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The performance of the Australian Securities and Investments Commission Submission

The performance of the Australian Securities and Investments Commission Submission

Dr Evan Jones    3rd September 2013    

The performance of the Australian Securities and Investments Commission Submission 295

Senate Economics Committee Inquiry

The performance of the Australian Securities and Investments Commission

Submission (with attachment)

(Dr) Evan Jones

Honorary Associate (previously Associate Professor), Department of Political Economy, University of Sydney

3 September 2013

Terms of Reference

The performance of the Australian Securities and Investments Commission (ASIC), with particular reference to:
(a) ASIC's enabling legislation, and whether there are any barriers preventing ASIC from fulfilling its legislative responsibilities   and obligations;
(b) the accountability framework to which ASIC is subject, and whether this needs to be strengthened;
(c) the workings of ASIC's collaboration, and working relationships, with other regulators and law enforcement bodies;
(d) ASIC's complaints management policies and practices;
(e) the protections afforded by ASIC to corporate and private whistleblowers; and
(f) any related matters.

* * *

I.    Introduction

This submission is devoted to one arena only – that of the comprehensive failure of the regulatory system to acknowledge and counter major bank fraud and unconscionability towards small business and family farmer (henceforth ‘SME’) borrowers.

Bank fraud/unconscionability towards its SME customers is systemic in Australia. It is a racket, and the National Australia Bank is its most steadfast practictioner. In this arena, banks evidently consider themselves above the law and their presumption is justified. The strategic indifference of the regulators in this domain is a farce and a disgrace.

I have researched, written on and lobbied on bank malpractice against SMEs for the last 13 years. In collaboration with retired bank manager John Salmon we have documented bank malpractice against SMEs operating since the late 1980s – a 25 year period, at minimum, through which the major banks have left widespread carnage, with legal profession complicity, in what are purportedly crucial sectors of Australian society and of the economy.

Successive innumerable Parliamentary inquiries (beginning with the 1991 Martin Inquiry and including the most recent Post-GFC Banking Inquiry of this Committee) into relevant domains have ended with either further obfuscation or marginalisation of the problem (with one exception, below). The regulators, with rare exceptions, have been missing in action. ASIC’s manifest failure is thus merely representative of a larger failure – pervasive in the financial regulatory system and ultimately in the political sphere itself.

II.    ASIC’s unconscionable negligence

In the eleven years since ASIC acquired responsibility for business to business unconscionable conduct, it is my understanding that ASIC has pursued not a single case under this acquired responsibility – this while the country has been awash with bank fraud/unconscionability against SMEs. This is a scandal of the first order.

Whence business to business unconscionability in the first place? Getting this concept into statute law has been an epic journey, product of both lobbying in opposition from the Big End of Town and academic/bureaucratic conceptual difficulty with the meaning of foul play in a commercial environment in which the god ‘competition’ must be paramount and the losers are those who, by definition, deserve to lose.(1)

A development against the grain occurred with the seminal House of Representatives Standing Committee on Industry, Science & Technology Report, Finding a balance: towards fair trading in Australia (May 1997). This admirable (and rare) bipartisan report exposed ongoing predatory behaviour by corporates in some key areas, including that of small business finance.(2)

Thus there was legislated the significant s51AC (business to business unconscionable conduct) into the Trade Practices Act in 1998. The ASIC Act was amended in August 2001, operative March 2002, bringing business to business unconscionable conduct in financial services into the ASIC Act (s12CB-CC, the s51AC TPA equivalent), removing responsibility for this sector from the Trade Practices Act (now the Competition & Consumer Act).(3)

Alas, when the ACCC held responsibility, it pursued no actions under s51AC against lending institutions, even though there was fertile soil for prosecutions (and the legislation that introduced s51AC also gave the ACCC a Small Business Commissioner position). Since 2002, ASIC has replicated interminably the shorter ACCC precedent. With this inaction, apart from indifference to the victims, ASIC shows contempt for all those responsible for bringing business to business unconscionable conduct into statute law, against the odds.

* * *

Although coherence of argument is at risk, I will structure my submission according to the Terms of Reference.

III.    (a) ASIC's enabling legislation, and whether there are any barriers preventing ASIC from fulfilling its legislative responsibilities and obligations;

There are no legislative barriers preventing ASIC from fulfilling its legislative responsibilities in the arena of concern here. In particular, ss12CA-CC are lying fallow, waiting to be utilised.

Business to business unconscionable conduct in financial services was carved out of the ACCC in the spirit of the 1996 Wallis Committee Inquiry. The said Committee Members and Secretariat, lauded at the time, had far too simplistic a view of their bailiwick. In attempting to create clean lines by hiving off financial sector regulation, they destroyed clean lines with respect to the regulatory treatment of unconscionable conduct.

