ASIC Australian Securities & Investments Commission 29 criminals jailed for fraud, criminal breach of duties and insider trading $506 million in fun protected, compensation orders or assets frozen new initiatives targeting insolvency, financ reporting and disclosure 29 criminals jailed for fraud, criminal breach of duties and insid trading $506 million in funds protected, compensation orders or assets frozen new initiativ targeting insolvency, financial reporting and disclosure 29 criminals jailed for fraud, crimin breach of duties and insider trading $506 million in funds protected, compensation orders assets frozen new initiatives targeting insolvency, financial reporting and disclosure 2 criminals jailed for fraud, criminal breach of duties and insider trading $506 million in fun protected, compensation orders or assets frozen new initiatives targeting insolvency, financ reporting and disclosure 29 criminals jailed for fraud, criminal breach of duties and insid trading $506 million in funds protected, compensation orders or assets frozen new initiativ targeting insolvency, financial reporting and disclosure 29 criminals jailed for fraud, crimin breach of duties and insider trading $506 million in funds protected, compensation orders assets frozen new initiatives targeting insolvency, financial reporting and disclosure 2 criminals jailed for fraud, criminal breach of duties and insider trading $506 million in fun protected, compensation orders or assets frozen new initiatives targeting insolvency, financ reporting and disclosure 29 criminals jailed for fraud, criminal breach of duties and insid trading $506 million in funds protected, compensation orders or assets frozen new initiativ targeting insolvency, financial reporting and disclosure 29 criminals jailed for fraud, crimin breach of duties and insider trading $506 million in funds protected, compensation2 ‘enforcement is an essential part of effective regulation’ David Knott, ASIC Chairman annual report 2002–03 fighting fraudand misconduct
Transcript
A S I CAustralian Securities &
Investments Commission
29 criminals jailed for fraud, criminal breach of duties and insider trading $506 million in funprotected, compensation orders or assets frozen new initiatives targeting insolvency, financreporting and disclosure 29 criminals jailed for fraud, criminal breach of duties and insidtrading $506 million in funds protected, compensation orders or assets frozen new initiativtargeting insolvency, financial reporting and disclosure 29 criminals jailed for fraud, criminbreach of duties and insider trading $506 million in funds protected, compensation orders assets frozen new initiatives targeting insolvency, financial reporting and disclosure 2criminals jailed for fraud, criminal breach of duties and insider trading $506 million in funprotected, compensation orders or assets frozen new initiatives targeting insolvency, financreporting and disclosure 29 criminals jailed for fraud, criminal breach of duties and insidtrading $506 million in funds protected, compensation orders or assets frozen new initiativtargeting insolvency, financial reporting and disclosure 29 criminals jailed for fraud, criminbreach of duties and insider trading $506 million in funds protected, compensation orders assets frozen new initiatives targeting insolvency, financial reporting and disclosure 2criminals jailed for fraud, criminal breach of duties and insider trading $506 million in funprotected, compensation orders or assets frozen new initiatives targeting insolvency, financreporting and disclosure 29 criminals jailed for fraud, criminal breach of duties and insidtrading $506 million in funds protected, compensation orders or assets frozen new initiativtargeting insolvency, financial reporting and disclosure 29 criminals jailed for fraud, criminbreach of duties and insider trading $506 million in funds protected, compensation2
‘enforcement is an essential part of effective regulation’David Knott, ASIC Chairman
annualreport2002–03
fighting fraudand
misconduct
ASIC’s profile
The Australian Securities and Investments Commissionenforces and regulates company and financial serviceslaws to protect consumers, investors and creditors.
An independent Commonwealth government body, ASIC has regulatedfinancial markets, securities, futures and corporations since January1991. From 1998, we became responsible for consumer protection insuperannuation, insurance, deposit taking and, from 2002, credit. ASIC works with other financial and law enforcement agencies inAustralia and internationally.
For our statutory aims and where we fit in the regulatory picture, see page 12.
In 2002–03, ASIC:
� employed 1,396 full time equivalent staff around Australia, see page 58
� outputs cost $173 million and we collected $405 million in fees forthe Commonwealth, see page 10
� operated under full time Commissioners appointed by the Governor-General on the nomination of the Treasurer, see page 16.
ASIC report of operations 2002–03
2002–03� Achieved record enforcement outcomes, including 29
criminals jailed for fraud, criminal breach of duties andinsider trading, page 25.
