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Appendix 2 - Answers to questions on notice
conflict, p. 29)
Senator SHERRY—What about the
potential conflict though where KordaMentha are acting for a bank who would be
first mortgagees in most cases, I assume?
Mr Lucy—Probably a receiver,
which would mean a floating charge. It may also mean that they have a specific
charge but they would be in there as a receiver because of a floating charge.
moneys flow or are left over, it is first mortgagee first, usually a bank, and
then whatever is left—if there is anything left—goes to the consumer. Do you
see any conflict with KordaMentha working in respect to the bank and also being
the general receiver?
Mr Lucy—I will take that on
notice because, for example, let us say company A and company B are both under
the Westpoint family. I could imagine company A having a firm of receivers
appointed and company B having that firm as liquidator, but I could not
envisage company A having both the same firm acting as receiver and liquidator.
ASIC does not believe that
there is any conflict of interest with KordaMentha. KordaMentha have 2 separate
and distinct roles.
First, they are receivers or
receivers and managers of assets of certain companies in the Westpoint Group,
by various secured creditors pursuant to various securities (such as debenture
charges). Their powers under these private appointments will be governed by the
terms of the lenders' relevant security and appointment documents. Such powers
are likely to include a power to realise assets with a view to satisfying
amounts owing to the relevant secured creditor.
Second, they have been
appointed by the Federal Court as 'receivers' of certain property of:
of companies associated with the Westpoint Group (that is, Messrs Carey, Beck,
Dixon and Rundle); and
companies connected to the Westpoint Group (such as Richstar Enterprises).
KordaMentha's limited and
specific powers as Court appointed 'receivers' are principally to identify,
preserve and secure all of the property of the defendants for the benefit of
potential creditors (but to still permit the defendants to pay their living
expenses and continue carrying on business).
A principal purpose of
appointing KordaMentha as 'receivers' of the defendants' property was to ensure
the preservation of such property pending ASIC's continuing
As Court appointed receivers,
their role is not (in the absence of a specific order by the Court) to realise
As far as ASIC is aware,
KordaMentha have not been privately appointed as receivers and/or receivers and
managers (that is, by any lender) to any of the same companies as those to
which the Federal Court has appointed them as 'receivers' (with the principal
purpose of preserving assets).
Therefore, no conflict of
interest for KordaMentha is apparent.
However, if – as Court
appointed 'receivers' – KordaMentha feel that they may be placed in or face a
conflict of interest in performing that role (given their appointment as
receiver and/or managers appointed by any secured lender or for any other
reason), they would be required to bring that matter to the Court's attention
and make an application to the Federal Court for directions.
Similarly, if ASIC became aware
of KordaMentha facing an actual or potential conflict, it would consider
whether that matter ought be brought to the attention of the Court.
In ASIC's view, this is an
appropriate way for any potential conflict to be managed and is not uncommon in
(Banking complaints, p. 30)
Senator SHERRY—I have just a
couple of matters relating to banks—away from Westpoint and super for a moment.
Has ASIC examined recently, and if so when, the internal disputes procedures of
Mr Lucy—My recollection is
that a similar question came up at estimates and we took that on notice.
Senator SHERRY—If it did it
probably came from me, but I cannot recall getting into this area.
Mr Lucy—To the best of my
recollection it did, including the issue of fees. We have that on notice. To
the extent that you would like to expand on that with your own question on
notice, we are happy to take it on board.
ASIC's oversight as to the
way in which banks and other AFS Licensees handle complaints through their
internal procedures is an ongoing process.
The Corporations Act requires
that all AFS Licensees providing financial services to retail clients,
including banks, have an internal dispute resolution (IDR) system that complies
with standards made or approved by ASIC and covers complaints made by retail
clients in connection with the provision of all financial services covered by
the licensee (ss 912A(1)(g) and 912A(2)(a)).
ASIC Policy Statement 165
explains ASIC's requirements for IDR procedures. In part, PS 165 applies the
Essential Elements of IDR set out in Section 2 of the Australian Standard on
Complaints Handling (AS 4269-1995). PS 165 also provides guidance on the
application of AS 4269-1995 to the financial services industry and outlines
additional matters necessary for compliant IDR procedures. ASIC is satisfied
that all banks have procedures in place to ensure their IDR procedures comply
with these requirements.