It is possible that responsible ASIC staffers feel inhibited in taking assertive action against bank unconscionability due to an estimation that victory in the courts in this arena is an uphill battle, making any effort risky in terms of resources and reputation. There is reason for this potential estimation, as the courts do indeed have a shocking track record on business to business unconscionability (save for ‘disability’ unconscionability re guarantors, within s51AA TPA, now s20 ACL). That record reflects a problem of an impoverished legal culture, deeply entrenched. But there is no reason why ASIC can’t strategically test the waters, instead of letting SME victims sink alone in an intolerably imbalanced court system. Testing the judicial waters is important, and establishing legal precedents is everything.

The barriers to action by ASIC are not legislative but appear to be ones of competence and of culture. Deficiencies here are not readily remedied.

The NCSC and ASC were constructed narrowly on the principle of enhancing information transparency, aimed at the investor segment then assumed sophisticated. But ASIC has been handed responsibility for oversight of the populous unsophisticated investor and for small business credit (the latter responsibility perennially denied), requiring different skills and a different culture.

The inadequate response of ASIC, for example, to the CBA’s (and subsidiary CFS’s) instrumental role in the large scale Storm Financial operation, essentially a  racket, and to the Commonwealth Financial Planning Ltd ‘wealth management’ operation, also essentially a racket, highlights a failure to diagnose the nature of the beast – the entrenched rapacity of the Commonwealth Bank of Australia.(4)

With respect to CFPL, how many rotten apples (individual financial advisers) does one locate and ban before one concludes that the barrel itself is rotten (as per the marginalisation of the whistleblowers and the message derived from their insider experience)? The evidence indicates that the corrupt allocation of investor funds was integral to CFPL’s modus operandi.

Because the CBA ‘got away’ with its roles in Storm Financial (save for minor compensation) and the CFPL scam (and earlier scams), senior management evidently felt free to carry through with its scam in the mass default of BankWest SME borrowers. The CBA feels itself above the law because the law is not enforced. A law that is not enforced becomes de facto a law that operates to the advantage of the law-breaker and to the disadvantage of the victim. The confidence with which senior management of the CBA and BankWest engaged in dissembling and lies at the Post-GFC Banking Inquiry hearings (9th & 10th August 2012 respectively) highlights that the state of play is well understood at the highest levels of the Australian banking sector. CBA’s Chief General Counsel David Cohen remains adamantly abusive and insulting towards the victims of a process that he himself would have seen at work from close quarters.(5)

ASIC’s inappropriate culture intact, it proceeds to ignore the scale of the CBA/BankWest defaults and the implications of that significant scale and to treat cursorily those BankWest customers who have complained to ASIC.

The myriad defaulted BankWest victims are thus left to individually pursue their cases in the court system, a system transparently prejudiced against bank victims, both in the unaffordable costs involved and the long trend of judgements favouring the bank lender.(6)  More, the separate multiple litigations clogs the courts and at the expense of the public purse.

IV.    (b) the accountability framework to which ASIC is subject, and whether this needs to be strengthened;

ASIC is subject to no accountability whatsoever. There is the razzmatazz of Senate sub-Committee hearings, and the formal reporting requirements – but these are just going through the motions.(7)  ASIC’s Annual Report is annually an exemplar of managerialist blah, a box-ticking waste of paper. Some little guys are put through the wringer to salve everybody’s conscience, but the big guys remain untouched.

Such indifference was transparent in the conduct of senior regulator officials at this Committee’s Post-GFC Banking Inquiry hearings on Wednesday and Thursday, 8 & 9 August 2012, in response to the CBA/BankWest saga. The numerical scale of BankWest customer defaults provides prima facie reason for close scrutiny. The testimony of criminally defaulted borrower and victim Sean Butler on Wednesday the 8th brought the broad parameters down to specifics with absolute clarity.(8)  Yet the regulators all responded with insouciance – there is no problem; and on the small chance that there is, it’s nothing to do with us. The shockingly cynical statements of Treasury Deputy Secretary, Jim Murphy, the country’s highest ranking bureaucrat presiding over bank regulation, exemplify the indifference.(9)

In a letter (23 February 2010) to CBA farming victim Ian Clapham in response to a letter from Clapham to Treasurer Wayne Swan, the Treasurer’s office claims: “Neither the Government nor the Australian Securities and Investments Commission (ASIC) have a direct role in resolving commercial disputes between borrowers and lenders.” This claim is transparently inaccurate. Is the Treasurer’s office ignorant of the ASIC Act, or is the Treasurer’s office complicit in helping to divert irritating bank victim complainants from clogging the ASIC complaints system?

Apart from the carte blanche handed to ASIC from officialdom, my experience as a disinterested professional outsider is relevant here. During almost a decade, I have made sporadic attempts to alert ASIC to the character and scale of major bank malpractice against SME borrowers. They have all come to nothing.

These attempts are summarised in a letter to then ASIC Chairman, Tony D’Aloisio, dated 3 December 2010 (Attachment A). A response was received under D’Aloisio’s signature, dated 24 January 2011. It is obfuscatory in design and intent. The message is: go away.(10)

D’Aloisio’s letter claims, inter alia, “As we have previously stated in our past correspondence with you, ASIC assesses every complaint we receive.” This claim is simply a lie (of which more below).