� $506 million in funds protected, compensation orders orassets frozen for the public and creditors, page 27.
� Launched new initiatives targeting insolvency, financialreporting and disclosure, and secured additional budgetfunding to develop them, page 51.
� More consumers turned to ASIC. Visits to our consumerwebsite up 79%, reports of misconduct up 19%,database searches up 20%, pages 42, 52.
� More than 1,400 approvals to facilitate commercialtransactions and reduce business costs, page 5.
highlights
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fighting fraud and misconduct
Highlights 1
Chairman’s report ASIC Chairman David Knott reports. 3
ASIC effectiveness Achieving our statutory aims over the past 3 years. 7
Objectives, plans Implementing our 3 year plan. 8and results
Financial report Meeting expanding demands. 10
Organisation chart Key reporting lines. 11
The regulatory picture ASIC’s role, financial regulation: who’s involved, 12who it protects and how it’s carried out.
ASIC directorates Summary of our 7 operational directorates. 14
Six year summary Data on business, ASIC performance and finance. 66
Financial statements Reporting on operational and administered finances. 67
Index 119
Inside this report
About this reportThis report was produced under the Commonwealth Authorities and Companies Act 1997.The members of the Commission are responsible under section 9 of that Act for thepreparation and content of the report of operations in accordance with the Finance Minister’sorders.
To meet high standards of disclosure, we used feedback from Parliamentarians and thepublic. Last year’s report won ASIC’s fourth Gold Award from the Australasian ReportingAwards Inc.
ASIC report of operations 2002–03
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In this section:� enforcement� combining strategies� consumer education� financial services reform� facilitating commerce� effectiveness measures� the Commission� ASIC staff
ASIC report of operations 2002–03
EnforcementEnforcement is an essential part of effectiveregulation.
In the current domestic and internationalenvironment, the fight against fraud andmisconduct has pervaded much of our work.ASIC has responded strongly to Australia’scorporate failures and market abuses,including insider trading, as outlined in thisreport. These measures have been critical tothe restoration of investor confidence and tothe good reputation of the Australianequities market.
Enforcement is demanding and challengingwork, and the results to date reflect credit onASIC’s enforcement officers. That work nowincludes the 53 referrals to ASIC from the HIHRoyal Commission, in addition to the criminaland civil actions ASIC had already taken.
Successfully combining strategiesWe have also combined enforcement withwider regulatory strategies, for example, inaction we have taken on insolvency andmarket disclosure.
There has been a substantial increase incomplaints about corporate insolvenciessince 2000. Last year, ASIC responded tothis increase by:
• helping liquidators to obtain books andrecords
• requiring companies to properly maintainsuch records
• visiting companies that appeared to be atrisk of failure, and
• pursuing legal proceedings whereappropriate, including insolvent tradingproceedings against directors.
Chairman’s report
‘Enforcement is an essential part ofeffective regulation.’
chairman’s report
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Encouraged by the positive feedback fromthe insolvency profession, we sought andobtained additional, dedicated funding in thisyear’s budget to extend our pilot project intoa continuing regulatory program.
Similarly, in financial reporting and marketdisclosure, we combined more assertiveintervention with other measures designedto raise standards. Our audit of Australia’slisted companies for ‘Enron’ style reportingabuses suggested that there is no reason tobelieve that the type of accounting abusesidentified in the United States pose amaterial risk in Australia, but it raisedawareness of other issues and resulted insome financial restatements.
We also used a combination of strategies topromote a stronger culture of marketdisclosure among companies, including:
• regulatory intervention that led in manycases to the release of additionalinformation to the market
• closer cooperation with the AustralianStock Exchange Ltd (ASX), and
• extensive industry consultation.
The Government recognised the importanceof these disclosure and financial reportinginitiatives by including an additional budgetappropriation to expand them over the next3 years. The Government’s CLERP 9legislative package, expected later this year,will further support these regulatory andenforcement programs.
Consumer educationConsumer education and protection plays aless direct, but equally important, role infighting fraud and misconduct.
Many of the worst abuses we encounteredwere financial frauds targeting unsophisticatedconsumers. Realistically, enforcement actionswill only ever catch a relatively small numberof offenders, often after the horse hasbolted. In the long term, the best policy forprotecting consumers is to raise their ownknowledge of the issues and their skill indealing with them.
ASIC has recently sought to place financialliteracy firmly on the national educationagenda. This has attracted strong cross-sectoral support and, hopefully, will lead tothe adoption of a coordinated and cohesiveapproach to this issue in our schools.