Oversight of compliance
As this is a licence
obligation, failure to maintain a compliant IDR process would be a matter for a
breach notification, if such a failure is characterised as a significant
breach, or likely breach of the licensee’s obligations (s912D).
ASIC also reviews the
efficacy of IDR procedures when considering individual complaints made by or on
behalf of consumers or analysing complaints data provided by banks under
Statutory Notices in relation to particular issues.
It is an additional licence
requirement that AFS Licensees be a member of an ASIC approved External Dispute
Resolution (EDR) Scheme. ASIC Policy Statement 139 explains how ASIC will
approve an EDR scheme. PS139.62 requires that EDR schemes identify issues that
are systemic or that involve serious misconduct and report such issues to ASIC.
Failures to adequately deal with complaints at the IDR level are likely to
result in systemic issues capable of being identified by the relevant EDR
scheme (in the case of banks – the Banking and Financial Services Ombudsman),
which will in turn be reported to ASIC.
ASIC therefore monitors the
effectiveness of the IDR procedures by banks through feedback from the BFSO and
through reviewing complaints.
(Banking complaints, p. 31)
Senator SHERRY—What about
their internal dispute procedures? Every bank has their own internal consumer
disputes mechanism and then there are, beyond that, other processes. Have you
examined those recently?
Mr Cooper—Not as far as I am
aware, but we can take that on notice. Again, I think you will find that they
are off our patch.
Please see answer to PJC [question]
(Banking complaints, p. 31)
Senator SHERRY—Do you have
any statistics on complaints in respect of banking activities?
Mr Lucy—We can take that on
notice. It has been pointed out to me that it is in our answer that we have
Senator SHERRY—I will have a
look at those answers that you have on notice.
ASIC collects banking
statistics when monitoring compliance with the Electronic Funds Transfer Code
of Conduct ('EFT Code'). The last publicly reported EFT complaint statistics
covered the period April 2003 to March 2004.
The complaints statistics
collected as part of the EFT Code monitoring are basic volume statistics.
Statistics are only collected for complaints that are covered under the EFT
Code, i.e. not all banking complaints. The April 2003 to March 2004 EFT
complaints breakdowns included:
type (Major Bank, Other Bank, Building Society, Credit Union, Other
- Transaction type (ATM, EFTPOS, Internet, Phone, Other)
- Handling status (handled internally, discontinued,
referred to EDR)
- Resolution status (customer liable, institution liable,
the complaint was about a system malfunction or an unauthorised transaction.
These complaints statistics
are available in the annual monitoring reports, which are posted to both the
ASIC and FIDO websites: www.fido.asic.gov.au/fido/fido.nsf/byheadline/compliance+with+financial+industry+codes+of+practice+FIDOv?openDocument
(Westpoint, p. 36)
Senator SHERRY—I return to a
question on notice relating to Westpoint applying for a licence. I refer to
E43, question AT36. I asked whether they had applied for one and you said:
No, Westpoint Finance
Pty Ltd held an Investment Adviser’s licence ... from 27 June 1996 to 21
January 1999. ASIC has no record of Westpoint Finance Pty Ltd ever making an
application for an AFSL, however it was an Authorised Representative ... for
CGU Insurance Ltd ... during the period 4 February 2004 to 14 July 2004.
As Westpoint was an
authorised representative of CGU, could or did ASIC take any action against
Westpoint at that time as an authorised representative of CGU?
Mr Lucy—Was that a question
on notice 10 days ago or at some earlier time?
Senator SHERRY—This relates
to the additional estimates of 16 February 2006. We got the answer in that
batch last week and I have those in front of me.
Mr Lucy—I will have to take
that question on notice. I am not aware of whether or not we looked at the CGU
Senator SHERRY—According to
ASIC’s answer on notice, Westpoint Finance Pty Ltd were an authorised
representative of CGU for a period of time. In those cases, can ASIC take
action against the authorised representative because it was licensed through
Mr Cooper—In relation to
what? We will have to take this on notice. It could well be that that licence
was in order to advise about and sell CGU insurance to people who invested in
Senator SHERRY—Take that on
notice. It does not make that clear.
Mr Cooper—It does not.
If, in the course of acting
as CGU's authorised representative, Westpoint Finance Pty Ltd breached the law
and there was evidence of this, ASIC may be able to take action against CGU.
ASIC is not aware of any
complaints against Westpoint Finance Pty Ltd that relate to it acting as an
authorised representative of CGU and has not taken any action against Westpoint
Finance Pty Ltd as an authorised representative of CGU to date.