D’Aloisio’s letter also claims the complExternal Dispute Resolution mechanismsementary importance of  for alleviating victim distress, particularly via the Financial Ombudsman Service and the Code of Banking Practice. D’Aloisio would have known that both the FOS and the Code, in both design and in practice, complement ASIC inaction in throwing up roadblocks to inhibit justice being achieved by SME bank victims.(11)  In other words, breathtaking cynicism from D’Aloisio and his letter writing functionaries and an insult to the letter’s recipient (yours truly), who knows where the bodies are buried.

I have written myriad extended letters (or lengthy emails) to responsible regulatory and public service personnel and to Members of Parliament regarding regulatory inaction on bank malpractice against SME customers, and have consistently been met with either obfuscatory responses or no reply.(12)

Letters of particular relevance (not including ASIC correspondence) include, to the following parties:

•    Graeme Samuel, Chairman, ACCC, 6 May 2004
•    ACCC (Nigel Ridgway, Compliance), 28 February 2007
•    Hon. Fran Bailey (Minister for Small Business), 13 April 2007
•    Hon. Peter Costello (Treasurer), 13 April 2007; 23 August 2007
•    John Laker (Chairman, APRA), 26 March 2008
•    Senator Nick Sherry (Minister for Superannuation & Corporate Law), 26 March 2008; 21 July 2008
•    Treasury (senior officials, Financial System Division), 25 July 2008
•    Treasury (Jim Murphy, Acting Secretary), 29 July 2008
•    Hon. Bill Shorten (Minister for Financial Services), 22 October 2010 [Email, plus attachments]
•    Hon. Joe Hockey (Shadow Treasurer), 25 October 2010 [Email]
•    Members of the Senate Economics References Committee, 20 December 2010 [Email]
•    Senator Nick Sherry & Hon. Wayne Swan (Minister for Small Business, Treasurer), 24 February 2011 [Email, plus   attachments]
•    Senator Nick Sherry, redirected to Hon. Wayne Swan, 10 March 2011
•    Senator John Williams, 2 June 2011 [Email]
•    Hon. Warren Entsch, 20 June 2011 [Email]
•    Senator John Williams, 8 September 2011
•    John Laker (Chairman, APRA), 15 May 2012 [Email, plus attachments]

In general, ASIC is unaccountable. But of additional significance is that ASIC’s unaccountability is excused, de facto condoned, reinforced by all those in relevant authority – the entire financial regulatory and bureaucratic apparatus and the cabals that direct the three major political Parties which govern interchangeably.

V.    (c) the workings of ASIC's collaboration, and working relationships, with other regulators and law enforcement bodies;

Whoever wrote this reference has a sense of humour. If there is any collaboration, it is implicitly devoted to ensuring that victims of financial malpractice are sidelined and quarantined.

The RBA, Treasury and APRA collaborated in (instigated?) the CBA takeover of BankWest, corrupting ACCC procedures in the process, and subsequently effectively gave the CBA carte blanche to corruptly foreclose on hundreds of BankWest customers.

The first priority of these bodies is finance sector stability (which means propping up the Big 4 banks’ profitability as protected species). It is in these bodies’ interests that ASIC does not fulfil its legislated charter.

The Australian Prudential Regulatory Authority

I emailed APRA in mid-May 2012 with the recommendation (supported by copious material) that APRA conduct another internal inquiry into the NAB, given that bank’s ongoing corrupt practices against its SME customers. APRA replied on 6 June, noting:

Your email and attached documents have been referred to the appropriate areas within APRA, including the supervisor of NAB, for review. Any issues that APRA identifies to be of prudential concern will be addressed as part of APRA's ongoing prudential supervision of ADIs including NAB.

Due to the secrecy provisions contained in the Australian Prudential Regulation Authority Act 1998, APRA and its officers are restricted from disclosing information relating to the supervision of a particular regulated entity. As a result, I am unable to provide you with further feedback regarding your concerns. I regret that I cannot be of further assistance to you.

APRA produced an important report into NAB’s dysfunctional culture in March 2004, Report into Irregular Currency Options Trading at the [NAB]. Since then nothing, in spite of the NAB conscientiously declining to implement that report’s message across its portfolio (instead merely escalating its advertising and PR expenditure).

Dr Laker admitted in the related APRA Media Release (24 March) that ‘[the governance and risk management weaknesses] did not threaten the bank’s viability or its capacity to meet its obligations to depositors.’ Then why this one-off investigation and report – if this one, why not more? Since 2004, the NAB’s large scale off balance sheet exposure and large scale CDO exposure, ditto the monumental incompetence and perennial corruption of the NAB’s UK operations (e.g. the PPI scam, the Interest Rate Swap Agreements scam), cast major questions on the intelligence, sobriety and integrity of NAB senior management – as does the NAB’s systemic involvement in malpractice against SME customers. It is not unreasonable to infer that having let HIH/FAI fail on its non-existent watch, APRA saw the NAB’s currency trading fiasco as a vehicle for redemption. APRA has since reverted to inaction. The 2004 NAB Report is not available on the NAB (removed) or the APRA website – an event best forgotten for both organisations?