Financial services reformConsumers of financial products and servicesare entitled to expect a regulatory frameworkthat includes systemic safeguards andaccessible redress against misconduct.
The Financial Services Reform Act 2001 iscentral to these objectives. After a somewhatslow start, industry licensing is gainingmomentum and will reach a peak by theend of this calendar year. The Treasurer’srecent statements that the Government willnot extend the transition period, whichexpires in March 2004, have provided afurther incentive for financial servicesbusinesses to lodge their licenceapplications.
On behalf of the Commission, I wishexpressly to acknowledge the outstandingwork of ASIC officers on this project.
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ASIC report of operations 2002–03
While this report accurately describes ourprogress, it cannot adequately reflect thecomplexity and challenge that this reformhas posed for ASIC’s management and staff.They have made a huge commitment toconsulting industry on policy andimplementation, a commitment that hasbeen both appreciated and reciprocated byindustry.
ASIC’s collateral initiatives to protect andinform investors have also won publicattention and support, including our work toenhance the quality and credibility ofinvestment advice and our proposals toimprove fee disclosure. The 79% increase invisits to our consumer website indicates toothat we are reaching more consumers andproviding them with valuable assistance.
Facilitating commerceIn the past financial year, we approved morethan 1,400 applications for waivers of ormodifications to the law that reducedbusiness costs. In some 90 cases, weconsidered and approved innovative andcomplex transactions that might otherwisenever have proceeded.
Although that is not high profile work, it isimportant to the competitiveness ofAustralian enterprise and the long terminterests of Australian investors. It forms partof our statutory mandate to help improve theperformance of Australia’s financial system.
We also prepared to implement theGovernment’s CLERP 7 reforms, which willfurther reduce the compliance costsassociated with lodging annual returns forapproximately 1.3 million registeredcompanies.
Finally, we contributed substantially tointernational efforts to facilitate cross-bordercapital and business flows, particularlythrough the International Organization ofSecurities Commissions (IOSCO).
New effectiveness measuresFor the first time this year, we have soughtto measure explicitly our regulatoryeffectiveness, against both our statutorymandate and our 2003–2005 strategic plan,see pages 7–9. This stands in addition to afull account of our activities and ourstewardship of public moneys.
Measuring regulatory effectiveness ischallenging. Statistics or ‘heads on sticks’portray activity levels, but do not fully reflectthe effectiveness of that activity. For example,how do you prove that successful resultsagainst fraud and misconduct deterred otherwould be offenders? Yet without overstatingthe significance of specific measuresincluded in this report, we strongly believethese new measures will contribute to abetter assessment of our performance. Wewill develop these measures in future reports.
The CommissionIn February 2003, Mr Jeffrey Lucy, AM, wasappointed Deputy Chairman for a 3 yearterm. Mr Lucy brings significant experience inaccountancy and expertise in financialreporting to the Commission, and has takenup residence in Sydney.
Pending Mr Lucy’s appointment, Mr IanJohnston (Executive Director, FinancialServices Regulation) acted for extendedperiods as a Commission member. Hissupport and assistance were muchappreciated.
chairman’s report
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ASIC report of operations 2002–03
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ASIC report of operations 2002–03
This will be my last annual report, as I intendto retire from ASIC at the end of 2003. Mydecision has been made in the knowledgethat ASIC is well prepared and structured todeal with its outstanding enforcement andregulatory issues.
During my term at ASIC, the Treasurer hasbeen a strong supporter of effective and well resourced corporate and securitiesregulation. The considerable achievements of the agency over that time could not havebeen delivered without his support.
I also express my appreciation to theCommission members and ASIC staff fortheir professionalism and hard work inensuring that the agency is so well placed tocarry out its mandate, and to the ParliamentarySecretary to the Treasurer, Senator the HonIan Campbell, for his ongoing support.
Our staffThis year workloads have risen right acrossthe organisation as a result of major lawreforms, numerous large and complexinvestigations and increased public demandfor our assistance. Our staff have risen to theoccasion and coped admirably with thesepressures and demands.
The Commission is also pleased with theprogress that has been made inimplementing new staff training programsand improved systems for capturing andsharing information across the agency. Thesekey components of our 2003–2005strategic plan were foreshadowed in lastyear’s report, and remain critical to ASIC’scontinuing development as a nationallyfocused, knowledge based agency. We tooka further step towards their achievement byincluding information sharing strategies asperformance requirements for staff in ourrecently negotiated Certified Agreement.