If there is any evidence
available to support an allegation that in the course of acting as CGU's
authorised representative, Westpoint Finance Pty Ltd breached the law, ASIC
will look into those allegations.
(S8, p. 40)
CHAIRMAN—The other issue I
wanted to raise was in relation to a company called S8 which is a major tourism
company in Queensland that has been under investigation by the Queensland
department of fair trade in relation to various allegations. The allegation
that has been made to me is that S8 has not disclosed to investors in the
company the fact that it is being investigated. Are you aware of that
Mr Lucy—We would have to take
it on notice. To the extent that the background is reliable, that may well be
an event that they would have disclosed to us and we will tie the ends
ASIC examined the matter
about whether the non-disclosure of the potential Queensland Office of Fair
Trading action was in breach of the Corporations Act.
At the time, the action was
threatened, not initiated, and was already in the public domain. The view was
taken that there was not contravention of the continuous disclosure provisions.
(Budget for HIH case, p. 45)
Senator WONG—How much more
did you ask for for HIH than you got?
Mr Lucy—I would have to take
that on notice but, to the best of my knowledge, for all of those matters,
whatever we have sought, we have received.
The HIH funding bid was
jointly prepared by ASIC and DOFA, and no gap existed between what was
requested and the final amount received by ASIC.
(Business judgment rule, p.
Senator WONG—Have you been
asked for advice as to the enforcement impact of anything in the discussion
Mr Cooper—Not that I am aware
of, but we could take that one on notice.
ASIC was not asked to advise
on anything in the Parliamentary Secretary to the Treasurer's 'Corporate and
Financial Services Regulation Review Consultation Paper' (April 2006).
(Earlier question on notice
AT20, p. 50)
Senator WONG—Mr Lucy, in the
context of this hearing I want to draw your attention to a question on notice,
AT20, that you responded to through the additional estimates in relation to the
history of the section 19 issue.
Senator WONG—When you went
back to Treasury and asked about the ability to improve your powers.
Mr Lucy—I do recall that
Senator WONG—The answer to
the question on notice is, ‘A history of a request to Treasury to amend the
ASIC Act to enable ASIC to compel a person to provide a witness statement in
certain circumstances was not raised at the PJC hearings in September 2005.’ I
did ask you specifically whether we could have a copy of the proposed
amendments and I also want to know the history of the request to Treasury and
the process of that. Could you take that on notice in this hearing?
Mr Lucy—We will.
There appears to be some
confusion about the questions and the responses that ASIC has provided.
Senator Wong refers to the
response to Question AT20, and indicates that it was not an answer to her
request for a copy of the proposed amendment. The response that provided a copy
of the amendment proposed by ASIC was the response to Question AT18. This response set out the suggested amendment
to s49 of the ASIC Act to enable ASIC, in certain circumstances, to compel
people who had attended a s19 examination to provide a signed statement
admissible in a criminal prosecution.
The response to which Senator
Wong refers above, the response to Question AT20, refers to her subsequent
question as to why disclosure of the proposal to amend s49 was not made to the
previous hearings. The answer to this
was that the line of questions at that hearing was such that there was not an
opportunity to do so.
Question: AT 20
Topic: Section 19 in the context of
Hansard Page: E8
Senator WONG asked:
Mr Lucy, why was this not
disclosed to the committee previously when questions were asked about the
section 19 issue?
Mr Lucy—I am not sure that we
were asked that question.
Senator WONG—We did ask quite
a lengthy range of questions, in the context of the Vizard matter, about why
section 19 had not been utilised.
Mr Lucy—I would have to take
that on notice and refer back to the questions that were specifically asked.
Obviously we do not make the laws, but, as to that particular reference, I
would need to go back to Hansard.
Senator WONG—I am not
suggesting you make the laws, Mr Lucy. I am asking why, when the committee was
inquiring into this issue, it was not raised. If you want to take that on
notice, obviously you can do that.
The history of a request to
Treasury to amend the ASIC Act to enable ASIC to compel a person to provide a
witness statement in certain circumstances was not raised at the PJC hearings
in September 2005 because during that hearing the line of questioning referred
to whether ASIC did or should have conducted an examination of a person in
relation to an investigation into conduct by Mr Vizard. Ms Redfern attempted to raise the issue of
reluctant witnesses (CFS11), but was asked to address questions on use of the
power to conduct s19 examinations.
