Siobhan Moran-McFarlane: Barely a day goes by when ASIC isn’t in the news.

(Media grabs)

“Today ASIC slammed Australian Super.”
“Financial regulator, ASIC, has now released a scathing report.”
“Cameron Waugh is at the centre of an insider trading case that’s got the whole of St George’s Terrace talking/****ing themselves.”

Siobhan Moran-McFarlane: Hi, I'm Siobhan Moran-McFarlane and you might already know that the Australian Securities and Investments Commission, our corporate regulator, is one of the busiest law enforcement agencies in the country. 

It keeps our financial system and markets safe and makes sure consumers, investors and businesses aren’t being ripped off.

(Media grab)

“ASIC has won a federal court case against global investment giant, Vanguard, over allegations of greenwashing.” 

Siobhan Moran-McFarlane: But what goes on behind the headlines? How does our corporate watchdog decide who to prosecute or which investment scams it should flag to the public?  

Over 6 episodes we’re going to pull back the curtain on the inner workings of ASIC and hear from insiders on the details of some of their most high-profile cases, as well as the biggest challenges facing the Commission in its forensic pursuit of wrongdoing. 

Inside ASIC – listen out for the first episode. 

Jo Longo: Hi, it’s Joe Longo here - and I’ve been the Chair of ASIC for the past three years.

ASIC – the Australian Securities and Investments Commission - is an independent government body that regulates corporates, markets, financial services, and consumer credit in Australia. And as I’m pretty fond of reminding people, we’re also one of the nation’s most active law enforcement agencies.

This is the first of 6 episodes where we’re going to pull back the curtain on the work of ASIC and tell you the inside story of what we’re doing every day to keep Australian consumers, financial markets and businesses safe.

On this episode we’re talking about scams - and how we’re working to detect, prevent and respond to scams and help protect Australians from losing their hard-earned money to scammers.

This is Inside ASIC.

Siobhan Moran-McFarlane: Hi, I’m Siobhan Moran-McFarlane and a big thanks to Joe Longo for helping us kick this series off.

And there’s a reason we’re starting with scams - because they’ve absolutely been one of the hottest financial topics for ordinary people over the past few years.

(Media grabs)

“There’s been no let-up in the attempts by scammers to steal your cash.”
“It can happen to anybody and will happen to anybody.”
“They forged my signature and forged JP stamps.”

Siobhan Moran-McFarlane: Almost everyone has a story - because let’s face it - it’s impossible to pick up your phone or open your email - without being hit by a potential scam.

And as Australia’s corporate regulator ASIC is laser-focused on preventing and disrupting scams - so people aren’t duped into handing their money over to criminals, who have no regard for the people they’re stealing from.

I’m very happy to say I’m joined now by ASIC’s Deputy Chair, Sarah Court - Sarah will be pretty well known to our audience because she is in the public arena a lot for ASIC. Sarah, great to have you with us.

Sarah Court: Really nice to be here, thanks Siobhan.

Siobhan Moran-McFarlane: Sarah, we’re also going to hear from a couple of your team working deep in this area in a moment - but let’s get across the basics first.

What is an investment scam? Could you give us a couple of examples because there are many different types of scams out there.

Sarah Court:  Well as you say, Siobhan, scams come in many shapes and sizes, as do investment scams, which is ASIC’s focus. And because they come in so many varieties, it's part of the reason they can be so difficult to detect.

But at their heart, in an investment scam, the scammer tries to trick you to invest funds in what you’re led to believe to be a real financial product, but that product doesn’t actually exist. So essentially, the scammers are purporting to be someone that they're not and what they’re offering to you is fake.

Siobhan Moran-McFarlane: Okay, so what might they [scams] look like?

Sarah Court: They often use sophisticated techniques to reach you, so you’ll often see scams through your social media feeds, text messages, and they’re all trying to entice you to click on a link that takes you through to a scam investment website.

So, we might see scams embedded in, for example, in a fake news article, often they impersonate real financial services firms, sometimes they even claim to be regulated or authorised by ASIC.

And then more recently what we’ve been seeing is the emergence of deepfake technology that’s using artificial intelligence to create fake celebrity videos that are endorsing fake investments.

And so, all of these things, what they all have in common is they’re hard to spot. They feel really legitimate when you’re right in the heat of looking at them and anyone can be victim to one of these scams.

Siobhan Moran-McFarlane: Now the key stats on all this last year: Aussies reported losing $2.7 billion - and the biggest slice of that - about $1.3 billion - was down to investment scams. So how big of a priority is this for ASIC?

Sarah Court: Look combatting scams is one of our core priorities at ASIC and we’ve got a whole-of-ASIC scams strategy with a whole range of different limbs.

So, firstly we are aiming to disrupt investment scams at their source with our website takedown capability. And that important program has now removed more than 7,000 investment scam websites in the last year or so.

Secondly, we are warning investors about websites that are not to be trusted with our investor alert list. Now, this list is on our Moneysmart website, and on that list, you can search for the details of companies, or businesses, or websites that ASIC’s concerned about. So it’s really designed if you're thinking about an investment and you’re not sure, you’re worried about whether or not it’s legitimate or not, then go onto our investor alert list.

Siobhan Moran-McFarlane: And what about banks and other institutions? What sort of onus is on them to do something?

Sarah Court: We’ve done a lot of work in ASIC over the last year or so to do a deep dive into what the banks are doing to prevent, detect and respond to the risk of their customers being scammed. We’ve issued a couple of reports, and we have found that while certainly improvements are being made, the banks still have quite a lot of work to do to be applying a consistent and bank-wide approach to looking after their customers in respect of scams.

Siobhan Moran-McFarlane: And Sarah it’s fair to say for a while the trend with scams was all heading in the wrong direction - they've been exploding - but the most recent data is actually encouraging.

Sarah Court: Yes, we are seeing some real indications of progress, and we are, I think it’s fair to say, “cautiously optimistic,” but certainly not wanting to claim victory yet.

So, a recent report from the National Anti-Scams Centre reported a drop in overall losses from investment scams from $1.5 billion in 2022, down to $1.3 billion last year. Now, this is still an eye-watering amount of money that is being lost to Australians every year, but it is trending in the right direction.

So that’s all a hopefully good news story, but we do know that scammers are innovative, they change their approach all the time, so we need to remain very vigilant across the ecosystems – so government, regulators, banks, telcos, digital platforms – everybody needs to be involved in this fight.

Siobhan Moran-McFarlane: Thank you Sarah - that's really great to hear your progress catching up with some of these scammers.

Sarah Court: Thank you, Siobhan.

Siobhan Moran-McFarlane: Next up we are going to be joined by a couple of ASIC scam experts who are going to pull back the curtain on the work their teams are doing to take down investment scams.

Siobhan Moran-McFarlane: And I’ve got a couple of special guests now to help us really get behind what ASIC is doing to take down scammers.

Jodie Mahoney is ASIC’s Scams Coordinator - Hi Jodie.

Jodie Mahoney: Hi Siobhan.

Siobhan Moran-McFarlane: And Ged Fitzpatrick is the Senior Executive Leader of International - great to have you with us.

Ged Fitzpatrick: Great to be here.

Siobhan Moran-McFarlane: I want both of you just to give us a sense of how you came to be in your roles – Jodie, you first. How did you come to be ASIC’s scams coordinator – and what’s a taste of some of the work you might dive into once you’ve hit your desk?

Jodie Mahoney: I’ve worked in the area of corporate financial crime for roughly 20 years, in mostly government compliance and enforcement roles. In terms of my current role, the work of my team involves coordinating 5 key areas of work streams which are carried out by several teams across ASIC.

These 5 areas include:

1. coordinating the takedown of investment scam and phishing websites
2. reviewing anti-scam practices of ASIC’s regulated population
3. warning consumers about entities that could be a scam and about changes in investment scam typologies
4. engaging with the scams ecosystem, which includes working closely with the National Anti-Scams Centre and other domestic and international regulators; and
5. taking targeted action against scammers

Siobhan Moran-McFarlane: Ged, a lot of these scams originate from overseas. Most people don’t understand how complex and multi-layered these scams are that are targeting people, including Australians. Can you give us a sense of what you’re dealing with?

