Watchdog cops a blast

THE corporate watchdog has come under fire at the financial services royal commission for its cosy relationship with Australia’s scandal-plagued major banks.

Counsel assisting the commission Rowena Orr, QC, tabled documents yesterday detailing close and “problematic” dealings between the banks and the Australian Securities and Investments Commission.

One document, an email, revealed an ASIC commissioner had urged National Australia Bank to accept a lesser penalty for misconduct by a staff member rather than risk a more extensive investigation that might uncover further concerns.

In the email, Cathie Armour, who chairs the watchdog’s enforcement committee, said that if the investigation kept going, “there would be a risk of us developing more information and forming views on different outcomes”.

In another email regarding a separate scandal, an ASIC senior manager said he had been warned by an executive at the Commonwealth Bank that a penalty the company was due to pay looked weak.

It could be perceived as “paying off” the regulator to avoid more heavy-handed action, the CBA executive had said.

Ms Orr presented the emails as she grilled ASIC chair James Shipton about the workings of his organisation.

In its interim report, published in September, the royal commission found weak corporate policing was partly to blame for the scandals that had engulfed the nation’s financial sector.

Ms Orr presented Mr Shipton with an email showing how ASIC dealt with revelations that a NAB employee, from the bank’s foreign exchange desk, had shared confidential information and placed problematic orders.

She showed an internal email from Ms Armour about her discussions with NAB chief risk officer David Gall in August, 2016.

“I did say to him that, given the relatively early stage of the investigation, we would be willing to consider a proposal that did not involve a court outcome if it otherwise met our key regulatory outcomes,” Ms Armour said.

“I said that we will continue our investigation and there would be a risk of us developing more information and forming views on different outcomes in the meantime.”

Ms Orr asked if the comments by Ms Armour were “problematic beyond a lack of professionalism”.

Mr Shipton replied: “no”. “As I understand from Ms Armour, (it was) at that particular point in time (where) there was not a great degree of confidence that … there was sufficient evidence or legal hook, as it were, to pursue the other matters,” Mr Shipton said.

ASIC was “prepared and willing to continue with the investigation”, he said.

But it had already “spent millions of dollars” investigating that issue and another scandal that had engulfed NAB.

Ms Orr also questioned Mr Shipton over ASIC’s handling of a case involving the CBA’s insurance business, CommInsure.