add new laws until policy deficiencies are shown in existing laws. What I have also said is that litigation is fraught with risk. Win or lose, ASIC needs to be prepared to bring actions where there is a case to answer and which are in the public interest.
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The comment that ASIC has let its “crusading zeal cloud its judgment” is incorrect. ASIC carefully considers each action it takes on and it has in place significant checks and balances in the decision making process including full Commission approval for major matters.
The editorial concluded by saying that ASIC must pursue directors for substantive failings and ASIC is entitled to test the boundaries of the law on directors’ duties. Where there is a case to answer, we agree and we do! We have in the James Hardie case.
Tony D’Aloisio
Chairman, Australian Securities and Investments Commission