Ged Fitzpatrick: Sure, one of the problems is that scammers can use technology such as VPNs or using hosting providers located in another country to appear to be in a different location, so getting accurate statistics on where the scams are originated is quite difficult.

But we are aware that they are happening in other jurisdictions, and that’s why it’s really important that we do collaborate with overseas regulators and law enforcement agencies to be able to share information where we can identify scams, and where we can share best practices to how to deal with them.

Siobhan Moran-McFarlane: Because if I do fall for a scam that originates overseas, I’m imagining it’s not easy for Australian authorities to help me.

Ged Fitzpatrick: This is certainly a key area of our work going forward. The problem with scams originating overseas is that if they trick unsuspecting Australian investors, for example, into handing over their money, it will very quickly be sent overseas – often by a cryptocurrency – and is almost impossible then to trace or recover.

Now, ASIC has powers, but they largely apply to Australian entities. And if that conduct takes place in Australia, and it doesn’t necessarily extend to overseas and foreign jurisdictions. And that’s why we’re focusing on those issues where we can have the most impact in dealing with our peer regulators on scam detection and disruption, and before they can harm Australian consumers.

Siobhan Moran-McFarlane: Jodie, Sarah Court mentioned to us – one of the ways ASIC is disrupting investment scams activity is through taking down websites that are hosting investment scams - tell us about how you go about that.

Jodie Mahoney: It achieves this by working with relevant parties such as the organisation hosting the site, to request the site to be taken down. The service does not involve the use by ASIC of any coercive powers – rather, takedowns are requested by the third party on a voluntary basis.

We’re essentially working with the online ecosystem to stop scammers from infiltrating their systems.

Siobhan Moran-McFarlane: And Jodie, can you tell us about a scam case that’s really stuck with you?

Jodie Mahoney: Siobhan, the thing with scam cases is they all stick because they all involve devastating impacts on Australians. What has stuck with me are the repeated stories about Australians who have lost their entire life savings after believing they were setting themselves up, or their families up, for the future.

I’ve listened to consumers being told what they thought was a safe investment was a scam, and the silence or the gasps at the end of the call.

I’ve read referrals from Australians who have all the details of the people and businesses they thought they knew and trusted for months, and sometimes years, and ultimately lost a lot of money.

So, my team is really passionate about making a difference in this space and really pressing on the types of work that ASIC can do to minimise the risk of consumers being scammed.

Siobhan Moran-McFarlane: And look I imagine working in the fields that you do - you're both pretty savvy consumers - what’s a final word from both of you on how consumers can avoid being the next victim of a scammer? And Jodie, we’ll go to you second, I’ll start with you, Ged, what do you reckon?

Ged Fitzpatrick: Look, I think the reality is, anybody can be scammed at any time, even the savviest consumers.

So, I’d say the first thing is perhaps always be on your guard. It’s really hard to avoid scams, they're in our face every day. So, we’d encourage consumers to think about three things before they share their personal information and their money. 

1. First of all, just Stop – don’t give money or personal information to anyone if you’re unsure.
2. Second, Think – ask yourself could this message or call be fake.
3. And third, Protect – act quickly if someone or something feels wrong.

And really, don’t rush into investment decisions. If someone calls you out of the blue and encourages you to move your super or spruiks an investment opportunity, don’t do it – just hang up.

Siobhan Moran-McFarlane: And Jodie, what would your advice be?

Jodie Mahoney: Absolutely, everything that Ged has said.

Also in reflection, across the work that we’ve been doing, sometimes it is really for consumers to start with the baseline of – if they’re looking to invest – the baseline is that they should be thinking that perhaps it could be a scam, unless they can verify otherwise.

Unless they can take steps to prove that, yeah, this is a real company, this is a licensed entity, this is a product that actually exists.

And until they’re able to convince themselves and to verify that what they're investing in is an actual financial product, the licensee is regulated with ASIC, and those sorts of things – all of which information can be found on how to do this can be found on ASIC’s Moneysmart website. I think consumers really need to take those steps.

They’re dealing with criminals, and the criminals are getting smarter and changing the way they’re operating. Consumers need to consider ways to counter that.

Siobhan Moran-McFarlane: Jodie Mahoney, thank you so much for your time.

Jodie Mahoney: Thanks, Siobhan.

Siobhan Moran-McFarlane: And Ged Fitzpatrick, thank you also.

Ged Fitzpatrick: Thank you.

Siobhan Moran-McFarlane: And to our other guest, ASIC Deputy Chair Sarah Court.

I’m Siobhan Moran-McFarlane, thanks for listening to Inside ASIC.

Don’t forget you can catch up with the episodes wherever you get your podcasts.

(Media grabs)

“The cost-of-living crisis has been building for months on end.”
“Families are skipping meals in order to keep the lights on, in order to afford their mortgage.”
“They’re ashamed, often they can't believe that they're actually in this situation.” 

Siobhan Moran-McFarlane:

Hi, I'm Siobhan Moran-McFarlane, and it's great to have your company on Inside ASIC.

The increased cost-of-living has been one of the biggest ongoing stories of the past couple of years, putting significant pressure on a lot of ordinary Australians.

And while it might not be the work ASIC is traditionally known for, our corporate watchdog actually plays a vital role in protecting our most vulnerable consumers.

(Media grabs)

“Financial regulator ASIC has now released a scathing report.”
“Showing lenders are shirking their responsibility to help borrowers, even in the most dire circumstances.”
“They're in crisis. They've lost their job. They've lost a loved one.”
"The ASIC report is clear about what needs to be done.”

Siobhan Moran-McFarlane: In this episode of Inside ASIC, we're going to hear from some ASIC insiders about that landmark report which called out banks and lenders for their poor treatment of customers facing hardship.

And we'll hear from the Commission on why it won't hesitate to take action if lenders don't do the right thing.

But first up, I'm joined now by someone who's operating at the coalface of cost-of-living pressures.

Steph Tonkin is the CEO of the Consumer Action Law Centre. It's a not-for-profit, seeing first-hand the struggles hitting people right now.

Steph, hi. Great to have you with us.

Steph Tonkin: Hi, thanks for having me.

Siobhan Moran-McFarlane: Steph, we are hearing story night after night of how cost-of-living issues are hitting people right now. Can you paint us a picture of what you're dealing with at the moment?

Steph Tonkin: So at Consumer Action Law Centre, we operate the National Debt Helpline in Victoria. We are seeing a real growth of people presenting to the National Debt Helpline for help with really struggling to make ends meet. What's been so noticeable in those people presenting to us, well, the core people that we've always supported are still coming to us.

We're seeing a real growth in people who own a home, who some people may think aren't a typical person who would reach out for financial counselling.

But, we're seeing a real change, a shift in the face of people presenting for help and the need is really widespread.

Siobhan Moran-McFarlane: And the latest stats on mortgage stress are pretty alarming. We've hit an eight year high of people falling behind on their payments.

What are some of the issues facing people coming through your door?

Steph Tonkin: Mortgage stress is now the top presenting issue, on the National Debt Helpline. And that's the first time that that's happened in the history of the National Debt Helpline’s existence. So, the shift that we see in, the work presenting on our front lines, is that people are reaching out to us, having exhausted all other avenues. So people's energy will be in hardship, their credit cards will be maxed out, there'll be other loans, ‘Buy Now, Pay Later’ facilities, a whole range of other financial difficulties that are sitting alongside that mortgage stress.

So, people are prioritising their mortgages, and then there are a lot of other things to untangle as well. So, it presents a really complex picture, and people are doing it really tough at the moment.

There's simply isn't enough money to afford energy, to afford to put food on the table for many, many families out there.

Siobhan Moran-McFarlane: And Steph, you were there when ASIC launched its report putting the heat on lenders to do more to help home loan customers experiencing hardship. And we are going to dig into that detail in a moment.