APRA is the only regulatory body empowered to intervene in a bank’s internal workings –an extraordinarily powerful tool but one that APRA keeps firmly in the closet. Two features of regular bank practice that impinge directly on APRA’s narrow brief, but of which APRA is self-consciously oblivious, deserve mention.

First, APRA’s prudential brief has an important empirical basis in the bad debt figures provided by the banks. APRA’s rules give the banks discretion in the formulation of the bad debt figures,(13)  yet the banks routinely cynically construct bad debt scenarios in the process of arbitrarily defaulting SME customers. APRA shows no interest in the substantive accuracy and significance of the bad debt figures on which it formally allocates so much importance.

Second, the banks routinely reward lending managers according to the size of their loan book achieved per period. Would-be borrowers are perennially given loans on inappropriate properties or given excess loans on a price-inflated property (the valuer industry obliges) to fuel the lending manager’s rewards. It is a dysfunctional practice, with perennially unconscionable outcomes. It should be on APRA’s radar (it has prudential implications), and banks should be forced to discontinue the lending quantum – earnings link.

In short, APRA’s claim that ‘Any issues that APRA identifies to be of prudential concern’ [my emphasis] appears to be merely a front for ongoing negligence. In October 2010, an NAB SME victim (WA egg farmer) unknowingly contacted APRA seeking assistance regarding the NAB’s malpractice against the business. APRA rightly informed the proprietor that ‘APRA deals with systemic matters at an entity level rather than pursuing individual complaints’. But APRA advised the victim that any complaints be directed to the entity itself (!) or, failing satisfaction, to the ‘independent’ FOS. There is no mention of ASIC’s legislated responsibility in the area.

One would think that the copious details forwarded by the WA NAB victim, although not formally within APRA’s bailiwick, would have raised eyebrows and propelled informal discussions with relevant regulatory parties. On the contrary. In so far as APRA engages in collaboration, it appears to be with the banks themselves; any collaboration with ASIC appears to be implicitly contrived to foster inaction. APRA is an enforcer of Basel’s crude prudential rules and nothing else, and its shocking indifference to bank corrupt practices is clearly displayed at the Post-GFC Banking Inquiry hearings on 9 August 2012.

The Financial Ombudsman Service

The manifest relationship between ASIC and the FOS, in so far as it can said to be a collaboration, constitutes a masterly vehicle for the prevention of a successful resolution of SME complaints against their bank oppressors. There is no apparent clear line of access, process or responsibility for SME complaints; and where are the successful outcomes?

This Machiavellian construction is well illustrated in the case of Ken Winton – a BankWest customer corruptly defaulted soon after the CBA offer for BankWest in October 2008.(14)  (Sean Butler, exemplary BankWest victim as noted above, also experienced comparable Tweedledum & Tweedledee buffoonery from ASIC & the FOS.)

Winton was unconscionably defaulted on 20 November, product of a manufactured revaluation of his properties delivered on 19 November. In September 2009, the Wintons were forced to sell their unencumbered family home, and under value. BankWest then sent in a Receiver.

In March 2010, Winton lodged a complaint with the FOS. In September 2010, Winton lodged a complaint with ASIC. In November 2010, the FOS claimed that it hadn’t got on to Winton’s case as things were busy. In March 2011, Winton wrote to ASIC requesting access to his company’s material lodged by the Receiver with ASIC. ASIC replied that “this matter is taking longer than we expected”. Both the FOS and ASIC replied that they might get around to his case sometime. In April, ASIC wrote again, noting: “… ASIC is looking at your complaint in conjunction with similar complaints from other people. … ASIC’s decision to take action will be influenced by whether there is evidence of systemic concerns, and whether it is in the public interest to take action, after the consideration of all relevant concerns.”

In July 2011, ASIC wrote to say that “ASIC has decided not to take any further action at this time”. In early August 2011, the FOS wrote to note that they accepted the investigation (Winton had complained to the FOS in March 2010, 17 months previously). In late August, the FOS wrote to claim that Winton’s complaint was outside its jurisdiction, as the FOS is only ‘able to consider a dispute where the value of the applicant’s claim is up to $500,000’.
In October 2011, ASIC confirmed that it would not handle Winton’s complaint, and that if he didn’t like it he should go to the Commonwealth Ombudsman. Which Winton did. The Ombudsman replied in early December to note that I “have made the decision not to investigate your complaint”.

In December 2011 and January 2012, Winton exchanged correspondence with the FOS requesting that the FOS intervene to clarify the supposed residual debt figure owed to BankWest from Winton. The FOS replied that it accepts BankWest figures as legitimate. And so on.

The FOS’ sublime indifference to efficient and effective procedure is complemented by its duplicity. The FOS was invited by the Senate Economics Committee to respond to Winton’s submission to the Post-GFC Banking Inquiry.(15)  The response, under FOS Chief Ombudsman (ex-ASIC) Shane Tregillas’ signature, ignored Winton’s complaints. Winton’s allegations that the FOS is not independent of its financial sector funders is answered by Tregillis saying that the FOS ticks all the boxes of ASIC’s Regulatory Guide 139 – i.e. managerialist mumbo jumbo.