My report, and the rest of this annual reportexcept for the financial statements,constitutes ASIC’s report of operations inaccordance with a resolution ofCommissioners made on 12 August 2003.
David KnottChairman
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ASIC report of operations 2002–03
ASIC
effectivenessStatutory aims (from the ASIC Act, see page 12) 2002–03 2001–02 2000–01
Upholding the law effectively and quickly• Criminals jailed 29 19 25
• Civil orders against people or companies 151 140 n/a
• Successful litigation (target 70%) 94% 92% 71%*
• Additional disclosures achieved through ASIC intervention 311 n/a n/a
Promoting confident and informed consumers• $ millions protected, frozen or compensation orders $506m $401m $530m
• Public complaints about misconduct finalised 9,292 7,827 6,646
• Use of our consumer website FIDO 875,000 488,000 241,000
• Callers assisted through our Infoline 142,284† 161,000 123,000
Making company information available quickly and efficiently
• Total use of our databases (free and paid) 10,997,500 9,095,600 7,260,700
• Company data lodged on time 93% 93% 93%
• Availability of database 99.9% 99.9% 99.9%
Improving the performance of the financial system and the entities within it
• Approvals of commercial transactions or products that reduced costs 1,360 n/a n/a
• Approvals of innovative transactions or innovative financial products 90 204‡ 80
• Australian financial services licences issued 604 35 n/a
* Success rate understated.† Calls fell because company document lodgement enquiries were re-routed, see page 53.‡ Financial services reform triggered an unusually high number of special applications.
Staff, expenses and revenue 2002–03 2001–02 2000–01
Staff (full time equivalents) increased for enforcement and financial services reform
No of staff 1,396 1,284 1,221
Annual change 9% 5% –1%
Operating expenses rose to pay for extra workload$ millions $173m $160m $143m
Annual change 8% 12% nil
Revenue collected for the Commonwealth up$ millions $405m $379m $363m
Annual change 7% 4% 1%
ASIC effectiveness: 3 year perspective
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Fight fraud and misconduct.
The public rates enforcement asour highest priority and hasacknowledged that ASIC is morecredible and more visible.
We plan to:
• produce results that willjustify this shift in opinion
• seek support for moreflexible enforcementremedies
• act against misleading anddeceptive conduct affectingconsumers, and
• promote awareness aboutscams and fraud.
This year, ASIC:
• tackled crucial issues andsucceeded in 94% oflitigation, page 24
• sought power to fine forbreaches of marketdisclosure rules
• acted against 43 illegalschemes, and obtained 311corrective disclosures, pages 7, 24, and
• increased publication anddistribution of warnings, page 42.
Objectives and context 3 year plan for 2002–05 Results in 2002–03
Raise standards in financialservices and further buildour expertise.
Parliament has given us a majortask to implement its financialservices reforms smoothly.
We plan to:
• raise standards in theindustry
• become more active andmore skilled insuperannuation andinsurance, and
• negotiated a new CertifiedAgreement emphasisinginformation sharing, page 56,and
• extended our leadershiptraining, and recruited 18new graduates, page 61.
Objectives and context 3 year plan for 2002–05 Results in 2002–03
In 2002–03, ASIC received an appropriationof $162.8 million. This included an increaseof $16.8 million, provided principally toimplement the Financial Services Reform Actand to supplement our general enforcementcapability.
Some $10.6 million of our appropriation wascollected by the Government as a levy onvarious deposit taking, superannuation,retirement savings and insuranceorganisations. The levy was used for ASIC’sconsumer protection, regulatory andenforcement activities relating to theproducts and services these organisationsoffer, and for the Superannuation ComplaintsTribunal. ASIC spent approximately $9.8million on these activities, and theSuperannuation Complaints Tribunal spent$3.1 million, bringing the total amountexpended against the levy to $12.9 million.See also page 65.
We also generated more than $9 millionfrom external sources including $2 million inrecoveries for court and investigation costs.Our combined revenue funded ourregulatory, enforcement and consumerprotection activities.
We incurred a small operating deficit of$0.112 million, an improvement on lastyear’s deficit of $5.599 million.Benchmarking our infrastructure servicesagainst public and private sectors continuedto demonstrate that we managed resourcesefficiently.
Total fees and charges collected for theCommonwealth amounted to $405 million.