But from your point of view, how important is it that the regulator takes on the banks and lenders on an issue like this?

Steph Tonkin: I think this report, Hardship, hard to get help is incredibly powerful by using its compulsory information gathering powers, ASIC is able to dig into issues where I think the public, certainly the consumer sector, and others can't really make sense of what's going on.

So, in the case of financial hardship, and mortgage stress in particular, on the National Debt Helpline, we know that we are seeing unprecedented levels of financial stress, and complexity and trauma in the people presenting to us on the front lines. But that's not necessarily reflected - or what we're hearing from lenders is - that's not reflected in their data.

So, there’s this huge disconnect. And so, for ASIC to be able to step into that gap and actually uncover the true nature of what's going on, they found that 35% of people are dropping out of the hardship application process.

Well, that tells us something. You're having people who need help and who ask for help, but who, ultimately give up because the process is too hard. It's really concerning. So, I think it really is serving such an important purpose in filling that information void, and just pulling out clear facts and data about a really complicated issue, in a way that no one else really can.

Siobhan Moran-McFarlane: Steph, thank you so much. It's been a pleasure.

Steph Tonkin: Thank you for having me.

Siobhan Moran-McFarlane: Next up, we're going to hear from ASIC about how they uncovered big lenders weren't doing the right thing by customers doing it tough.

And now I'm joined by a couple of special guests from ASIC. Alan Kirkland is an ASIC Commissioner. He started his five-year term in 2023, but before that he was well known to a lot of us as the CEO of consumer advocacy group CHOICE for more than a decade.

Alan, terrific to have you here.

Alan Kirkland: Great to be here.

Siobhan Moran-McFarlane: And Michael Dorman is Senior Manager of Strategic Surveillance at ASIC and led the research and writing of this report.

Michael, hi.

Michael Dorman: Thanks for having me.

Siobhan Moran-McFarlane: Now, Michael, this ASIC report appropriately titled Hardship, hard to get help, really painted a pretty alarming picture of how poorly lenders have been treating some of their customers who've fallen on hard times.

I want to go back to how this issue really first landed on your plate.

Michael Dorman: As you might expect, ASIC monitors a wide range of data to point us towards potential issues that might require our attention. In this case, towards the middle of last year, increasingly a range of data sources, such as calls to the National Debt Helpline, hits to our Moneysmart web pages and data from the big banks were showing that increasing numbers of consumers were finding it tough and experiencing financial difficulty.

We were starting to hear about issues from customer advocates, including from the Consumer Action Law Centre, and we were starting to see small increases in complaints to AFCA, the Australian Financial Complaints Authority.

Siobhan Moran-McFarlane: Was there a moment or was it more of a slow burn when you realised all of the evidence you were gathering pointed to a systemic problem, and not just a handful of customers being let down?

Michael Dorman: What I think first started to point us to the fact that there were issues, that was when we first received and analysed data from lenders. We found through that, for example, that more than 1 in 3 customers were dropping out of the hardship application process.

Then we started to look at policies and procedures of lenders, and what we were seeing is that in many cases, they were just making it too difficult for customers to request and go through that assessment process.

Then we got to the case studies, and I think our concern really ramped up here when we started looking at the internal records, the communications of customers, and in particular started listening to call recordings. Through this review, it became very clear that too often lenders were putting a focus on process over people.

Siobhan Moran-McFarlane: Is there a story of a vulnerable customer that sticks with you, Michael?

Michael Dorman: One of the clearest examples of this is in a case study that we referred to as ‘Amy’ in the report, and this is a real customer. Amy was experiencing family violence, she was living in the home that she owned with her partner and wanted to obtain a deferral on her loan so that she and her daughter could move into an apartment and escape her situation.

Amy couldn't afford to make the normal mortgage repayments and pay her rent at the same time, as her partner would remove funds from their offset account. So, she called her lender for assistance.

Unfortunately, it took her three phone calls, three separate explanations of her situation with different people. One hour on hold, two applications and five weeks to ultimately get some assistance.

Siobhan Moran-McFarlane: Alan, this hardship report really made quite a splash when ASIC released it. Why was it so important to take on the lenders on this issue?

Alan Kirkland: Well, I think a lot of people know ASIC as the regulator that takes on corporate misconduct, and that's an important part of what we do. But really, one of our central roles is to be the consumer protection regulator in the financial system.

So that means that where institutions like lenders have got obligations under the law, that we're looking at whether they're complying with those obligations. When it comes to working out which issues we take on within that role, we scan what's happening in the economy, we look at where people may be experiencing pain. And right now, with so many people struggling with cost-of-living concerns, the ability and the way in which lenders respond to people who are struggling to meet their commitments is one of the most important issues that we could take on, which is why we did.

Siobhan Moran-McFarlane: Now ASIC wrote an open letter to Banks in August 2023 about this behaviour, warning them to lift their game. Then you published this report in May 2024, giving lenders a pretty clear set of actions, what, if any, improvements have you seen?

Alan Kirkland: It is very clear from the work that I do that these interventions are having an impact. As a Commissioner, I'm out talking to lenders, talking to major banks, talking to their industry associations on a regular basis and we get lots of questions about this. So, people want to understand in more detail what we found and what our expectations are, so, we'd started to see some improvements as a result of that letter, and a lot more as a result of this report.

We have for the lenders that were part of this review, written to them, giving them individual feedback on what in particular we found needed improvement within their processes and systems.

And we've asked them to prepare an action plan and they've all already started working on that. And as one example, one of the major lenders has started the process completely redesigning its hardship process and function, and that's appropriate.

We found very serious problems with these, processes across institutions, large and small, and those problems require really deep thinking and really strong responses.

Siobhan Moran-McFarlane: And if the banks and lenders don't improve fast enough, is ASIC prepared to take action, and what avenues are even open to you on that front?

Alan Kirkland: If we see serious breaches of the law, then we can take action seeking civil penalties or major fines in the court. And we've shown that we're willing to do that. So, we've got action underway at the moment in the federal court against Westpac for failures that we allege to comply with some of these obligations. And that is a clear warning to other lenders, that we're willing to take that action.
This is one of our enforcement priorities for 2024. So, it means that we look seriously at any cases that we see in this area of systemic misconduct. And the basic message is we've got a big stick, and we're quite happy to use it where that's the appropriate thing to do to protect consumers.

Siobhan Moran-McFarlane: Alan Kirkland, thank you for your time, it's been a pleasure.

Alan Kirkland: Thanks, Siobhan.

Siobhan Moran-McFarlane: And Michael Dorman, thank you for joining us too.

Michael Dorman: Thank you.

Siobhan Moran-McFarlane: And thanks to our other guest, Steph Tonkin from the Consumer Action Law Centre, I'm Siobhan Moran-McFarlane, thanks for listening to Inside ASIC. Don't forget, you can catch up with the episodes wherever you get your podcasts.

(Movie grabs)

“The point is, ladies and gentlemen; Greed is good.”
“That's inside information, isn't it? You're not inside. You are outside.”
“So, tell me, Gordon. When does it all end? How many yachts can you water ski behind? How much is enough?”

Siobhan Moran-McFarlane: Hi, I'm Siobhan-Moran and MacFarlane, and it's terrific to have your company on episode three of Inside ASIC.

When you hear the term insider trading, it might conjure up all the usual Hollywood stereotypes of Wall Street, lavish lifestyles and whole trading floors of suited blokes whispering codes to buy and sell stocks. But the reality of this behaviour in an Australian context is not like the movies.

(Media grabs)

“Australia's corporate watchdog ASIC, has charged two mining officials with insider trading.”
“Cameron Waugh is at the centre of an insider trading case that's got the whole of Saint George's Terrace talking/****ting themselves.”

Siobhan Moran-McFarlane: In this episode of Inside ASIC, we're going to hear from a senior investigator at the Commission with the story of one of the country's most high-profile insider trading cases.

And we're also going to look at ASIC's much broader role in keeping our markets clean, because the reality is, insider trading is just one way people try to manipulate our markets.