In his response, Tregillas also claims that the FOS has ‘extensive obligations in regard to systemic issues’, and that ‘We provide comprehensive reports to ASIC on systemic issues’. This is dissembling at its best. The CBA mass default of BankWest SME customers represents a systemic issue par excellence.

As I noted in my cited article on the Winton experience:

In its earlier incarnation as the Banking Ombudsman, the organisation was restricted to a mediation role on small scale retail banking complaints. Commercial dealings were outside its bailiwick. In this guise, it worked reasonably well. Latterly, the organisation has acquired greater ‘responsibilities’, but it is structurally incapable of catering to them. It is financed by the institutions who are the subject of complaints to the FOS. Moreover, it cannot handle complaints against organisations outside the fold (lawyers, receivers) that do the bidding of financial institutions.
The FOS is structurally incapable of dealing with financial institution corrupt practices that are systemic. FOS staff appear incapable of confronting the very concept of systemic corrupt practices. Its brief now overlaps with the central role of ASIC, confusing victims as to appropriate avenues for seeking redress, and partially absolving ASIC for its own profound inaction. Mediation may be appropriate when incompetence is involved, but not when corruption is involved. In short, the FOS is a waste of time and resources. Rather than a vehicle for the maintenance of integrity in the financial system it is a vehicle for the opposite.

The experience of an SME couple, NAB victims, with the FOS highlights that there is a small flame of honesty and intelligence glimmering within, but that candlelight is encased in an institution wretchedly and self-consciously compromised. This couple were subject to malpractice by the NAB in 2006. They approached the FOS in 2009. A year passed with no response, until the victims upped the ante. Another year passed, during which the FOS investigator manufactured a string of defenses of the bank for fear of finding the NAB at fault. In 2011, the FOS verbally advised that the NAB had been found culpable of ‘maladministration’, but the written report found the NAB not guilty. When the victims contacted the FOS for an explanation, they were told that the NAB didn’t like the determination. In August 2013, out of the blue, the victims received written advice that the FOS had found the NAB guilty of maladministration, and the claimed debt outstanding would be reduced in consequence. Note that, in spite of the partial relief, the guilt is one of (inadvertent?) maladministration. The attribution of (self-conscious) unconscionability and/or fraud remain verboten.

At the least, short of disbanding the FOS completely, the mediation of commercial disputes (currently proscribed by an arbitrary and meaningless dispute value limit) should be removed from the FOS’ charter. With that improvement, ASIC’s responsibility for and neglect of intra-financial sector commercial disputes will be more transparent.

VI.    (d) ASIC's complaints management policies and practices;

As a reluctant researcher and writer involved since 2000 in the (voluntary) support of SME bank victims, I am in possession of copies of correspondence from ASIC to bank victim complainants. This material led me to write the document, ‘Business to business unconscionability – ASIC missing in action’, October 2010. This document is appended as Attachment B.

This decent sample of correspondence to SME victims highlights that there is a pattern at work, and the message is, consistently, ‘Go Away’. This much-utilised pattern constitutes ASIC’s ‘complaints management policies and practices’ with respect to SME bank victims. Highly educated and reasonably well-paid personnel spend considerable time sending off automatically-generated rejection messages to those desperately needing a regulatory champion for their cause.

One letter noted in my 2010 document, particularly egregious but comprehensive in its ignorance (real or feigned?) and cynical avoidance of responsibility, deserves revisiting. The victim is sometime game meat processor and successful exporter, Craig Harwood (with his father), and the bank is Westpac (the bank that, inexplicably, topped for years the ‘corporate social responsibility’ charts).

Harwood. ASIC (Mr X, National Assessment & Action) to Harwood, 12 November 2006(16)  (my comments in square brackets):(17)  

“With respect to your request for ASIC to expand on the reasons for not investigating your complaint, we advise that as with other law enforcement agencies, it is not the policy of ASIC to identify the specific issues considered in any matter alleging corporate or individual misconduct.

“With respect to your complaint we can advise that all the information and documentation you provided was carefully considered and preliminary enquiries were conducted before the decision was made not to commence a formal investigation in relation to your complaint. …
[I would suggest that the claim that ‘all the information … etc … before the decision was made’ is a blatant lie.]   

"Given the volume of complaints received each year … ASIC weighs every complaint against four basic questions:

•    What action can we take?
[Simple – ASIC should implement its legislated responsibility under s12 of the ASIC Act.]

•    Is the evidence likely to be sufficient?
[A lay down misère in the Harwood case, albeit facing the usual problems of inadequate bank discovery, itself unconscionable.]

•    How urgent and serious is the complaint?
[A representative urgency and seriousness; one generation of Harwood has lost everything, including of course the family residence, and is now spending his forcibly retired years in impecunious circumstances; the other has lost a lifetime of the results of entrepreneurial activity and has been working as an employee in the industry of which he was previously a major player; moreover, over $1 million in federal government grant money has disappeared down the gurgler.]

