The response to the Commonwealth financial planning scandal shows banks really are above the law (2024)

Met a bloke the other day who had lost the lot. He inherited a fortune, trusted a bank to invest it for him. They blew it all up in a co*cktail of reckless leverage and fees. Now he lives in a Salvation Army hostel.

We won't mention his name at this point, nor that of the bank. Suffice to say it is one of the usual culprits. This is an unusual case, the riches-to-rags story quite exceptional, but this man is merely one of thousands whose life savings have been obliterated due to corporate malfeasance by perpetrators who will never face justice.

It is a sad reality that while bankers enjoy the cherished place of being protected by the taxpayers, they are also above the law. Look no further than the Commonwealth Bank financial planning scandal. Rather than being prosecuted, the careers of those responsible have advanced. And those above them have continued to rake in bonuses. This despite a Senate inquiry that found fraud. The enforcement action has been feeble. It has been conveniently institutional rather than targeting actual people.

Adding insult to injury for the victims, Finance Minister Mathias Cormann emerged with the government's response to the Inquiry into the performance of the Australian Securities and Investments Commission on Friday.

To borrow from Cormann's own rich vernacular, this is truly the response of an "economic girlie man".

No penalties, no redress for the palpably poor performance of ASIC. The same crew responsible for a litany of failures is still running the commission. Nor are there any reprisals for the bad behaviour of the people at Australia's biggest financial institution, the Commonwealth Bank.

There was no need for a royal commission on CBA, something the senators had called for. And some of the Senate's recommendations, embraced by Cormann, are good. A register of financial planners, for instance, is long overdue. Essentially, though, this is little more than a list, a list slated to cost $5 million.

The problem with corporate regulation in this country is essentially cultural, however. It is about people cowed by the big end of town, spooked into inaction. It is about regulation by press release. It is about the appearance of regulation.

Now the people running the large institutions have been sent an unequivocal message that they will not be prosecuted come hell or high water, it is worth contemplating once again what the most concerted enforcement action of the past couple of years has been – the only raid.

This was the raid on the campsite of a lone green activist, Jonathan Moylan, in Singleton, NSW. Moylan's crime had been to issue a fake press release to rabble a coal company and its bankers. Ironically, this was an action taken from principle, not from personal gain.

Yet the message from our government is: act from principle and you will be dragged through the courts, act for a big bank, churn people's life savings, and the worst fate to befall you might be the embarrassment of a Senate inquiry and a few "enforceable undertakings".

Those who followed the inquiry will be familiar with the testimony of James Wheeldon, a former lawyer at ASIC who exposed in intimate and unassailable detail how the regulator not only does favours for the big banks but even allows them to have a hand in formulating the nation's laws.

Specifically, Wheeldon testified to the role played by lobby group the Financial Services Council in jagging a special exemption from the law. Further, he described how a lawyer from MLC – owned by National Australia Bank – had been seconded to a team involved in formulating the legal exemption. Wheeldon's own internal legal advice on the matter had been ignored in favour of an outcome that benefited the banks and disadvantaged consumers.

Looking at the government's response to recommendation 32 (regarding secondments), it seems that a decision must have been made at the higher levels of government that the Parliament and the Australian people are not entitled to information about bank employees who are seconded to ASIC's policy-making function.

The point about secondments is that the regulator is infested with lawyers and professional types from the big accounting firms who have an influence on the laws and their enforcement. It is like a secret mates' club. There is zero transparency and it is fair to assume that this ensures a "captive" regulator.

ASIC did finally publish its policy on secondments on July 25, but this relates only to outbound secondments, that is, ASIC employees going to other organisations.

It says nothing about "policies and safeguards" applicable to inbound secondees, and the identities of inbound secondees has never been disclosed.

The only information ever given to the public about ASIC's use of inbound secondees was the information Wheeldon provided to the Senate. ASIC to this day has failed to respond properly to Wheeldon's testimony.

Thanks to the high document search fees – for information which is already public – ASIC is a golden goose for government. Yes, the economic girlie men may well be slashing its budget, but historically the commission has cut a cheque to Canberra in the vicinity of $350 million a year.

Presumably they don't want to encourage too much enforcement, court cases are costly, or that might compromise the golden goose.

So consumers will lose and the real cost will be in the coming years when there is a downturn and the failure of regulation will cost thousands more Australians their life savings as the big end of town knows their only penalty for bad behaviour is a spot of reputational damage.