Our financial statements begin on page 67.
Cost of outputsASIC’s outputs in 2002–03 cost $172.6million, up from $159.9 million. The increasereflected the cost of new financial servicesreform and enforcement activities.
Output* Cost
1 Policy and guidance about laws $9.7madministered by ASIC
2 Comprehensive and accurate $46.1m information on companies and corporate activity
3 Compliance monitoring and $47.7mlicensing of participants in the financial system to protect consumer interests and ensure market integrity
4 Enforcement activity to give effect $69.0mto the laws administered by ASIC
Total $172.6m
*Infrastructure costs are apportioned to theseoutputs
Employee expenses, our major outlay,increased 14% to $96.9 million. Some 112additional full time equivalent staff wereengaged to meet our financial servicesreform and enforcement responsibilities.These extra staff also contributed toincreased supplier expenses, excludingproperty costs, of $43.6 million. Expenditureon enforcement matters and litigation alsoincreased. Property expenses of $18.9million fell by $0.9 million, a cost wecontinued to manage tightly byaccommodating all additional staff withinexisting premises.
ASIC’s legislationASIC regulates companies and financialservices, and promotes investor, creditor andconsumer protection under the AustralianSecurities and Investments Commission Act2001; Corporations Act 2001; Insurance Act1973; Insurance (Agents and Brokers) Act1984; Insurance Contracts Act 1984;Superannuation (Resolution of Complaints)Act 1993; Life Insurance Act 1995;Retirement Savings Accounts Act 1997; andthe Superannuation Industry (Supervision)Act 1993.
In brief, section 1(2) of the ASIC Act requiresus to:
• uphold the law uniformly, effectively, andquickly
• promote confident and informedparticipation by investors and consumersin the financial system
• make information about companies andother bodies available to the public, and
• improve the performance of the financialsystem and entities within it.
Who does ASIC regulation protect?We protect consumers, investors andcreditors of corporations, including anestimated*:
• 15.4 million people with a depositaccount
• 9.9 million investing throughsuperannuation or annuities
• 9.5 million with credit or charge cardsincluding debit only
• 6.1 million with a home, personal orinvestment loan
• 4.3 million directly owning shares
• 2.3 million having invested through afinancial adviser, and
• 1.4 million investing in managed funds.
*Roy Morgan Research, 12 months to March 2003people aged 14+
Other financial regulatorsThese government bodies also regulateAustralia’s financial system and financialservices:
• Australian Prudential Regulation Authority(APRA) regulates prudential standards fordeposit taking institutions, insurancecompanies, and larger superannuationfunds designed to ensure, under allreasonable circumstances, that they meettheir financial promises
• State and Territory fair trading or consumeraffairs agencies regulate consumer creditunder the Uniform Consumer Credit Code,and
• Reserve Bank of Australia (RBA) regulatesmonetary policy and the stability of thefinancial system.
ASIC cooperated with these bodies throughconsultation at senior level and regularcontact by operational and policy staff.
In this section:� ASIC’s legislation� who we protect� other financial regulators
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ASIC report of operations 2002–03
Where ASIC fits in the regulatory picture
‘ASIC regulates companies and financial services, and promotesinvestor, creditor and consumer protection.’
ASIC report of operations 2002–03
the regulatory picture
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Who we regulate How we regulate them
1.3 million companies. Register each company with a unique number, and record the number,name, directors and other information on a public register.
Investigate and act against misconduct by company directors and officers.
Grant or refuse requests for relief from the law.
Receive prospectuses before money is raised.
Uphold the law on financial reporting and company mergers and acquisitions.
7,025 company auditors,832 registered liquidatorsand 363 official liquidators.
Register them before they start operating.
Investigate and act against misconduct.
5 financial marketsauthorised by theMinister, including: • Australian Stock
Exchange Ltd (ASX)• Sydney Futures
Exchange Ltd.
Investigate and act against misconduct by listed companies, brokers andtraders.
Assess and report to the Minister on market supervisory arrangements.
Advise the Minister about rule changes and whether to approve newmarkets.
Monitor what ASX does as a listed company, and trading in its shares.
Participate in andinfluence internationalstandard setting.
Description of ASIC directorates
* The work of these directorates received substantial support from other directorates.† Full time equivalents, not including 34 staff supporting the Commission, General Counsel, Chief Accountant, and 35 staffsupporting the Superannuation Complaints Tribunal and other statutory bodies.‡ Includes 21 full time graduates working for other directorates.