•    If we succeed, will people behave better in the future?
[It will take more than one successful action against bank malpractice to break an ingrained culture built up over the previous 25 years of financial deregulation, but one must start somewhere. All regulatory progress is built upon adequate legislation, committed enforcement, and judicial precedent.]

"In circumstances where a potential defendant has a reasonable basis for engaging in the alleged misconduct, such as acting on professional advice and therefore not forming the required intention of dishonesty, ASIC's opinion is that it would not be in the public interest to prosecute a matter that does not have a reasonable prospect of success.
[The suggested scenario is hypothetical and has nothing to do with the Harwood specifics or bank SME predation in general. Certainly any prosecuting regulator needs to consider the ‘reasonable prospect of success’ of prospective litigation, but one would have a head start by confronting the facts and avoiding fictional scenarios. ASIC personnel might then juxtapose the facts and/or victims’ versions of the case with criteria for examining potential unconscionable conduct laid out in s12CC of the ASIC Act.]

"In addition to this, the age of the alleged conduct and whether this would prejudice the quality of the evidence now available, as well as the regulatory impact of taking such action on the future behaviour of people, are all factors we consider, in all complaints, to help us reach a conclusion as to whether we should or should not exercise the decision to prosecute, such discretion having been given to us by law.
[All unconscionable blather. The age of the conduct was then well within statutory limits. Any such regulatory action, especially if it involved hauling bank CEOs and senior management before a court, facing media exposure and significant fines or even gaol terms, would have a dramatic salutary effect on bank willingness to perpetrate similar practices in the future.]

"We understand that you may still be dissatisfied that we have not provided the specific issues we considered in respect of your original complaint. However, we believe that such action would significantly prejudice current and future ASIC investigations and the proper administration of the law."
[This last response of ASIC to Harwood is reprehensible in the extreme – the sentiments are outrageous, not to mention fanciful. What ‘current and future ASIC investigations and the proper administration of the law’? They and it do not exist in the arena under consideration here.]

ASIC wrote another letter in response to Harwood’s complaint about Westpac’s imposition of penalty interest rates. ASIC (Ms Y, Misconduct & Breach Reporting, Stakeholder Services) to Harwood, 6 October 2008: “Currently, ASIC does not have the jurisdiction to prohibit or prevent the charging, or regulate the amount of, any default fees.” ASIC directs Harwood variously to his own civil action, or to CHOICE magazine’s ‘Fair Go on Fees’ campaign!

ASIC wrongly categorises Harwood’s complaint as a consumer credit issue. More, ASIC is studiously oblivious to the integral role of usurious penalty rates imposed on defaulted customers (corruptly or otherwise) in bank predation against SME customers. In spite of ASIC’s myopia, penalty interest rates thus fall within ASIC’s obligations under s12 of the ASIC Act.

ASIC’s denial of assistance to Craig Harwood is representative of the treatment of SME victim complainants. But my 2010 document outlining a sample of ASIC responses is now almost three years in the past. Has anything changed in the interim? No, it’s more of the same.

Clapham. ASIC (Ms X, Deposit-Takers & Insurers (?)) wrote to foreclosed macadamia nut farmer ASIC missing in action on 19 May 2010. The message was the same as always – go see your own lawyer (the CBA sued for bankruptcy while Clapham was pursing Legal Aid). However, the ASIC letter to Clapham, differs from the typical vacuous missive. In this case, ASIC has gone to the CBA for feedback, and dutifully acted as the bank’s spear-carrier (as does the FOS), in passively reinforcing the bank’s position against the complainant.

Kay et. al. Kay, Inak and Canli complained to ASIC but were denied an ear. They were forced to fight the NAB in court without regulatory assistance (and with an indifferent to negligent legal team), yet achieved a rare (if partial) victory (Kay v NAB, NSWSC 1116, 30 September 2010). There are two lessons relevant here from Kay et. al.

One, their case clearly had legs (Rothman J: “From day one of the contract, NAB was in breach … NAB continued in breach for the duration of the contract.”). ASIC’s endless crying poor about ‘winnability’ looks thin in this instance.

Two, the trio were able to survive the litigation and achieve a successful mediation outcome only because of exceptional circumstances: income was coming from jobs, they had an indefatigable supporter in a (Today Tonight) television reporter with experience in reporting bank malpractice, complemented latterly by some print media, and two Senators were present at the mediation. The typical SME bank victim has none of these props. Thus one can draw no inference from the success of this case that bank victims can, as a matter of course, successfully handle litigation on their own account.

Butler. On 26 July 2011, ASIC had had no trouble laying down the requirements on CBA/BankWest victim Sean Butler as a proprietor whose properties had become subject to receivership. Butler contacted ASIC on 16 September seeking assistance regarding the oppressive and malign behaviour of the Receiver principals at Taylor Woodings. On 21 November ASIC (Ms Z, Misconduct & Breach Reporting, Stakeholder Services) replied thus.

“ASIC conducts an assessment of every report of misconduct we receive. … In exercising the discretion [whether ‘further enquiries or investigations are warranted’], we must consider whether the available evidence is sufficient to form the basis of civil or criminal proceedings. We also consider whether any further action would have any regulatory impact by deterring similar conduct or provide a suitable remedy for the conduct in question. …

A lie and blather.