The discussion then moved on
to the utility of conducting a s19 examination of the person in question, and
what consideration ASIC had given to this and what advice it had received. In the context of the discussion – that the
person proved not to be appropriate as a witness – it was not directly relevant
to attempt again to refer to a proposal for law reform that would very likely
not have assisted in the case in question.
(Vizard, p. 51)
Senator WONG—Did ASIC have
any concern in putting that statement of agreed facts before the court in the
insider trading case that there might have been an inconsistency between that
evidence and the evidence that Mr Vizard had given previously?
Mr Lucy—The evidence that we
put was to do with director’s duties as distinct from insider trading. The
evidence was put forward to the court in a manner that the court required.
Senator WONG—That is not
really an answer to my question.
Mr Lucy—To the extent that
there were any inconsistencies, that is not a matter for ASIC to follow
through. That is properly a matter for the Victorian police.
Senator WONG—No, but you put
forward a statement of agreed facts on the basis of which a guilty plea was
entered and submissions were made as to what penalty should be in place. Surely
it is incumbent upon ASIC to ensure that the facts put forward were facts that
could be relied on by the court. Surely it was incumbent on you to look at
whether that statement of agreed facts was consistent or not with previous
evidence given by the defendant.
Mr Lucy—We might in part take
this on notice. Our anxiety is that we do not say anything that might prejudice
the Victorian police. To the extent that there was material in the background
that we might have considered, which I think is the real thrust of your point,
we should take that aspect of it on notice.
Senator WONG—I want to know,
when you were preparing the statement—whatever facts went before the court in
the Vizard matter to which ASIC was a party—whether regard was had to evidence
previously given by Mr Vizard—
Senator WONG—and whether you
turned your mind to the issue of any possible inconsistency.
Mr Lucy—Understood, and we
will take that on notice.
In preparing the statement of
agreed facts, ASIC considered all the evidence it had obtained during the
course of the investigation. This
evidence included sworn testimony given by Mr Vizard and other parties. The statement of agreed facts that ASIC filed
with the Federal Court represents a version of events that ASIC believes to be
accurate and that, in ASIC's opinion, is supported by the evidence. Mr Vizard had agreed to that version of
As for the possibility that
Mr Vizard may have committed perjury in the preceding committal hearing of Mr
Hilliard, that is a matter for the relevant state authorities, namely the
Victoria Police and the Victorian Director of Public Prosecutions. ASIC has and will continue to provide
whatever assistance it can to any enquiries by the Victoria Police.
(HIH, p. 52)
Senator WONG—Has any
investigation been conducted or material provided by ASIC?
Mr Lucy—I would have to take
that on notice, because that would be almost certainly historical as distinct
ASIC has regularly liaised
with the Liquidator of HIH since the collapse of the HIH Group in March 2001,
within the limits of its statutory obligations.
On 3 May 2004, General Re
Australia Ltd (formerly General & Cologne Re Australia Limited (GCRA)) paid
$27.2 million to the Liquidator of FAI General Insurance Company Limited as
part of an enforceable undertaking provided to ASIC. The enforceable undertaking followed ASIC's
investigation into reinsurance arrangements entered into by FAI with GCRA in
The Liquidator has provided
ASIC with a broad account of proposed civil actions including actions relating
to the takeover of FAI. The takeover of FAI by HIH was not the subject of a
specific referral to ASIC from the HIH Royal Commission, however, ASIC did
conduct a preliminary assessment as to whether there were civil remedies
available for ASIC to pursue regarding the takeover prior to the receipt of the
HIH Royal Commission referrals.
At the request of the HIH
Liquidator, HIH material obtained by ASIC from the HIH Group of Companies,
pursuant to ASIC's compulsory powers, and from the HIH Royal Commission, was
returned in electronic form to the Liquidator on 19 July 2006 to assist the
Liquidator with current and proposed civil actions. ASIC will continue to liaise with the
Liquidator with a view to facilitating any requests arising from the conduct of
(MLA reporting/Philps letter,
CHAIRMAN—We have received
correspondence from Mr Russell Philp regarding the adequacy of Meat and
Livestock Australia’s communication with its members and relevant stakeholders.
You are probably aware that MLA is a producer owned body that funds research—
Mr Lucy—Like you, we received
that today also and so we are looking at that. Therefore, if we take it on
notice we will be able to respond to you.
Meat and Livestock Australia
is an unlisted public entity and is also not a disclosing entity.