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ASIC report of operations 2002–03
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Consumerprotection*
25 staff
Identify and act onconsumer issues,approve complaintsschemes, review codesof practice.
Expert assessment ofconsumers’ financialplans issued a wakeup call to the industry.
875,000 visits to ourconsumer website, up79%. 270,000consumer publicationsdistributed.
Mortgage brokersreport began reformprocess to protectconsumers.
ASIC called for afinancial literacyorganisation to boostfinancial education inschools.
Promote publicawareness of domesticand internationalscams and fraud.
Help consumers makemore informeddecisions aboutsuperannuation.
Increase internalefficiencies andaccountability for costs.
ASIC report of operations 2002–03
David Knott LLB
ASIC Chairman from November 2000 for a5 year term. (In August 2003, he announcedhis intention to retire at the end of 2003).
David Knott is a lawyer and Fellow of theAustralian Institute of Company Directors. In 2002, he was elected Chairman of theTechnical Committee of the InternationalOrganisation of Securities Commissions.Member: Companies and Markets AdvisoryCommittee, Council of Financial Regulators,Australian Crime Commission. PreviouslyASIC Deputy Chairman from July 1999.
His career covers 13 years in private legalpractice, specialising in company andcommercial law, 10 years in senior roles ininvestment banking, and 9 years in thepublic sector. He has been a partner atArthur Robinson and Co, Senior ExecutiveDirector Capel Court, Executive Director ofthe Australian Financial InstitutionsCommission, Chief Executive ofCommonwealth Funds Management andChief Operating Officer of APRA.
Jeffrey Lucy, AM FCA
ASIC Deputy Chairman from February 2003for a 3 year term.
Jeffrey Lucy is a Chartered Accountant and aFellow of the Institute of CharteredAccountants in Australia, the NationalInstitute of Accountants, and the AustralianInstitute of Company Directors. He was mostrecently the Chairman of the FinancialReporting Council and head of LucyConsulting.
He is a former member of the BusinessRegulation Advisory Group, a former National President of the Institute ofChartered Accountants in Australia, and a former Managing Partner ofPricewaterhouseCoopers, Adelaide. He wasmade a Member of the Order of Australia forhis contribution to the accounting professionand to the business sector as an adviser oncorporate and taxation reform.
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Berna Collier BA, LLB (Hons)(Qld), LLM (Melb)
ASIC Commissioner from November 2001for a 3 year term.
Professor Berna Collier is a lawyer and amember of the Insolvency, the CompanyLaw and the Banking and FinanceCommittees of the Law Council of Australia.She serves on the Advisory Board of AxissAustralia, and was ASIC’s nominee on theAPRA board until 30 June 2003.
She has worked in and written extensivelyabout commercial and insolvency law for 15 years. Professor Collier was most recentlyProfessor of Commercial Law at theQueensland University of Technology and aneducational consultant with CPA Australia.She previously practised law in Melbourneand Brisbane. During 1999 and 2000,Professor Collier chaired the CommonwealthGovernment’s Taskforce on Industry Self-Regulation.
Ian Johnston
Acting Commissioner from July 2002 untilFebruary 2003.
Ian Johnston is a lawyer and ASIC’s ExecutiveDirector, Financial Services Regulation. Hepreviously served in other senior ASIC roles,and has been a company director in thefinancial services sector and CEO of a majortrustee company. The Treasurer appointedhim to serve as Acting Commissioner untilthe appointment of Deputy Chairman JeffreyLucy.
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comm
issioners
GovernanceThree full time Commissioners directedASIC’s affairs. Full time membership:
• enabled Commissioners to monitor anddirect ASIC’s complex and wide rangingactivities, and
• avoided conflicts of interest that mightotherwise affect part time Commissionersstill active in business, law or accounting.
The Commission held 17 formal meetings toconsider and set goals and strategy,including ASIC’s strategic plan (page 8) anddirectorate business plans. Meetings alsoreviewed operational, financial and AuditCommittee reports, and discussed key issuesaffecting human resources, governance anddelegations.
Commissioner Eligible Attendedto attend
David Knott 17 17
Jeffrey Lucy 6 6
Berna Collier 17 15
Ian Johnston (acting) 10 10
Independent legal and accounting expertsadvised on specific matters. Wherenecessary, an individual Commissioner mayobtain independent legal advice at ASICexpense.