First up, today I'm joined by ASIC Commissioner Simone Constant.

Simone commenced her five-year term in 2023 after 25 years in investment and risk management at big banks, investment managers, and government treasuries.

Simone, great to have you with us.

Simone Constant: It's lovely to be here Siobhan.

Siobhan Moran-McFarlane: Simone, I want to start with insider trading because it's the most well understood form of market manipulation.

Can you just give us a fuller picture of what it may look like, and why it's so important to ASIC to deal with it?

Simone Constant: Insider trading is definitely the right place to start for our conversation on this, Siobhan. So, I think in the sense of people who perpetuate insider trading, they work hard to make it not be understood. You know, by its very nature, insider trading is insiders, people with privileged access to information, exploiting that information. And of course in markets, information is value, exploiting that for their benefit at the expense of the rest of us. And I know my generation, we think about Gordon Gekko and braces and oversize telephones, kind of doing big mergers and acquisitions deals, and trading inside information on Wall Street.

But actually, what's really interesting and important to know is insider trading takes many shapes and sizes, many forms and shapes. So it can be in different markets, it can be in different products, it can be in different sectors, and it's all harmful.

Siobhan Moran-McFarlane: Right. So it's not just the large mergers or acquisitions that Hollywood conjures up?

Simone Constant: It can be in debt markets. You can have insider trading in debt markets, not just in listed equities markets, as we often think about. And actually, you can see it in small places, but you can see insider trading in really large organisations. If you’ve got a large organisation that has access to information in lots of different markets, for example, and they don't treat that with the respect they should, by protecting those different parts of information, and they've got lots of different touch points in different markets, and they don't protect that, then they can be using that at the expense of the rest of us in markets just as much as in a small company with a small group of insiders.

Siobhan Moran-McFarlane: Simone, we know only a handful of cases ever make the news, and we're going to talk about those in a moment.

But first, can you tell us more broadly about the enforcement work ASIC is doing in that space?

Simone Constant: ASIC actually is one of the most in court, active enforcement agencies in this area globally. Interestingly, since 2019, we've run 45 investigations on insider trading. And at the moment, ASIC is in court most days of the week in some part of our brief.

Actually, as part of that, we've got six insider trading cases on foot right now. So, that's a lot of activity. It's really important enforcement activity and you can expect to see more.

Siobhan Moran-McFarlane: So how confident can we be that insider trading isn't just the way that some firms do business?

Simone Constant: It's a really good question right now for ASIC, because we've actually just released an important piece, an important report that shows Australia, actually we can be confident, has one of the cleanest markets, one of the cleanest equity markets in the world.

So why do I say that and what is this report? We've just released our market cleanliness report and we did it over a period of about five years, and it's something we've done in the past. So, when public markets, get hit with important information about a company, we expect there to be activity, because that information, of course, is value that's traded.

We look at the period just before that. So, is there anomalous or suspicious activity? And when we looked at it two different ways.

One is the volume of anomalous activity in the lead up to release of information. The other is actually the number of accounts, like different individual accounts, doing anomalous things in the lead up. In both cases, it was some of the lowest in the world.

Siobhan Moran-McFarlane: A lot of ASIC's attention is obviously on companies trading on the ASX, but Simone, there's been this global trend and here in Australia away from listing on the stock market, so a lot more firms choosing to raise equity privately.

Does that mean the law doesn't really apply to them?

Simone Constant: That is a great question because it's such a simple one.

No way right, is the answer to that. And at ASIC this is something we're really conscious of this changing shape of markets in the conversation today. We're mindful in that globally private capital and private markets are growing in importance. So, at the moment at last stock, we have an estimated 139 billion of private capital under management in Australia. Clearly that is a smaller number than the trillions we have on the ASX, for example.

But what's really interesting, Siobhan, is that that represents a 33% growth rate in the 18 months leading up to that figure. So, there is something going on here and there is a growth of private markets. That's not necessarily bad. It's not for ASIC to say, you know, private versus public is good or bad. It is for ASIC to be aware of the differences in how the capital, those different capital markets go about their activities and how we ensure that there is transparency and accountability for integrity of conduct in those capital, in that type of capital, in that type of market.

And as a consequence and mindful of that change in growth in ASIC, we've announced also a dedicated team focused on these private markets and ensuring that we both understand them and understand can hold them accountable for how they are conducting themselves and that market conduct, market integrity and of course, deterring market manipulation is as strong whether it is public capital or private capital for Australian markets.

Siobhan Moran-McFarlane: Simone, thank you for your time.

Simone Constant: It was a pleasure to talk about this with you, Siobhan.

Siobhan Moran-McFarlane: Now next up, we're going to be joined by a couple of ASIC insiders about the forensic work that goes on behind the scenes to keep our markets clean.

Siobhan Moran-McFarlane: And I'm joined now by Calissa Aldridge, who's the Executive Director of Markets at ASIC. Calissa, hi.

Calissa Aldridge: Thanks Siobhan. Great to be here.

Siobhan Moran-McFarlane: And Tegan Gosling is Senior Manager of Enforcement. Tegan thanks for talking to us.

Tegan Gosling: Thank you, Siobhan.

Siobhan Moran-McFarlane: Tegan you served the arrest on Cameron Waugh back in 2022, an event that generated a lot of headlines, especially in Perth.

Just to remind our listeners, corporate adviser Waugh was sentenced to two years in prison earlier this year for insider trading. But back in 2022, this was all pretty dramatic because you actually served the arrest on him at a wedding south of Perth.

Tegan Gosling: Well Siobhan, we actually had no idea that Mr. Waugh had a wedding to attend that Friday.

So Mr. Waugh had come to our attention through various company documents, that had been produced in the course of the investigation that we were conducting some eight weeks earlier. And we started to investigate his trading in the lead up to the significant announcement that had been made by Genesis Minerals Limited about its change of board composition and also its fundraising.

So we had referred a brief to the Commonwealth Director of Public Prosecutions. And as they were assessing the brief, we became aware that Mr. Waugh was booked on a one-way flight out of the jurisdiction. And that was around Saturday, the 17th of December of 2022. So, the week prior to Mr. Waugh’s flight, ASIC sought and obtained a warrant for his arrest on charges of insider trading.

When we went to serve that arrest warrant with the Australian Federal Police that Tuesday, we discovered that Mr. Waugh was actually in Western Australia's south-west, which is a very large area. So, we were able to get an AFP team to travel down south with us, in the latter half of that week, and we were able to locate Mr. Waugh and serve that warrant mid-morning on the Friday.

So his flight out of Australia was the next day on the Saturday, and we thought it was preferable to execute at a time earlier than the departure lounge at the airport.

Siobhan Moran-McFarlane: And step us through the evidence you'd been gathering on the case to that point. I'm imagining it's all a pretty painstaking process.

Tegan Gosling: So, ASIC is constantly monitoring who's trading in the market ahead of significant announcements. And we do that through our markets analysis and intelligence software. And we're constantly looking at that trading and the circumstances around that trading. Mr. Waugh had actually not been the focus of our investigation, we were considering other suspicious trades that occurred in the lead up to that announcement by Genesis Minerals. But in the process of conducting that investigation, we did become aware of his trading.

We then started interviewing people, concerned with that trading and the company around that time. And we started to build a better picture of the alleged contravention. It is pretty painstaking. Insider trading is a criminal provision. So any case that we take, we have to prove beyond a reasonable doubt, which is a pretty high bar.

So we have to be meticulous in the manner in which we collect and produce the evidence to ensure that it's not just compelling, but also admissible in any subsequent proceedings.

Siobhan Moran-McFarlane: And Calissa, as the Executive Director of Markets, you're responsible for end-to-end regulation of markets.

Does it surprise you that people think they can still get away with these manipulations, that they won't be found out?

Calissa Aldridge: Siobhan unfortunately, it doesn't surprise me. It's human nature to chase a quick buck, and that hasn't changed over time. And this is why market misconduct, including manipulation and insider trading is an enduring priority for ASIC. We need to make sure we keep on top of this part of the market continually to adapt to the new forms of technology that are used by the various actors that are, engaging in this activity.

