Chapter 2Engagement and conduct
2.1This chapter discusses the progress of the inquiry in more depth, with a particular focus on ASIC’s interactions with the committee. This chapter also discusses ASIC’s attempts to influence the inquiry process from the outset, ASIC’s reticence to engage with the committee, the interim report of the inquiry, as well as other Senate orders to produce documents.
Initial stages of inquiry
2.2As stated in Chapter 1, the inquiry was referred on 27 October 2022. From the outset, the inquiry attracted significant community interest and a high volume of submissions, correspondence, and other documents from the public, many of them highlighting significant community concerns about ASIC’s investigation and enforcement role in relation to the financial sector.
2.3On 19 July 2023, ASIC published documents released under freedom of information (FOI) processes which showed the reaction of senior officials of ASIC at the time of the inquiry’s commencement.
2.4Emails revealed through FOI showed the Chair of ASIC, Mr Joseph Longo, expressing concern at the terms of reference proposed for the inquiry:
This is extraordinary. What can be done to narrow the breadth of the terms? Can the PJC [Parliamentary Joint Committee on Corporations and Financial Services] do this??
2.5Later communications showed other senior ASIC executive members discussing the concurrent inquiry started by the Parliamentary Joint Committee on Corporations and Financial Services (PJCCFS), and ‘need[ing] to tailer [sic] a facts and figures brief for the months ahead.’
2.6Most concerningly, these FOI documents revealed communications between ASIC officials suggesting ‘we arrange a dorothy dixer to make sure it’s up front and early as loudly as possible’ during the early stages of the inquiry.
2.7When questioned about this incident, Mr Chris Savundra, General Counsel at ASIC, stated that this communication was ‘a throwaway line’ and it was not ASIC’s practice to approach parliamentarians to ask questions in parliamentaryhearings.
Concurrent inquiry
2.8On the same day as the committee’ inquiry into ASIC was referred by the Senate, the PJCCFS commenced its own inquiry into ASIC, called the Inquiry into ASIC’s capacity and capability to respond to reports of alleged misconduct. This inquiry had almost identical terms of reference as the inquiry commenced by this committee.
2.9To date, the PJCCFS has not published any submissions, correspondence or additional information, has not held any public hearings, or published anything apart from a media release announcing the inquiry.
Public interest immunity claims and interim report
2.10In the initial stages of the inquiry, members of the committee provided written questions on notice to ASIC about a variety of completed and ongoing investigation and enforcement matters. While providing answers to the majority of these questions, ASIC also made 13 public interest immunity claims, refusing to answer the relevant questions on notice. The committee rejected 11 of those 13 claims of public interest immunity.
2.11Broadly speaking, the questions that ASIC made claims of public interest immunity against fell into three categories:
questions relating to ASIC’s engagement with the Parliament;
questions relating to ASIC investigations; and
questions relating to ASIC’s discussions with the Minister.
2.12An in-depth examination of these various questions and the grounds on which ASIC claimed public interest immunity was provided in the committee’s interim report. For ease of reference, a brief discussion of these claims and the committee’s responses to them is reproduced below.
2.13In order for a public interest immunity claim made by a government agency to be successful the agency in question must state the grounds on which the claim is made and include an explanation of the harm which would be caused if the information requested was released. There are several grounds which have previously been accepted by the Senate for public interest immunity claims (examples include: prejudice to current legal proceedings or law enforcement investigations, unreasonable invasion of privacy, and disclosure of cabinet deliberations).
Questions relating to ASIC’s engagement with the Parliament
2.14The committee asked questions on notice relating to ASIC’s engagement with the Parliament prior to the commencement of the inquiry, as well as for the production of correspondence relating to the same.
2.15ASIC refused to comply with this request and after a chain of correspondence between the committee and ASIC, Mr Joseph Longo (Chair of ASIC) made a public interest immunity claim relating to these questions on the grounds that providing the requested information would constitute an unreasonable invasion of privacy for the members of Parliament that had communicated with ASIC prior to the commencement of the inquiry.
2.16In the report the committee expressed concerns about ASIC’s conduct prior to the commencement of the inquiry, in particular the question of whether ASIC sought to influence the terms of reference of the inquiry prior to its commencement (see earlier discussion in this chapter), but did not make a recommendation in regard to the public interest immunity claims made on these questions on notice.