ASIC’s Executive Committee, the seniormanagement forum of Commissioners andExecutive Directors of our 7 operatingDirectorates, met monthly to discuss currentand emerging issues, to plan and makepolicy across the organisation, and tomaintain high level communications.
Commissioners’ appointment andremunerationThe Governor-General, on the nomination ofthe Treasurer, appointed Chairman David Knottin November 2000, Deputy Chairman JeffreyLucy in February 2003 and Professor BernaCollier in November 2001 on fixed terms thatmay be terminated earlier only for reasonsset out in section 111 of the ASIC Act.
The Treasurer may nominate asCommissioners only people who arequalified by knowledge or experience inbusiness, administration of companies,financial markets, financial products andfinancial services, law, economics oraccounting.
The Remuneration Tribunal set Commissioners’remuneration; see also page 99.
Reporting to ParliamentASIC reported to Parliament through itsannual report, replies to Parliamentaryquestions and inquiries on behalf ofconstituents, and 12 appearances before 5Commonwealth Parliamentary Committees:Joint Committee on Corporations & FinancialServices (5); Joint Committee of PublicAccounts & Audit (1); Senate Committee onEconomics (4); Senate Select Committee onSuperannuation (1); House of RepresentativesCommittee on Environment & Heritage (1).
In this section:� governance and the role of Ministers� ethics� audit
ASIC report of operations 2002–03
18 ASIC governance, ethics and audit
‘All ASIC staff must comply with the Australian Public Service Code of Conduct.’
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Role of the responsible MinisterThe Ministers responsible for ASIC are theTreasurer, the Hon Peter Costello MP and, in matters determined by him, theParliamentary Secretary to the Treasurer,Senator the Hon Ian Campbell.
Under the ASIC Act, the Minister nominatesCommission members for appointment bythe Governor-General. Commissionersreported formally to the Minister throughtheir annual report of operations, briefings,submissions and meetings with the Treasureror Parliamentary Secretary. ASIC also briefedthe Treasury about current issues andproposed changes to the law.
ASIC’s legislation permits the Ministerformally to direct ASIC in specificcircumstances. Consistent with Ministerialpractice across most statutory authorities,such powers have been exercised rarely.
Under section 12 of the ASIC Act, theresponsible Minister may direct ASIC aboutpolicies and priorities in using our powers orperforming our functions, but may not directus about a particular case. Only one suchgeneral direction has been given, inSeptember 1992, about collaboration andconsultation between ASIC and the Directorof Public Prosecutions in the investigationand prosecution of serious corporatewrongdoing.
Under section 137, the Minister mustapprove contracts exceeding $1 million(recently raised from $250,000) and leasesof land exceeding 10 years.
Under section 28 of the CommonwealthAuthorities and Companies Act, the Ministermay also notify Commissioners in writing ofgeneral policies of the Commonwealth
Government that will apply to ASIC. No suchnotifications have been received. However,as with other agencies, CommonwealthMinisters and Departmental Secretaries fromtime to time asked ASIC to conform toGovernment policies affecting our generaladministration, for example, staffemployment practices.
Relationship with the StatesThe Commonwealth assumed responsibilityfor corporate regulation from the States in1991. The relationship between theCommonwealth, States and NorthernTerritory in corporate regulation is governedby the Corporations Agreement 2002.
Under that agreement, the Commonwealthconsults the Ministerial Council forCorporations (MINCO), comprisingCommonwealth, State and Northern TerritoryMinisters in appointing ASIC Commissioners,and ASIC must:
• consult the relevant State or NorthernTerritory Minister in appointing RegionalCommissioners
• maintain certain minimum service levels ineach State and the Northern Territory
• maintain offices in each State capital andDarwin, and
• maintain regional liaison committees ineach State and the Northern Territory toconsult the local business community, anduse our best endeavours to have aCommission member present at everymeeting, see page 22.
ASIC attended MINCO as an observer and toanswer questions about the administration ofthe corporations legislation.
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governanace, ethics and audit
EthicsAll ASIC staff must uphold the AustralianPublic Service Values and comply with theAustralian Public Service Code of Conduct asset out in the Public Service Act 1999. Thevalues and code require impartiality, honesty,diligence and service.
In addition, formal procedures requiredisclosure of any real or apparent conflict ofinterest. Commissioners and staff arerequired to take no part in decisions wherereal or apparent conflicts of interest mayarise. We set up special reporting anddecision making procedures to maintain theintegrity of our decisions.
