A parliamentary inquiry into the Australian Securities and Investments Commission (ASIC) has revealed startling evidence about some of its operations, including liquidator workforce issues and a not-so 鈥渇ast-track鈥 insolvency program.
Worst of all, ASIC is using artificial intelligence to auto-reject reports containing evidence of serious corporate crime.
Since 1991 ASIC has been the , on behalf of the government, regulating all business entities registered under the Corporations Act.
is itself the result of a sort of hostile takeover.聽It replaced the National Companies and Securities Commission聽and absorbed the corporate affairs offices of all states and territories.
As digitised markets and offshore tax options expanded, ASIC鈥檚 powers, responsibilities and budgets also increased, including the advent of the .
ASIC is legally responsible for maintaining, facilitating and improving the performance of the financial system, and entities in it, using its considerable powers to monitor corporations and businesses, including financial services.
罢丑别听 is the federal government committee that monitors ASIC鈥檚 activities. It regardless of changes in government and its current chair is New South Wales聽Labor Senator Deborah O鈥橬eill.
Three inquiries
The committee is presiding over three inquiries. The first is the聽, which is聽looking at all aspects of how corporate insolvency is managed by ASIC.
When a company goes into administration, having become insolvent, a registered liquidator must be appointed to wind up what is left. These people forensically assess any remaining assets and liabilities and how many cents in the dollar creditors and employees may, or may not, recover.
They are senior roles in the most challenging of audit environments with a .
During the COVID-19 freeze on insolvencies under the Coalition government, the Australian Financial Review reported that about were on JobKeeper.
Now the insolvency moratorium is over and outdated Reserve Bank of Australia monetary policy sees the economy struggling with inflation and numerous corporate collapses, registered liquidators won鈥檛 face unemployment again any time soon.
The problem now is there are not enough of them.
ASIC chief concedes workforce shortfalls
In his opening address to the Parliamentary Joint Committee on March 1,聽ASIC chief of operations Warren Day聽 two major issues had been revealed in the more than 70 submissions.
Witnesses to the inquiry noted the low representation of women in insolvency and restructuring firms, particularly at senior levels.聽About 9% of registered liquidators are women.
A key reason cited was that candidates applying to become a registered liquidator have to demonstrate at least 4000 hours of insolvency experience in the past five years.
Submissions noted the 4000 hours rule was particularly challenging for women, anyone planning parental leave or anyone with carer duties.
Day noted steps had been taken to address this, with the registration committees given greater discretion to consider other work experience.聽Day stated 鈥渟ome鈥 candidates of both genders had benefitted since, however he did not specify numbers.
Not so simplified liquidation process
The second issue is the poor uptake of ASIC鈥檚 鈥渟implified鈥 liquidation process, introduced in 2021.
Day stated submissions 鈥済enerally support the underlying policy objective鈥 of a fast-track insolvency option. However, those same submissions said the process is not simple enough, does not reduce costs as intended聽and the timeframes and eligibility criteria are too tight for many small businesses.
ASIC is considering improvements, including insolvency turnaround times, and is reviewing small business restructuring options.
Robocop auto-rejects evidence of fraud
The second Parliamentary Joint Committee inquiry is the聽.
鈥淢isconduct鈥 is the for 鈥渃rimes鈥 that include money laundering, tax evasion, securities fraud, insider trading and many similarly heinous offences.
for spruiking a 鈥渓ast resort鈥 compensation scheme for victims in lieu of the zero-tolerance shown to all other crime cohorts.
In the same week as the heard yet more disturbing evidence of the inhumane, illegal way vulnerable people were targeted using a government-funded algorithm, the Sydney Morning Herald revealed ASIC is using artificial intelligence to automatically reject reports of serious criminal misconduct.
A senior liquidator with documented evidence of serious criminal allegations he dutifully reported to ASIC, told the SMH he received an auto-rejection 38聽seconds聽after he lodged it, adding that ASIC citing resources and thresholds is 鈥渁 cop-out鈥.
ASIC鈥檚 own figures show of the more than 30,000 reports from liquidators received from the 2018鈥22 financial years, at least 28,000 included allegations that the company directors had broken the law.
On average, less than 3% were referred to another part of ASIC for more action.
Invoking 鈥渢hresholds鈥 to reject investigations is a bit rich from a corporate regulator who declined to prosecute Crown Casino directors in the wake of the Bergin Inquiry.
It is stretching credibility further to claim ASIC鈥檚 robocop has resource-threshold integrity, when no humans review the evidence reporting officers have taken great pains to provide.
Apparently zero-tolerance is only for Centrelink recipients and protesters, not for banks and corporations.
As Australians found out the hard way with Robodebt, integrity and sound judgment are human attributes that only exist in the bloodless algorithms of automation if they are engineered into it by human intelligence.聽聽
The (for which submissions are still open) will be the聽Oversight of ASIC, the Takeovers Panel and the Corporations legislation.
Given the revelations from the first two inquiries so far, tighter oversight of ASIC may be warranted.
Given ASIC rakes in $2 billion more than it costs to run, it remains to be seen just how much the government is willing to pay to maintain corporate law and order.
[Suzanne James has a background in writing policy, governance, risk management and regulatory compliance frameworks and in legislative compliance application.]