2.17The committee concluded that the Senate Standing Committee on Privileges would be a better venue for consideration of these concerns and left it open to an individual Senator to make a referral regarding these concerns.
Questions relating to ASIC’s investigations
2.18In late 2022, the committee placed a number of questions on notice with ASIC on various investigations, in particular investigations into Nuix Ltd, ALS Limited, and a superannuation insider trading investigation. Subsequent questions also asked about ASIC’s investigation into Magnis Technologies Ltd. Mr Longo made public interest immunity claims in relation to all thesequestions.
2.19After correspondence between ASIC and the committee, the committee decided to accept two of the public interest immunity claims on the basis that the matters referred to in the questions were ongoing investigations. In the interim report, the committee considered ASIC’s other grounds for public interest immunityclaims.
2.20In brief, these claims and the committee’s reasons for rejecting them were:
that ASIC releasing the information requested by the committee would prejudice legal proceedings and law enforcement investigations and methodologies. The committee noted that the claims made by ASIC for these questions were not clear and did not provide a specific harm which would occur if the information was released;
that ASIC releasing this information would be an unreasonable invasion of privacy for third parties. The committee rejected this claim on the grounds that a specific harm was not stated by ASIC and there had been no suggestion on how to mitigate this harm; and
that release of the information would impugn legal professional privilege between ASIC and its lawyers. The committee noted that legal professional privilege has never been accepted as a valid claim for public interestimmunity.
2.21As noted above, the committee rejected all these grounds for claiming public interest immunity and made a recommendation to the Senate ordering the production of the documents which had been requested by through the original questions on notice.
Questions relating to ASIC’s discussions with the Minister
2.22ASIC also made a public interest immunity claim against a question asked by the committee relating to its correspondence with the Minister in relation to the PII claim regarding superannuation insider trading.
2.23The grounds for ASIC’s claim were two-fold:
(a)that the communications/correspondence asked for related to ASIC’s internal deliberations and advice to the Minister in response to the committee’s questions, and
(b)that providing the requested information would undermine another accepted PII claim that ASIC had with the Parliamentary Joint Committee on Corporations and Financial Services.
2.24The committee rejected both grounds for claiming public interest immunity. It stated that ASIC’s claim that advice to the Minister gave rise to a public interest immunity claim did not exhibit sufficient harm to the public interest.
2.25The committee stated in relation to the second ground:
The decision by one committee to grant a public interest immunity claim in relation to a request for information does not bind another committee to make the same decision. Committee are made up of individual senators, and their deliberations and decisions will be unique to the considerations of that committee at that time.
2.26The committee made a recommendation to the Senate ordering the production of documents which had been requested through the original questions on notice.
Orders for the production of documents
2.27The committee tabled the interim report on 20 June 2023 and subsequently the Senate ordered the production of documents as per the recommendations of the report. The Treasurer was ordered to provide the requested documents to the committee by 12.00pm, 18July 2023.
2.28By 18 July 2023, the committee received no response from the Treasurer. On 19July 2023, the committee tabled a Report on compliance with orders for the production of documents in the Senate.
2.29On the same day, the Minister representing the Treasurer, Senator the Hon Katy Gallagher (Minister for Finance), tabled in the Senate a letter in response to the order to produce documents. This letter, from the Hon Steven Jones MP, Assistant Treasurer and Minister for Financial Services, stated that the Government was not in possession of the documents which were requested by the original questions on notice and as such could not provide them to thecommittee.
2.30The letter also recommended that the committee accept an offer made by ASIC in previous correspondence to provide the information requested by the committee through an in camera hearing, as well as stating:
The Australian Securities and Investments Commission (ASIC), as an independent regulator, only shares confidential information relating to investigations and enforcement matters with the Government in the very rare event that it is necessary and appropriate to do so. In the usual course of things, the Government does not intervene in ASIC’s investigation and enforcement decisions. Indeed, as you would be aware, under section 12 of the ASIC Act the Government is unable to give ASIC any direction about particular cases, so the circumstances in which it is appropriate for the Government to request this kind of information are extremely uncommon.
2.31On 28 July 2023, the committee tabled a further report on compliance with the orders for the production of documents, stating that it had considered the above response and maintained its view that the orders had not been complied with.