The Chairman and Commissioners disclosedto the Minister all direct or indirect pecuniaryinterests in businesses, companies, orfinancial products regulated by ASIC.
Staff were required to keep registers ofinterests that supervisors may inspect at anytime. Commissioners appointed seniordisclosure officers to advise managers andstaff on how to handle possible conflicts.
Investigating complaints about staffAs our staff have significant publicresponsibilities, we have maintained internalprocedures for investigating complaintsabout how they carry out thoseresponsibilities.
During this financial year, ASIC completedinquiries into 8 substantive complaints. Fourinquiries remain on foot. In one of the 8completed inquiries, the complaint wasfound to be substantiated. That complaintrelated to the standard of service provided toa member of the public.
Complaints about the way in which ASICadministers its powers may also be made to,and investigated by, the CommonwealthOmbudsman.
DisclosureTo operate transparently, while protectingconfidential information, ASIC:
• observed the requirements of theFreedom of Information Act 1982, see page 63.
• met high standards of disclosure throughour annual report, see page 2
• published up to date information on ourwebsites, and through the ASIC Digestand other publications, see page 63, and
• issued media releases, subject to writtenguidelines, about enforcement andregulatory issues, while respecting therights of people subject to investigation oradministrative action.
Fraud controlASIC reviewed its fraud risks andimplemented the strategies outlined in its2001–03 fraud control plan. The planoutlines strategies and processes to avoid,detect, investigate and minimise the effectsof fraud. We maintained reporting and datacollection mechanisms that met our needsand complied with Commonwealth FraudControl Guidelines.
Indemnity and insurance policiesConsistent with the CommonwealthAuthorities and Companies Act, ASIC:
• paid a premium of $47,025 for directorsand officers’ insurance (includingemployment practices insurance), which
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ASIC report of operations 2002–03
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ASIC report of operations 2002–03
covered all current and formerCommission members and ASIC staffmembers for liabilities, including legalcosts, incurred by them in theperformance of their duties, and
• provided indemnities to Commissionmembers for liabilities, including legalcosts, incurred by them in the course oftheir duties.
AuditThe Commonwealth Auditor-General auditedASIC’s financial statements, see page 68.
The Commission’s Audit Committeeexamined internal and external audit mattersand risk assessment, see page 62. Themajority of members are independent ofASIC, including the Chair, Ms Merran Kelsall,who is a senior chartered accountant andcompany director in private practice. TheCommittee’s charter conforms withAustralian National Audit Office andAustralian Institute of Company Directorsguidelines.
governanace, ethics and audit
ASIC report of operations 2002–03
Presenting ASIC to the communitySenior ASIC staff gave more than 300presentations to an estimated 21,000people from the markets, financial servicesindustry, companies, government agenciesand consumer groups about how to complywith the law and how the law protects usersof financial markets, products and advice.
Consulting regions and businessTo ensure that we understood specific needsin all the States and Territories, we convenedliaison committees representing the businesscommunity in each State and Territory. Eachcommittee met about 4 times, receivedinformation on our performance and service,and offered ideas. A Commissioner usuallyattended these meetings.
To build support for compliance and goodpractice, we met regularly with some 18peak industry and professional associations,and consulted other organisations,companies and professionals on proposedpolicies. We helped thousands of companyoffice holders and professionals over thephone.
Supporting a consumer voiceWe funded a 10 member ConsumerAdvisory Panel, including consumer and
investor advocates experienced in financialservices and an independent Chair. Itrecommended research, alerted us to issuesand commented on policy affecting investorsand consumers. Read the Panel’s report onpage 44. We also consulted other investorand consumer organisations.
Building relationshipsASIC’s ninth Summer School broughttogether 24 speakers and 77 participantsfrom overseas and Australia selected fromindustry, the professions, government,regulators and our own staff. The theme,‘Borderless boards – a changing globalparadigm in ethics and governance’, focusedon recent Australian and internationaldevelopments.
Supporting professional standardsTo encourage professional education in thefinancial industry, we sponsored prizes fortwo Securities Institute courses: FinancialMarkets Law, Regulation and Compliance,and Financial Advising Essentials. We alsosponsored the Australian Securities andInvestments Commission Prize forProficiency in Corporate Law at the Universityof Sydney, and the ASIC prize in CorporateLaw at the University of Wollongong.
Community involvement
‘Senior ASIC staff gave more than 300 presentations to anestimated 21,000 people.’