Siobhan Moran-McFarlane: Right, so how does ASIC keep ahead of people who are looking to manipulate the market?

Calissa Aldridge: Look, we've got to adapt to it as well. We're using data and technology in innovative ways. In fact, our automated insider trading detection tool that we call ‘Artemis’ actually won an award last year as part of the APS, Data Analytics and Visualisation Awards.

And together with some of the tools, and Tegan just mentioned one of them, we can automatically detect unusual trading ahead of company announcements. And we combine that with Artemis to look at trading data and other sources such as the ATO data, for example. And it enables us to very quickly draw connections between people, family members, neighbours, colleagues, and we can then supplement that with other tools. For example, looking at social media connections.

And then that follows through to some of the enforcement that Tegan's just mentioned. We actually have one of the highest per capita conviction rates for insider trading around the world.

So, my message to listeners today is to really avoid that temptation to engage in market abuse.

ASIC has the systems, the people and the power to detect and prosecute market abuse. And no trade is worth prison time.

Siobhan Moran-McFarlane: Now, ASIC recently laid charges against four people involved in a so-called ‘pump and dump scheme’ which, like the name suggests, is all about artificially boosting the price of stocks before dumping them for a profit. And it's alleged the group hatched this scheme in a private messaging app.

Calissa, this is a great example that ASIC really has eyeballs everywhere. And your determination to stamp out any illegal activity that threatens the integrity of our markets.

Calissa Aldridge: Absolutely. I think some of the recent cases have reinforced our commitment to take action. The recent criminal charges that you've mentioned against a number of people, who were alleged to be using Telegram to pump and dump ASX listed shares is a good example.

They were charged with conspiracy to commit market rigging, and false trading to artificially increase the price of shares before they were dumping them. And there's really significant penalties for that type of activity. The maximum penalty 15 years imprisonment or over $1 million fine. This case is also another great example of ASIC trying to be more innovative. To deter the conduct at the time, it was a bit of a first for ASIC. We actually entered the chat rooms to warn users that it may be illegal, the activity that they're engaging in, but also to remind them of some of the potential consequences. And that really got their attention. And then we worked with Telegram and other social media platforms to shut down the chat rooms.

Siobhan Moran-McFarlane:  And Tegan, one final one for you. Enforcement is what you do. Why is it so important that these cases are pursued by ASIC?

Tegan Gosling: So Siobhan, we know from experience and anecdotal evidence that the enforcement of laws like insider trading, market manipulation, other types of market misconduct laws does make people stop and think about the decisions that they're making.

And having these examples where it has been enforced through the courts and criminal action does help to deter that market misconduct, because it forces people to realise that they could get caught. ASIC doesn't have a bottomless pit of people and resources, so we can't take every case. But we do hope the cases that we do take make people stop and think “it could be me,” and encourages them to make good decisions when they are in possession of market sensitive and non-public information.

Siobhan Moran-McFarlane: And Calissa, we talked a bit earlier with Simone Constant about the rise of private markets. I'm wondering what's big on your radar looking ahead for ASIC?

Calissa Aldridge: So look, we've been monitoring developments in private markets closely for some time. And we've seen over the last few years fewer listings coming through to public markets. And this is a trend we're seeing globally.

And we've started a discussion with stakeholders in the industry on whether this is more of a cyclical issue or is it a broader sort of structural change that we're starting to see. So, you can really expect to hear more from us over the near-term on, what we're hearing from industry, that stakeholder engagement that I mentioned, as we go through a process of considering tangible, actionable ideas to build the strength of the Australian capital markets.

Siobhan Moran-McFarlane: Calissa Aldridge, it's been a pleasure. Thank you.

Calissa Aldridge: Thank you.

Siobhan Moran-McFarlane: And Tegan Gosling, thank you for joining us too.

Tegan Gosling: Thank you, Siobhan.

Siobhan Moran-McFarlane: And also a big thanks to our earlier guest Simone Constant. I'm Siobhan Moran-McFarlane. Thanks for listening to Inside ASIC.

Don't forget you can catch up with the episodes wherever you get your podcasts.

(Media grabs)

“Built to look like humans. Robots have learned to sound just like us.”
“Trust is earned, not given.”
“And also, how do you regulate technology that changes so fast?”
"You can't stop this. It's already started. You can't put it back in the box. You can't delay it.”

Siobhan Moran-McFarlane: Hi, I'm Siobhan Moran-McFarlane, and it's terrific to have your company on Inside ASIC. Technology and data are rapidly changing nearly everything in the world around us.

(Media grabs)
"We may look on our time as the moment civilisation was transformed, as it was by fire, agriculture and electricity."
"We've had the computer age. We've had the internet age. We're now in the AI age."

Siobhan Moran-McFarlane: As Australia's corporate regulator, ASIC has to deal with plenty of emerging risks to keep our markets and consumers secure. So, in this episode of Inside ASIC, we're going to unpick both the challenges and potential of AI in our financial ecosystem.

First up, today I'm joined by Professor Nick Davis from the University of Technology in Sydney. Hi, Nick, thanks so much for joining us today.

Prof. Nick Davis: Hi, Siobhan.

Siobhan Moran-McFarlane: Nick, you really are the man for the job when it comes to getting to the nub of the big questions on artificial intelligence. You are Co-Director of the Human Technology Institute at UTS in Sydney, which is dedicated to ensuring, as we keep going down this road with new tech, it's led by human values.

So how do you think we're going on that front?

Prof. Nick Davis: We're at this really interesting stage where artificial intelligence is still a thing. It's a terrible phrase that really describes a huge wealth of use, cases and technologies, and it's disappearing before our eyes. It's becoming embedded in the products and services that consumers, use, and also in the systems that that businesses deploy.

So, we really have this moment now where these bits are still visible to overcome one of the key challenges here, which is low levels of trust in the public, people, particularly Australians, we are one of the countries with the lowest levels of trust in this set of new technologies. But we can also see this huge opportunity, a productivity upside that some estimate is 25% of current GDP levels by 2030, which is just incredible.

So really, the human values aspect of this is about unlocking that value in ways that really benefit everyday Australians.

Siobhan Moran-McFarlane: Can you give us any examples of some of the leaps that have come out of AI that we might not actually be aware of, but have benefited humanity?

Prof. Nick Davis: The most obvious leap that we've seen recently are things like, the large language models that ChatGPT and Claude and other things.

But you're right to call out that actually one of the most impressive feats of artificial intelligence in the last five years was the contribution it made to the development of the COVID vaccine. And we're seeing huge, strides in medical science, in logistics, in many areas of humanitarian support as well, but also just keeping us safe every day with things like cyber security.

These are areas where it's hugely beneficial to have AI systems powering our devices and supporting us. But we don't often see that as that upside because it has disappeared into the background.

Siobhan Moran-McFarlane: Nick, I know in a lot of boardrooms around Australia, directors might not feel equipped to deal with AI. It might feel way out of their skill set.

You've done a lot of work with the Australian Institute of Company Directors on this. What are you telling them about a best practice approach when it comes to AI?

Prof. Nick Davis: I think the first thing to say is that, AI systems do require a special focus from the board because it's not the same as IT governance in general or cyber security.

There are amplified and emerging risks here, but also huge strategic opportunity that board directors need to be aware of, and should be really leaning into, to make sure they're discharging their duties under section 180 and other of the scarier bits of the Corporations Act. And the second thing to say is we are at an early stage, here.

So, while it's important most directors, it's, you know, the first time that they may have come across many of these terms, which is why with the Institute of Company Directors, we created that guide. And the first thing we say is, you've got to know what you're doing. You've got to know where you're using these technologies, how they're adding value and should be really in line with your strategy.

And I guess Siobhan, the second key message is you need a structured approach to this. About 78% according to recent research, 78% of businesses say they are actually investing and leaning into safe and responsible AI governance. But when you dig into the data about whether they are doing anything specific that aligns with best practice in this area, it's under 30%.