2.32On 2 August 2023, the Minister representing the Treasurer, Senator the Hon Katy Gallagher, provided the response required by the orders to produce documents. This response largely reiterated points made in the letter sent by the Minister on 19 July 2023.
2.33This completed the formal processes relating to the orders to produce documents made in the interim report.
ASIC’s response
2.34Not long after the tabling of the interim report, the committee held its first public hearing for the inquiry. This hearing was held on 23 June 2023, with the only witnesses being representatives of ASIC.
2.35At that hearing, ASIC Chair Mr Joseph Longo was adamant that ASIC was not attempting to obstruct the work of the committee:
There is absolutely no evidence to support that assertion. Nor is there any evidence to support the assertion that ASIC attempted to undermine and influence the process of the inquiry from the outset. ASIC is accountable to parliament. This inquiry is an important part of ASIC's oversight. ASIC is taking an open, constructive and cooperative approach to this inquiry.
2.36Mr Longo further pointed out that ASIC had provided a submission and answered over 100 questions on notice since the commencement of the inquiry. There were limitations on the information ASIC could provide to the committee, however, due to its position as a law enforcement agency and the possibility of adverse impacts which could arise from providing the case file information the committee had requested.
2.37When asked at the hearing about how the inquiry was to be conducted with such a limited response from ASIC, Mr Longo acknowledged the committee’s frustrations but pointed out there had been many parliamentary investigations into ASIC and other law enforcement bodies in the past which had concluded without the requirement to see case files. Mr Longo said:
…the claims of public interest immunity and LPP [legal professional privilege]…are entirely orthodox and conventional approaches. It's extremely unusual for committees, certainly in a public context—by which I mean in a hearing that's available publicly, as opposed to privately or in camera—to request material that is the subject of public interest immunity or LPP…I'm disappointed that the committee is so disappointed with us, but the approach we're taking is quite orthodox. We're upholding governance and the rule of law. We're trying to be cooperative with the committee but show respect for these fundamental principles.
2.38Mr Chris Savundra, ASIC’s General Counsel, expanded on this, noting that parliamentary inquiries in the past have had largely positive feedback on ASIC’s engagement with the committee process. He noted in particular the inquiry in 2011 into the collapse of Trio Capital, the 2013 inquiry into ASIC’s performance, and the 2021-22 inquiry into the Sterling Income Trust, none of which required the public disclosure of ASIC’s case files in order to complete their reviews. MrSavundra repeated claims that ASIC was happy to meet with the committee in a private or in camera setting in order to discuss the various case file matters which the committee had questioned it about.
Orders for production of documents relating to ASIC governance
2.39There have been several governance matters relating to the conduct of senior ASIC officials where, as part of the committee’s inquiry, Senators have sought documents from both ASIC and Treasury in order to investigate those matters. These investigations have involved orders for the production of documents agreed to by the Senate. In order to group these together with other governance matters relating to ASIC, these will be dealt with in chapter 7 of this report.
ASIC supplementary submission and other correspondence
2.40On 17 June 2024, the committee received a supplementary submission from ASIC. This document provided an overview of ASIC’s views of its conduct throughout the inquiry, including a reiteration of its reasons for making various claims of public interest immunity and not providing other documents to thecommittee.
2.41In this document, ASIC rejected the suggestion that it has been uncooperative with the inquiry process, providing a list of the assistance it has provided to the committee and reiterating its reasons and grounds for making public interest immunity claims:
For the reasons set out in our previous correspondence, we maintain our claims of public interest immunity and other objections that we have raised with the Committee. These claims were made not only to minimise the harm caused to ASIC’s investigation and law enforcement processes, but also to prevent the revelation of confidential sources of information and information exposing third parties to unfair prejudice and damage to their reputation, privacy and other legitimate interests and the risk of action. ASIC is not aware of any evidence which supports the suggestion that in raising such objections that ASIC has done so with the intent of undermining or obfuscating the Inquiry.’
2.42A further development also involved written questions on notice asked to ASIC. These questions, originally asked in July 2023, had been outstanding for some time and requested copies of correspondence between ASIC and Treasury relating to the alleged conduct of Ms Karen Chester between January and June 2021 (this time period being when she was investigated for alleged misconduct).
