Just how weak the Australian Securities and Investments Commission is — and the new corporate crime penalties Scott Morrison was boasting of last week — has been demonstrated by US regulators in the latest Wells Fargo fine.
On Friday night, the giant US bank copped a US$1 billion penalty. The fine was levied for selling people car insurance they didn’t need and charging fees on mortgages that were not taken up (sound familiar?). It’ll be split between the Office of the Comptroller of the Currency, the main US bank regulator, and the Consumer Financial Protection Bureau. The fine is the largest ever imposed by the CFPB (and its first under the Trump administration).
Scott Morrison’s new fines, unveiled to great fanfare, selective media drops and Get Tough rhetoric on Friday, stop at just over $200 million. A pittance.
Wells Fargo’s $1 billion was on top of last year’s US$185 million fine for creating fake accounts. Regulators also forced the bank to replace directors on its board and froze its balance sheet at end of 2017 levels for an indefinite period of time.
ASIC has yet to force out a chairman, CEO or board member of a major Australian company, even in a sector like finance where ASIC itself has readily admitted there are major problems. Financial planning was a “target rich environment” for the regulator, one executive said back in 2014, and they’d known that since the turn of the century.
But ASIC simply let the banks and financial planners break the same rules over and over again. In some notorious cases, such as Commonwealth Financial Planning, it actually took multiple major breaches before ASIC would even impose an enforceable undertaking on a major corporation. As for actual litigation — pfffft. You kidding?
Only public shame and investor anger has forced anyone out here.
There’s a good test you can apply to financial regulation in Australia. When was the last time you heard anyone complain about ASIC being too heavyhanded? Most business people are whingers by nature — they see regulation as a painful impediment to making money, and regulators as useless interfering bureaucrats. But the big banks and AMP have never jacked up about ASIC. That’s because they haven’t needed to — ASIC had no interest in regulating them — and even if it ever developed a spine, the penalties provided by parliament for it to inflict on corporations were woefully inadequate. And they still are.
We hear a lot from the Business Council, and the government, and peak industry lobby groups, about the need to create a welcoming environment for investors (usually by tax cuts and slashing wages and conditions). What signal does it send to investors when the rule of law is consistently trampled on by the biggest corporations in the country? What is welcoming about an investment environment where the corporate regulator refuses to take on big corporations even when they routinely and systematically break the law?
The problem goes much wider than dodgy financial planners and the bank executives who encouraged them.
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