So, there's this huge gap between organisations say that the board and management are leading in to structured governance and really using this, this technology well, and the actual evidence of that practice being deployed. And so really, if you're a director, that's what you should be looking at today is how do you close that gap?

Siobhan Moran-McFarlane: Professor Nick Davis, thank you so much for joining us.

Prof. Nick Davis: Thanks, Siobhan.

Siobhan Moran-McFarlane: Now next up we're going to be joined by a couple of specialists working inside ASIC to talk about the challenges AI is throwing up for our corporate regulator and how it's working through these.

And I'm joined now by Graham Jefferson, who's the Senior Executive Leader for Data Analytics and AI at ASIC. Graham, welcome.

Graham Jefferson: Thanks for having me, Siobhan.

Siobhan Moran-McFarlane: And Kate Metz has been with ASIC for more than 20 years. She's currently a Senior Executive Leader overseeing ASIC's approach to regulating AI. Kate, thanks for joining us.

Kate Metz: Thanks so much for having me.

Siobhan Moran-McFarlane: Kate, I want to start with ASIC's overall approach to AI. Is it fair to say it's pretty similar to your approach to regulation generally?

Kate Metz: That is right. That's actually spot on. So, from an ASIC perspective, our ultimate aim is to make sure that our markets aren't compromised and that consumers are safe. But at the same time, we really don't want to stifle innovation.

Siobhan Moran-McFarlane: Kate I just wanted to tease out this idea of ASIC harnessing the benefits of AI for consumers, because ordinary people might just think that ASIC is really only interested in regulating the technology.

Kate Metz: Thanks, that's a great question. I mean, it really is all about getting the balance right. So, ASIC is very supportive of responsible use of AI, and we see that there are a large number of benefits in that.

So, ASIC does have a really long history of adapting our regulatory approach in response to new and emerging challenges and technologies. And in this respect, our approach to AI really will be no different.

Siobhan Moran-McFarlane: Graham, I want to get a sense of what you're seeing in terms of how financial entities are using AI and what sort of upside do you see for consumers?

Graham Jefferson: I think the simplest place to start is, the observation that AI embraces a wide range of technologies, including machine learning and financial services. And insurance institutions have been using that technology for quite some time, more than more than a decade. What's happened most recently is the evolution of generative AI, which is what we've seen with things like ChatGPT.

And that has led to essentially an exponential growth in the adoption of those technologies, principally because they're much, much easier to use. We're seeing technology, AI technologies supporting decision making within financial institutions, not so much replacing decision making. We're seeing quite a lot of marketing and customer engagement being supported by AI. So for example, chat bots. And the potential is that consumers can benefit with more efficient and effective risk management practices in financial institutions and better and more personalised offerings that address the consumer's need.

So, in the way that Kate was describing the protection of consumer, from harm can be supported by the adoption of AI within financial institutions.

Siobhan Moran-McFarlane: And, Graeme, you spent a lot of time as a tech lawyer within banks before coming to ASIC. What about the flip side of AI? The risks that are really front of mind?

Graham Jefferson: That's a difficult question in the sense that it's not yet the case that there's lots of evidence of harm emerging. There's the potential for that.

And what's hard to say is whether we're at the beginning of a cycle where it's just too soon for those risks and harms to emerge, or the way that they're emerging is different to what we've seen in the past. The fact that AI can be personalised and can deliver personalised services means there could be lots and lots of low-level impacts that just aren't registering yet.

But if you look at the literature, what you see people talk about is concerns about bias that's embedded in the data that's used to train these AI models. The risk that the models unwittingly or unintentionally discriminate and that they produce results that are superficially plausible but actually incorrect. And that's the notion of hallucinations that we hear about in connection with things like ChatGPT.

There were also privacy and data protection risks. If people's personal information has been used to train these models or is used in connection with these models, there's increased risks that privacy laws could be breached.

Siobhan Moran-McFarlane: Kate, we touched on this earlier with Professor Nick Davis, but I just want to go back to AI and the responsibilities of directors.
What's really front of mind for ASIC on that level?

Kate Metz: So, for any complex issue that comes before boards, it's really not an excuse for directors not to understand it. So, directors and officers need to be aware of developments in the use of AI and other technologies within the companies which they operate within, and they need to ensure that AI tools are carefully scoped, implemented and monitored.

So, we understand that risk-taking is a fundamental part of being a director, an inherent feature of growth and innovation. It really is up to directors to balance those risks against the potential benefits.

Siobhan Moran-McFarlane: And Kate, just a final one for you. I want to ask about AI washing. ASIC's already done quite a lot of work around greenwashing, where companies make misleading claims about their environmental credentials, but AI washing is now also something that you've really got your eye on.

Kate Metz: That's right. So, this goes to a more fundamental question that I seek, pursues across a range of areas. Are companies being upfront and honest about their services and credentials? So, we obviously want to avoid situations where companies are misleading investors and potential investors. That behaviour might be companies claiming to use AI when they're actually using less sophisticated computing.

While, in other cases, companies may suggest that their AI solutions are fully operational, when in fact they're not.

Siobhan Moran-McFarlane: And a final one for you, Graham, over the course of this series, we've spoken to teams in every corner of ASIC about the forensic work they're doing to try to keep our markets clean and consumers safe. And there's a pretty central theme running through all of it that you need the best data and tech to do this right.

So, what is ASIC's own approach to using generative AI?

Graham Jefferson: As you might expect from a from a regulator, we're cautiously investigating the technology. ASIC has been using machine learning, and we have an enterprise data platform or a data lake. We ingest very large amounts of information from various different sources, reports of misconduct, internal dispute resolution data, data from the ATO, external dispute resolution data from AVEC.

And one of the potentials is that we can better use that data. AI and machine learning in particular is really good at pattern matching. And when you've got large amounts of data, sometimes there are patterns in that data that are useful, that provide insights and that are not easy for humans to detect. But machine learning and AI tools can.

So, that's an example of where there would be real benefits to ASIC. We've done some pilots ourselves looking at how generative AI tools might be able to summarise documents. The result of that particular experiment was that our people are still better than the AI, which is a good thing. And most recently, the Federal Government's just released a whole of government AI policy that ASIC's aligned to and will implement.

So, there's lots of opportunity for us to learn and for us to use the technology in a thoughtful, considered, safe and secure way. I guess what I would finish with is that the opportunity is material, and I think that's probably the right way to think about this. It's a tool for us to use. If we don't use it, we're going to fall behind.

Siobhan Moran-McFarlane: Graham Jefferson, what a fascinating topic. Thank you so much.

Graham Jefferson: Thank you.

Siobhan Moran-McFarlane: And Kate Metz, thank you too.

Kate Metz: Thank you so much.

Siobhan Moran-McFarlane: I'm Siobhan Moran-McFarlane. Thanks for listening to Inside ASIC.

Don't forget, you can catch up with the episodes wherever you get your podcasts.

(Media grab)

"Auditors check the books of our largest companies. Regulator ASIC checks the auditors."

Siobhan Moran-McFarlane: Hi, I'm Siobhan Moran-McFarlane, and it's terrific to have your company on Inside ASIC.

The role of auditors has been in pretty sharp focus in recent times, whether it's after a high-profile company has gone bust or the broader issue of the ethics of some of our biggest firms.

(Media grab) 

"It's time that this sector was completely fixed up."

Siobhan Moran-McFarlane: Given how crucial auditors are to maintaining confidence in the reporting companies provide in this episode of Inside ASIC, we're going to look at the Commission's role in making sure the work of the audit sector is up to scratch.

First up, today I'm joined by ASIC Commissioner Kate O'Rourke. Kate, terrific to have you here.

Kate O'Rourke: Thanks, Siobhan. It's great to be here to talk about audit issues with you.

Siobhan Moran-McFarlane: Kate, I want to start with some of the media commentary around this issue. If you were a casual observer, you might get the impression that ASIC's really pulled back in its work in regulating auditors. Is that a fair impression?