Mr Philip's main complaint is
that the company discloses that "they feel the ASX [Corporate Governance]
Principles are an appropriate benchmark for guiding MLA practices" and
"MLA's corporate governance practices are now consistent with the ASX
Recommendations to the extent they are relevant to MLA as a non-listed
The complainant disputes
ASIC is currently reviewing
the extent to which MLA does not comply with these guidelines.
It should be noted that the
complainant does not disclose any contraventions of the Act.
(Timeshare, p. 53)
CHAIRMAN—Sure. Also, you
published in May 2006 the consultation paper Review of policy statement 160:
time-sharing schemes, with certain proposals. Have you had any response so far
to those proposals and, if so, what?
Mr Lucy—I will have to take
it on notice.
Senator MURRAY—Can you add to
that the time line in which you intend to come to a view on it?
CHAIRMAN—Do you consider that
an extended cooling-off period will overcome the problems associated with
Mr Lucy—I think that is all
part of the same issue so we will roll that into it.
CHAIRMAN—Do you propose to
deal with the problems of disclosure highlighted in our report on time share
that we tabled in September last year?
Mr Lucy—Again, we need to
roll that into the answer to the question on notice.
(Possible offenders register,
Senator MURRAY—As you know, I
am a great fan of your press release service because I think it is very
informative. Regarding those responsible for approving or encouraging unethical
behaviour such as directors, accountants, lawyers, valuers and those sorts of
people, do you have offenders lists?
Mr Lucy—No. Perhaps I was a
bit quick: Jeremy has pointed out that we do have a list on our website.
Mr Cooper—There are two
mechanisms for doing that. You can comprehensively search the website for
whether somebody has been mentioned in one of our media releases.
Senator MURRAY—Does that not
require you to type in the name?
Mr Cooper—It does.
Senator MURRAY—Then it
requires the search engine to work.
Mr Cooper—We also have a
specific list of people who we have banned. If you wanted to find out, for
example, whether or not a financial advisor firstly had been licensed by us or,
secondly and more importantly, had been banned by us, that is all there on the
Senator MURRAY—It seems to me
that you should consider going further. For the period in which a person is
prohibited from acting as a director, for the period under which somebody is
banned or for the period under which a particular action has been taken, it
would seem to me a list of names which is easily accessible would be of great
assistance. That extends further to those lawyers, accountants or valuers who
have been tied up in schemes which have been disallowed or have had the force
of law attached to them. I am not suggesting you should become judge, jury and
executioner; I am talking post facto or after a judgment has been made.
The professional damning of
somebody who has had a conviction or a finding against them has a very salutary
effect. The difficulty for anyone, including someone like me who watches all
your stuff very carefully, is to remember names. I think investors, bankers and
the general public themselves should be able to go straight to a list which
would be alphabetically listed and say, ‘Is this name there, and should that
ring alarm bells with me?’ There is no way that any person, apart from somebody
with a prodigious memory, will remember that somebody three years ago had an
eight-year penalty put on them.
Mr Lucy—Would you contemplate
the listing of the name only during the currency of the ban?
Senator MURRAY—Yes, because
you have to accept a rehabilitation process and that people learn their lesson.
I think it would be against natural justice to carry it on afterwards.
Mr Lucy—I agree. We could
have a look at that.
Senator MURRAY—It is not like
the sex offenders’ register where they are on there forever.
Mr BAKER—But if they are
serial offenders, more than once, they should stay on.
Mr Lucy—In colour code.
Mr BAKER—That is right: red
Mr Lucy—We will have a look
at that to the extent that there are legislative barriers. We will identify any
and come back to you. We will certainly take that matter further.
Under the law, ASIC maintains
public statutory registers of persons who are:
or disqualified from providing financial services (Corporations Regulation
- disqualified from managing corporations (s.1274AA of the
These registers are easily
searchable by the public, both by means of ASIC's general website
(www.asic.gov.au) and its consumer website (www.fido.gov.au) and via popular
search engines such as Google. Any
person who wishes to determine whether a particular individual is listed on one
of these registers may do so at no cost to them.
The terms for which
particular disqualifications and bannings apply, or previously applied, are
also clearly apparent from the registers.
A consolidated alphabetical
list of banned and disqualified persons appearing on these registers would be
duplicative of the current arrangements, but ASIC will give further
consideration to whether there might be any demand for, and utility in, such a
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