“Following consideration of the issues you have raised at a senior level, ASIC has decided not to take any further action (sic) into the issue you have raised at this time. …

“Although we have decided not to investigate your report of misconduct at this time, this does not prevent you from pursuing any civil remedies otherwise available to you. …

 “The information you have been provided has been added to our confidential database. The information may assist us if we receive future similar reports of misconduct, identifying trends of misconduct and identifying opportunities to propose law reform to Government.”

Variations on a stock response, disgraceful.

In Butler’s submission to this Committee’s Post-GFC Banking Inquiry (30 May 2012), Butler reports that “Staff at the ASIC have told me they are powerless to act because the way the laws are drafted.” My October 2010 document (Attachment B) details responses from ASIC to Ron Coomer, whose Queensland commercial laundry business was brought down by Suncorp Metway and the ATO and pillaged by receivers McGrath Nichol. The ASIC correspondence ranges between 2006-10 and uses near identical language to that in the correspondence to Butler.

If the laws are badly drafted and ASIC finds itself ‘powerless to act’, what then has ASIC been doing since 2006 in terms of ‘identifying trends of misconduct and identifying opportunities to propose law reform to Government’? The answer evidently is nothing. The arrival of the mass CBA/BankWest defaults provided this predatory sector with an unexpected feeding frenzy.

ASIC’s indifference to receiver predation, unleashed on bank victims in the wash of bank predation, demonstrates either staggering incompetence and/or cowardice, or active complicity with transparent criminality.

Sayed. Bill Sayed is a Wollongong area small-scale developer. The NAB facilitated fraud against Sayed by his business partner and the latter’s lawyer, foreclosed and sold the development property significantly under value. The NAB then foreclosed on the Sayeds’ family residence, the mortgage of which had been unconscionably joined with the business loan. Sayed has been subject to a sting operation pure and simple.

Sayed wrote to ASIC on 24 October 2012, claiming corrupt practices by the bank and related parties. ASIC (Anonymous, Misconduct & Breach Reporting, Stakeholder Services) to Sayed, 23 January 2013:   

“After careful consideration, including consideration of this matter at a senior level, ASIC has decided that we will not take further action into the issues you have raised at this time. In coming to this decision, we particularly note that the matter is currently before the Courts.   

“ASIC conducts an assessment of every report we receive. In determining which matters we will select for further action consideration is given to a range of factors … [etc, etc.]”

The ASIC letter then claims that the alleged offenses occurred in 2008, before the National Consumer Credit Protection Act 2009 for which ASIC acquired mandated responsibility in July 2010. But then ASIC claims, contradictorily, that Sayed’s matter is of a commercial nature and it isn’t covered by the Credit Act anyway. Once again, ASIC personnel deny the existence of ss12 of the ASIC Act.

The letter to Sayed is representative in its scandalous character. For a start, no name is attached to the letter, perhaps out of embarrassment for its contemptible contents. There is the usual dissembling about full consideration, albeit this time senior levels are implicated. And there is the strategic diversion about the irrelevant timing and coverage of the Credit Act.

O’Brien. Rory O’Brien is one of the bigger BankWest developer borrowers caught by the piranhas at the Commonwealth Bank, and who ASIC declines to assist because nothing untoward is supposedly in evidence. Having been denied justice in a BankWest[read CBA]-brought suit in a farcical Trial hearing and judgement, O’Brien miraculously had that decision overturned in the NSW Court of Appeal in April 2013.(18)

In a unanimous judgement, Macfarlan JA cites as partial support for the overturning of the Trial judgement the ASIC Act itself (par.12). ASIC sits on its collective hands while the legislated brief that it chooses to ignore is harnessed in the courts in its absence. The three judges countenance that O’Brien’s claim of a CBA/BankWest scam might have legs, and ASIC is missing in action.

VII.    In Sum

ASIC’s relentless and comprehensive inactivity in the domain of bank malpractice against SMEs, for which it has clear legislated responsibility, provides a green light to the banks to continue corrupt practices. De facto, ASIC is a party to criminality perpetrated by several of Australia’s most significant and profitable corporations.

It appears that parts of ASIC need to be disbanded and rebuilt from scratch. First cab off the rank should be the euphonically challenged ‘Misconduct & Breach Reporting, Stakeholder Services’. But it is likely that M&BRSS is merely carrying the can for a more widespread strategic impasse. And what body could be trusted to oversee wholesale reform of ASIC – certainly not any of the co-conspirators amongst the financial regulators.

It is conceivable that, reform being found inconceivable, responsibility for business to business unconscionability should be passed back to the ACCC. The ACCC itself needs reform and re-education in this arena (a specialist Small Business Commissioner would help), but at least its personnel know the nature of the beast that is unconscionable conduct, even though they have only hunted smaller animals of the herd to date.