Kate O'Rourke: I think it would be actually fairer to say that what we've done is evolved our work, because we really do recognise how important auditors are in our capital markets and for decisions that are being made in relation to financial information in our economy. And so, if we have good auditors, then we have great integrity and quality in financial reports.

And so that's why, if anything, we've been really improving our program rather than diminishing it.

Siobhan Moran-McFarlane: Okay, so ASIC has really determined that there is a better way. Can you talk us through how your approach is changing?

Kate O'Rourke: Sure. We have really moved away from the approach that we'd had for 15 years in three particular ways. So, the first is to better connect the work that we would do by reviewing financial reports with our audit files, because that's more likely to find actual problems with the audit files.

The second is that we are looking at a wider type of files now, a wider group of files. So, as well as unlisted companies and public companies, we're also looking at large private companies as well. For a long time they didn't need to file their reports with us, now they do - a really important part of our economy. The other category in here is superannuation trustees have to file reports as well.

The third is that we're starting to think about looking beyond files to firms. We're trying to think about, well, what about, managing ethics, governance, risk, looking at things at the firm level, again with the goal of driving improvements in audit quality and therefore improvements in the financial information in our economy.

Siobhan Moran-McFarlane: The big four accounting firms have suffered a lot of reputational damage over the past couple of years, even though that's mainly concerned their consulting arms. It probably tarnished the broader industry, including auditors. Is ASIC satisfied with the ethical standards and independence of the audit sector more broadly?

Kate O'Rourke: So ethics, independence, governance, these issues are really important. The firm level issues are really important as well. And that's why this year we have started a review of auditors compliance.

So, we did some scoping work before we started this project and it did highlight some areas of concern. So, we saw firms for example taking a hurried approach to remediation of findings or if there's problems that have already been identified in order to kind of meet deadlines so that at that point in time, nothing to see.

So we really, you know, as an initial thing, think that firms have to be careful if they're doing remediation or fixing things up, be comprehensive in action plans and careful with them, rather than kind of hurrying them for particular outcomes. But, we are going to look at these issues in more depth.

Siobhan Moran-McFarlane: Finally, Kate, there's been a lot of discussion recently about regulation of consultancy firms. Given ASIC's work in the audit space, what's your view on what should happen there?

Kate O'Rourke: Oh, you're so right. We've had lots of parliamentary inquiries in relation to this, and a lot of people are very concerned about issues in relation to consulting firms. So, we want to be part of the discussion. So, we come at it through the lens of our areas of current responsibility.

Audit being the main one and how the regulatory framework can be enhanced to better regulate audit, particularly audit firms. Noting that at the moment the framework really attaches at the individuals, the people who are registered company auditors, that we recognise that there's wider issues at play, and that our parliamentarians particularly have a strong interest there.

Siobhan Moran-McFarlane: Kate O'Rourke, thank you so much for joining us today.

Kate O'Rourke: Thanks Siobhan.

Siobhan Moran-McFarlane: And I'm joined now by ASIC's CEO, Greg Yanco. Greg has more than 30 years of experience in financial market regulation and supervision. Greg, welcome.

Greg Yanco: Thanks for having me, Siobhan.

Siobhan Moran-McFarlane: Now, Greg, last financial year, ASIC reviewed 180 financial reports. The majority of the companies were in the top 500 of the ASX, what did you find?

Greg Yanco: So, there were actually 55 companies that we wanted to know more about. 53 of those were listed on the stock exchange, and 2 of those were fairly large unlisted companies. Now, from those entities, 25, just under half of them, we felt that there were concerns about the financial report, and we wanted to know a little bit more.

Most of the findings were about insufficient disclosure, and out of the 55, 33 of them, we raised concerns about their disclosure. And that led to, them making some sort of changes.

Siobhan Moran-McFarlane: As you've suggested there, because of ASIC's interventions, some of the companies made adjustments to the tune of $215 million to the previously released financial information. Now, on one hand, that is quite a significant sum but given the scale of the companies we're talking about, it might also seem a bit immaterial.

Greg Yanco: Yeah, well, I think it's not immaterial to the investors in the companies that we're talking about. And investors use this information to make decisions. And if there's a problem in the information that they have, then that may lead to, you know, basically incorrect sort of decision-making by the investor. And so, it's very important that they have the right information.

Now, it might seem immaterial to some, but I think if I was an investor in one of those companies, I'd be wanting to know that there was a process to make sure that the information given to me was accurate.

Siobhan Moran-McFarlane: And just one final one for you, Greg. As well as ASIC, there's also an independent board dealing with any disciplinary issues relating to auditors. Why is it so important that ASIC and the board keep a strong oversight of the work of auditors?

Greg Yanco: So, I think it's important to just take a broader view of what we're looking at here. We're looking at, really good financial reports. That's the goal for Australian investors, and auditors play an important part as a gatekeeper. They're a big part of that process, so it's important that they have the appropriate systems and controls in place to ensure that they're doing a good job in overseeing the process. So, as I said, people are relying on the financial reports to make investment decisions, and they're relying on that tick off from the auditor that there is a true and fair view in the financial accounts.

So ultimately, ASIC's vision is to make sure we have a fair, strong and efficient financial system for all Australians. So, we focus on not just the work that auditors do, but also their governance, risk management and controls. And so, it's all an important part of having a fair, strong and efficient financial system for all Australians.

Siobhan Moran-McFarlane: Greg Yanco, thank you for your insights.

Greg Yanco: Thanks for having me.

Siobhan Moran-McFarlane: And thanks also to our earlier guest, ASIC Commissioner Kate O'Rourke.

I'm Siobhan Moran-McFarlane, thanks for listening to Inside ASIC.

Don't forget you can catch up with the episodes wherever you get your podcasts.

(Media grabs)

“Anybody can be scammed at any time, so always be on your guard.”
“I think this report, Hardship: Hard to Get Help, is incredibly powerful.”
“It is very clear from the work that I do that these interventions are having an impact.”
"ASIC has the systems, the people and the power to detect and prosecute market abuse, and no trade is worth prison time.”

Siobhan Moran-McFarlane: Hi, I’m Siobhan Moran-McFarlane, and it’s terrific to have your company for the final episode of this season of Inside ASIC.

Now, over the course of this series, we’ve pulled back the curtain on the work ASIC’s doing on everything from scams and financial hardship, to insider trading, audit surveillance, and regulating AI.

There’s no doubt it’s a big brief, and sometimes ASIC even finds itself in the spotlight for the work it’s doing.

(Media grab)

“One of the toughest jobs in Australia, no doubt, is that of corporate regulator ASIC.”

Siobhan Moran-McFarlane: In this episode of Inside ASIC, we’re going to be addressing some of the burning questions. The 101 on what ASIC does to balance its priorities, and some of the biggest strategic threats to our financial system looming over the horizon.

So, I’m joined now by the man responsible for setting the direction of our corporate regulator. Joe Longo commenced his five-year term as Chair of ASIC back in 2021 after four decades in corporate law, financial services, regulation and law enforcement. Joe, you helped us kick off episode one, and it’s terrific to have you back with us.

Joe Longo: Thank you, Siobhan. It’s great to be here.

Siobhan Moran-McFarlane: Joe, over the course of this series, we’ve got a pretty good sense of the breadth and work that ASIC does. Although, in some ways, I know we’ve still barely scratched the surface. What’s your assessment of how well ASIC is fulfilling its brief?

Joe Longo: Well, Siobhan, ASIC’s brief, as everyone knows, is very broad. But it seems to me we’re firing on all cylinders. We have a very broad remit. So, the work we’re doing with superannuation, in life insurance, with the banks, with predatory lending, with the regulation of the Australian Stock Exchange. And most recently, the work we’re doing in trying to understand what’s happening with private and capital markets, is another iteration, if you like, of the work ASIC’s doing to stay on top of what’s happening in the economy.

Siobhan Moran-McFarlane: Now, you do have finite resources. So, when you decide to bolster some areas, whether it’s standing up a team to look at private markets, or adding heft to deal with insider trading, it necessarily means that you have to reduce your focus on other things. I want to ask about how you make the decisions between those competing priorities.