2.43ASIC provided its answers to these questions to the committee in June 2024 as well as the requested correspondence and a letter from ASIC’s General Counsel. The correspondence in question was heavily redacted. ASIC’s letter explained it would not provide the information for the following reasons:
(a)the extent of the Government’s existing claims of public interest immunity over related material and ASIC’s concern that the uncovering of such information will be inconsistent with the basis of those claims; and
(b)redactions to the personal information of individuals including current and former officials of ASIC, ASIC’s legal advisers, and Treasury.
2.44On 28 June 2024, the committee wrote back to ASIC, accepting the redactions made on grounds ‘b’, but rejecting ASIC’s reliance on the government’s previous PII claims in grounds ‘a’. The committee requested that the documents be provided to the committee without the redactions made on grounds ‘a’.
Committee view
2.45It is clear from the information presented in this chapter that there have been significant concerns with ASIC’s approach to this inquiry from its outset.
2.46Information gained through freedom of information documents has shown that ASIC has continually viewed the committee’s inquiry as an adversarial process rather than one of information gathering and finding ways to improve ASIC’s processes and outcomes.
2.47Throughout this inquiry process, the committee has received significant interest from stakeholders and the public about ASIC’s investigation and enforcement priorities, including significant amounts of submissions and correspondence.
2.48The committee acknowledges that ASIC has made some attempts to engage with the inquiry through providing submissions, attending public hearings and answering questions on notice. However, there has also been significant resistance form ASIC to engage with the committee in a transparent manner, and even a resistance to the very idea that ASIC was not meeting community expectations or its mandate.
2.49Nothing better exemplifies this than ASIC’s refusal to provide the committee with information from closed investigations matters, a refusal examined in detail in the committee’s Interim Report.
2.50The lengthy correspondence and administrative efforts that occupied the committee’s repose to these public interest immunity claims was a significant drain on the committee’s and ASIC’s resources. This process could have been avoided had ASIC provided the information requested in a timely manner.
2.51ASIC’s rejoinder to the committee’s concerns about attempting to gain access to these closed case matters has continually been two-fold: that providing this information would harm ASIC’s ongoing investigations, through both revealing investigative techniques and potentially revealing the identity of confidential sources of information; and also by making offers to provide the committee with the requested information in either an in camera or private briefing.
2.52With all fairness to ASIC, the committee is of the view that this is not sufficient. The committee recognises that many aspects of ASIC’s investigative work is sensitive in nature, but one of the repeating themes of submissions from the community is frustration at ASIC’s lack of transparency and accountability.
2.53Adding to this, the concerns listed above were known to the Senate when the Interim Report and various Orders for the Production of Documents were before it, and members of the Senate still voted to order that these documents be provided to the committee. These orders were ignored by ASIC and continued to frustrate the committee’s inquiry process. ASIC failed to provide information as ordered by the Senate and, in doing so, undermined the committee’s task of inquiring into ASIC’s performance.
2.54Even more concerning is the fact that the interim report of this inquiry, the Orders to Produce Documents, and the numerous pieces of correspondence between ASIC and the committee have not seemed to have any effect on ASIC’s attitude toward the scrutiny work being done by this committee. The most recent correspondence from ASIC, received in the final weeks before the finalisation of this inquiry, and slightly less than a year after the relevant questions on notice were asked, are evidence of this.
2.55The committee recognises that many aspects of ASIC’s investigative work are sensitive; however, it is clear from community sentiment that ASIC is viewed as a black box, where complaints and concerns are raised only to seeminglydisappear.
2.56Even more disappointing is the repetitive nature of these concerns. The 2013-14 inquiry completed by this committee, Performance of the Australian Securities and Investments Commission, specifically commented that ASIC ‘needs to be a harsh critic of its own performance with the drive to identify and implementimprovements’.
2.57There is little evidence to be found for ASIC performing this kind of criticism of its own performance. The fact that many of the complaints and comments made to the committee by members of the community about ASIC’s investigation and enforcement (discussed in more depth in chapters 4 and 5 of this report) are similar in nature to the concerns raised in that 2014 report show that this recommendation was not implemented by ASIC.
2.58All of this undermines the committee’s confidence in ASIC’s ability to drive its own improvement.