Apart from the victims themselves, the general public has some awareness of the existence and scale of losses and suffering experienced by myriad untutored investors in managed investment schemes run by innumerable spiv operators, including the ‘most respected’ names in the Australian finance sector. Not so SME victims of major bank malpractice – an ignorance greatly assisted by media complicity and indifference.

The carnage wrought by major banks on small business and the family farm sectors in this country has been widespread and persistent. Thriving or sustainable businesses, product of risk-taking initiative, have been destroyed or stolen. Family homes have been stolen. Couples, once independent, have become dependent on the parsimonious goodwill of social services. Family relationships have been destroyed or imperilled. The mental and/or physical health of the victims has suffered, sometimes resulting in premature death.

In over 11 years of responsibility for this arena, ASIC has seen and done nothing, seen no pattern in the endless complaints coming to it that outline practices that sum transparently to a pattern of unconscionable and/or fraudulent bank practices, and has instructed victims through parroted misrepresentations within disgustingly insulting letters to buggar off.
What an indictment.



Att.A    Jones, ‘Business to business unconscionability – ASIC missing in action’, October 2010, 5pp.


(1). A brief chronology of the debate and tardy legislative enactment within the Trade Practices Act is given in my submission (no.17) to the Senate Economics Committee’s 2007 Inquiry into Trade Practices Legislation Amendment Bill (No. 1) 2007 [Provisions]. Among countless submissions to Parliamentary Inquiries, this submission has atypically not been held in camera.
(2). The Inquiry and Report acquired substance by guaranteeing confidentiality to SME victims of corporate predation, a crucial provision denied comparable supplicants during various ACCC hearings and inquiries into the retail sector under the chairmanship of Graeme Samuel.
(3). There is a Memorandum of Understanding between the ACCC and ASIC which canvasses potential joint action for unconscionability in financial services, but it is vague in wording and meaningless in practice.
(4). My submission to the Senate Economics Committee Post-GFC Banking Inquiry outlines the ‘dark side’ of the CBA over almost 30 years of corrupt practices, fuelled and facilitated by financial deregulation. That submission (no.10) was held in camera and the implications of its content ignored.
(5). C/f Richard Gluyas, ‘Developer recovers from CBA ‘annihilation’, The Australian, 5 August 2013.
(6). Remarkably, and against the grain, developer BankWest victim Rory O’Brien has won an appeal against a heinous lower court judgement. The details are outlined in my ‘CBA/BankWest unconscionability and the courts’, Online Opinion, 18 July 2013. True to form, the CBA has declined to pay O’Brien’s costs as decreed by the court. Nevertheless this victory merely grants O’Brien the right to ongoing litigation.
(7). In 2007, good reporting by Richard Gluyas in The Australian, led to the Parliamentary Joint Committee on Corporations and Financial Services directing ASIC to investigate a batch of neglected SME customers complaints against the CBA. There is no evidence that ASIC heeded the direction (the 2007-08 Annual Report is silent on the matter).
(8). Butler’s sober testimony is readily accessible on You Tube and provides the general public with a reality not found in the Post-GFC Banking Inquiry report itself.
(9). Regulator officials’ statements to the Post-GFC Banking Inquiry are highlighted and analysed in my ‘The Commonwealth Bank Takedown of BankWest Customers (Part 3)’, Independent Australia, 22 September 2012.
(10). Following D’Aloisio’s departure to PPB, some of whose satellites were corruptly involved in the CBA foreclosure of BankWest customers, I sent a comparable letter to D’Aloisio’s successor, Greg Medcraft, on 17 June 2011. I received a reply under Medcraft’s signature on 8 July 2011, with a comparable message (albeit strategically more obfuscatory): go away.
(11). The banking cartel’s attempts to neuter the Banking Ombudsman scheme and the Code of Banking Practice in their infancy, and the ongoing neutralisation to irrelevance of the Code (and of the NSW Farm Debt Mediation scheme), are outlined in my ‘The NAB, small business and the wilful ignorance of judges’, Independent Australia, 16 June 2013.
(12). Save for that of Senator Williams, whose concern for bank victims appears to be not shared by his own Party Members, leave alone Liberal Party Coalition Members.
(13). The discretion accorded to banks in the determination of bad debt figures is summarised in Salmon & Jones, ‘Shadow Ledgers and the Default Process in the Australian Banking Sector’, April 2010, p.16.
(14). Winton’s experience is recounted in detail in my ‘The Commonwealth Bank takedown of BankWest customers (Part IV)’, Independent Australia, 15 October 2012.
(15). There is an asymmetry in this recently adopted procedure. There is the implicit presumption that victims are unreliable purveyors of the facts of their experience, and a response is necessary from the institutional players (the predators or supportive parties) to set the matter straight.
(16). The letter, cited in my October 2010, document is wrongly dated as 21 November 2003.
(17). The ASIC letter to Harwood figures in my highlighting of ASIC’s ongoing inaction in my submission to the Senate Economics Committee Inquiry into the statutory definition of Unconscionable Conduct, October 2008. The submission, No.12, was held in camera and its content ignored.
(18). Details from the two court cases are summarised in my ‘CBA/BankWest unconscionability and the courts’, references in n.6 above.

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