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BFCSA: JAMES WHEELDON - ex ASIC lawyer. The day he shirtfronted IOSCO Chief Greggie Medcraft

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Budget cuts spark fears of muzzled watchdogs


Date November 15, 2014

Georgia Wilkins

It was nine years ago that former Australian Securities and Investments Commission lawyer James Wheeldon walked away from the corporate watchdog, disappointed by what he said was a too-cosy relationship between the regulator and the big end of town.

In the near-decade since, he's watched the regulator cop harsh criticism as retail investors lost billions of dollars from a string of corporate and investment collapses after the global financial crisis.  

Giving explosive evidence in the recent Senate inquiry that lambasted ASIC's performance, Wheeldon accused the regulator of allowing policy decisions to be unduly influenced by lobby groups.

And now, with ASIC poised to be stripped of tens of millions of dollars in funding, Wheeldon fears the budget cuts will leave the agency more vulnerable to industry demands, making Australia's burgeoning financial sector - and the millions of Australians whose life savings are entrusted within it - even more exposed to scandals and misconduct. 

"If you get a reputation for being captive of industry and beholden to industry ... you can't shake it," he says.   Few government agencies have been hit as hard by budget cuts as those tasked with keeping corporate Australia in line.  

The government is pressing ahead with cuts that experts warn will severely impact the regulators' ability to do their jobs, despite recent scandals involving financial advice - such as at the Commonwealth Bank - and allegations of large-scale tax dodging by multinationals.

Thousands of jobs will go from ASIC and the Australian Tax Office over the next four years as the government slashes more than $260 million from the two agencies.   It follows an overall decline in funding to ASIC over several years, despite its ever-expanding mandate.

The banking regulator, the Australian Prudential Regulation Authority, will also feel the pinch. Despite its role watching over Australia's almost $2 trillion in retirement funds, it will be required to pay an increased efficiency dividend to the government.

As world leaders talk up the need for economic reform at the G20 in Brisbane this weekend, calling for more resilience against future shocks, regulators have been left lamenting slashed budgets and reduced staff.

Consumer groups are worried. "If regulators aren't sufficiently funded, there's a real risk misconduct will occur and go unremedied," warns Gerard Brody, of the Consumer Action Law Centre.


(NB Comment:  Gerard Brody told same Inquiry that ASIC was doing a fine job!  He is "one of those who enjoy lunches....."   ASIC never did the job anyway so why pay for their uselessness Gerard.  Stop being a prime puppet!  This email address is being protected from spambots. You need JavaScript enabled to view it.

Now business groups - the very target of watchdog scrutiny - are joining them in expressing their own concern about having regulators that are unable to do the job.

"A good, strong corporate regulator actually assists everyone to know what their compliance obligations are," says Judith Fox, the national director of the Governance Institute - the mouthpiece for company secretaries.

"You get less confusion and ambiguity. For companies, that's better."

The cuts come as the key financial agencies struggle under the burden of greater responsibilities, including tax crackdowns and greater oversight of the stock market - some of the very issues being touted at this weekend's summit.

Wheeldon, who now represents companies being investigated by ASIC, says greater funding alone won't fix ASIC's problems - but is the first step in improving enforcement.

"You need to recruit good, aggressive people who have the experience to know where the loopholes are and where people will cut corners," he says. "There's no cheap and easy way to do it."

The annual reports of Australia's corporate watchdogs, tabled in Parliament last week, lay bare the state of the regulators' coffers.

ASIC, one of the hardest hit, with $120 million to go over four years, has been forced to cut staff in all of its focus areas, except financial advice - the industry that has been undermined by a series of scandals at some of Australia's largest financial institutions.

Teams as small as 20 or 30 people will now be left at the regulator to pore over the activities of some of the biggest sectors of the economy, including superannuation and investment banking.

The Tax Office's annual report highlights equally alarming numbers. It has already seen 3000 staff exit this year and will have another 1700 leave under Abbott government cuts.

This is despite growing evidence that Australian companies and multinationals operating in Australia are shifting profits overseas to reduce their tax - seriously eroding the country's corporate tax base.

Cuts to major agencies have triggered fear from consumer groups as well as the regulators themselves.    ASIC chairman Greg Medcraft made his concerns loud and clear last month when he said Australia was a "paradise" for white-collar crime.

He has since withdrawn the comments after being reprimanded by finance minister Mathias Cormann, but says proactive corporate surveillance will be "substantially reduced" due to cuts.

"My warning is that people will need to be careful. Take responsibility for yourself," he told a Senate estimates hearing in June.   The consumer watchdog, the Australian Competition and Consumer Commission, also made its concerns known to government in its report last week.

The agency has been spared from severe cuts, with a funding boost of $68.5 million over four years, however this is largely tied to the monitoring of prices related to the repeal of the carbon tax.

ACCC chairman Rod Sims said the regulator had undertaken a series of measures to ensure it could continue to provide high-quality outcomes, despite "operating with significantly fewer resources".

This week APRA Member Helen Rowell said that choosing where to allocate resources was now one of the greatest hurdles for regulators. .......................


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  • Wayne
    Wayne Tuesday, 18 November 2014

    Gregie, Just like the band Midnight Oil sang " Your dream world is just about to fall "
    It's only a matter of time.
    the evidence pile is getting taller as the good people leak the info. Soon you won't be able to Wiesel out like you have done so far.

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