Joe Longo: Well, Siobhan, that question goes to the heart of regulation and enforcement. Our resources are limited. And so, we spend a lot of time thinking about where to put them. Because what’s at the heart of what ASIC does is choosing the right problems and issues to deal with. Because we can’t solve every problem. We can’t address every issue. So, it’s very important we focus on the right ones.

And the way we do that is by engaging very systematically with everyone that we regulate, with government, with other policymakers, with industry organisations. So, we are in the midst of a cost-of-living crisis, interest rates remain a problem and there are a lot of vulnerable consumers who are seeking finance or credit, and they’re being taken advantage of. So, that’s an issue that we’re putting resources into.

Siobhan Moran-McFarlane: Now, I know you had a very frank conversation with the Parliamentary Committee back in June, seeking additional funding for ASIC. I want to touch on the case you’re making in a second. Because it also goes to one of the commonly repeated criticisms of ASIC, that you’re not pursuing enough cases through the courts.

Joe Longo: As we speak, we’re in court today, either in the Federal Court or a criminal court somewhere in Australia. Secondly, we’re starting a new investigation every other business day. We tend to take matters to court far more frequently than negotiating outcomes, which was part of the criticism during the Royal Commission.

The other thing about ASIC cases, of course, is that they’re not always on the front page. Although we’re in court every day of the year, you’re not going to see us on the front page every day. But for those entities that are affected by our cases, they know we’re there. And they know that we’re holding them to account for their misconduct.

Siobhan Moran-McFarlane: OK. So just to address that case you’re making for additional funding, what would that allow you to do?

Joe Longo: Well, the additional funding would allow us to do several things. One, most obviously, to run more investigations and to run more cases. The other area for funding is that when people talk about enforcement, we really need to understand that we’re talking about technology and people. So, the investment that I’m talking about, and the money that we need to spend, is to ensure that we have the best technology available to us, the best data analytics, and that we can hire the best people.

Siobhan Moran-McFarlane: And what’s the flip side of that funding equation? What’s the bottom line for ASIC if your funding stays stagnant or goes backwards in real terms?

Joe Longo: Well, I think the starting point for funding of any regulator is that you’re never going to get all the funding you would like. So, I think ASIC’s realistic about that. I’m realistic about that. If our funding stays stagnant but the responsibilities we’re given continues to increase, then I think we all know where that’s going to end up.

It seems to me that if we want ASIC to be in court more often, then we’re going to need more resources. If we want more individuals or entities held criminally accountable, then we’re going to need more resources. If we want ASIC to be a 21st century, modern, confident, ambitious regulator, then it must be allowed to invest in technology systems and processes.

Siobhan Moran-McFarlane: OK now Joe, I’m not letting you go just yet, because next up we’re going to go pretty big picture and look at the strategic threats on ASIC’s radar.

Joe, I want to zoom out a bit now and look at the stuff that keeps you awake at night, the threats and harms that have the potential to damage Australia’s financial system.

Joe Longo: Probably top of mind for me at the moment would be cyber security and cyber resilience. And in many ways, it’s really all things technology. So, when you really step back, we’ve had a number of incidents in the last 12 months in particular, where there've been outages of one form or another or data breaches. So, we are so reliant as an economy and as a community on technology. That is the area, that in terms of an economy wide risk, we need to be very vigilant about.

Siobhan Moran-McFarlane: And look, I know there has been a lot of conversation about the rise of private investment in Australia. We spoke to one of your Commissioners, Simone Constant, about that in another episode. But can you talk to me about the trends on ASIC’s radar?

Joe Longo: One in particular is climate risk and the compulsory climate risk disclosure. That’s just become law in Australia. We really need to get that right if we’re to achieve our sort of green transition goals, because if we don’t get that disclosure right, then we won’t confidently attract capital into the country. So, that’s another area of significance.

And I suppose all things superannuation are very much on my mind. Within the next 10 years, we’re likely to get five or six trillion Australian dollars under management. That’s going to have a profound impact and is already having a profound impact on the economy. So, we need to know what’s going on there. Are members getting the returns on their super that are going to give them the retirement that they expected? But also, just the economy wide impacts of having such dominant entities who are doing transactions.

Siobhan Moran-McFarlane: In ASIC’s 33-year history, it’s fair to say that you’ve been subject to regular external review, whether that’s by the Treasury, multiple parliamentary inquiries, the Financial Regulator Assessment Authority. Are you open to discussions on if there should be changes to ASIC’s remit?

Joe Longo: I think to my mind, having worked in the area for many years, the idea of twin peaks, which is basically us and APRA, I think has served us well. So, for an economy of our size, a relatively small economy, a population of around 27 million people, the idea that we need more regulators doesn’t readily come to mind.

I think there are a number of benefits with the current system. We have a nationally integrated regulator. We get data from every aspect of the economy. So, our enforcement work is informed by our regulatory work, and our regulatory work is informed by our enforcement work. So, I see a lot of benefits in the current regulatory architecture.

Now, that doesn’t mean there may not be aspects of our jurisdiction that may change. So, I think there’s a scale issue here, which I think is in the public interest. So, I personally think the twin peaks model works very well. Whether we want to tweak it here and there in terms of particular aspects of our jurisdiction, that’s always on the table.

Siobhan Moran-McFarlane: So, you don’t think the case has been made to split ASIC up?

Joe Longo: We’re a long way from that, absolutely a long way from that. The idea, for example, that there should be an entity that just does court cases, that just does enforcement, and the regulatory work is done by ASIC, I think has no merit to it at all. The inefficiency of one entity doing the investigating and another entity actually doing the court cases, I just don’t see any merit in that.

Siobhan Moran-McFarlane: ASIC’s been the subject of criticism across multiple different Chairs. Why do you think it’s attracted such a vocal band of critics across its lifetime?

Joe Longo: Well, ASIC’s been very active across all aspects of the economy. And I’m not surprised that over that period of time, we are going to get criticism from time to time for the work we do. And having been part of that story throughout my professional life, I’m very open, we’re very open to feedback of that kind.

But in the end, I think it’s also well to remember that we are probably the most accountable regulator in the country. We have our own oversight authority, the Parliamentary Joint Committee on Corporations and Financial Services. And that’s been in existence since January 1991, and we appear before them regularly. We also have the Financial Regulatory Assessment Authority. And in this year alone, we’ve appeared before parliament 14 times and answered over 850 questions on notice.

So, I think in the end, we are going to attract some criticism from time to time. We do a wide range of work in an extraordinary range of sectors. We have very dedicated staff, and I’m very proud of the work that ASIC does. And hopefully we will continue to improve and get the outcomes for all Australians that we’re here to do.

Siobhan Moran-McFarlane: And just finally, Joe, your five-year term as ASIC Chair runs through until 2026. What work needs to be done by then, for you to know that you’re handing it on to your successor in good shape?

Joe Longo: Well, from day one, I’ve wanted for ASIC for it to be a confident, ambitious, modern regulator. And that journey started in 2021. We did an infrastructure review. We did a review of capabilities. We completed the biggest organisational redesign in 15 years. We’ve appointed three new Commissioners, and there’s been a complete renewal of our Executive Committee (ExCo). So, I feel as if we’ve made a lot of progress over the last three years, but we’re not done yet.

In the next 18, 20 months, there’s additional work to be done in particular to make us a data-informed and enabled regulator. And that essentially means investing a lot more than we have invested in our technology systems and processes. So, that will be a fundamental objective that I hope can be achieved. It’ll take more than two years, but we need to start investing now. And that’s happening.

Siobhan Moran-McFarlane: Joe Longo, thank you so much for your time.

Joe Longo: Thanks, Siobhan.

Siobhan Moran-McFarlane: I’m Siobhan Moran-McFarlane. It’s been a pleasure to bring you these six episodes of Inside ASIC.

Don’t forget, you can catch up with the whole series wherever you get your podcasts. Bye for now.