class action, page-6

Something along these lines may also help?

http://www.smh.com.au/business/time-for-asic-to-stop-being-an-undertaker-and-step-into-the-world-of-the-living-20100314-q650.html

Time for ASIC to stop being an undertaker and step into the world of the living
ADELE FERGUSON
March 15, 2010

A group of victims of unscrupulous practitioners is soliciting support to run a multi-million dollar class action against the corporate regulator ASIC.

Talks have been held with victims, including Brian Mitchell Motors, Bill Doherty from Independent Powder Coating and others, and the next step is to approach litigation funders to gauge their appetite to bankroll such a controversial move.

This may seem fanciful on many levels, but if the group widens its scope to attract the many investors of collapsed companies and managed investment schemes, including Storm Financial, it could prove a huge PR disaster for the corporate regulator. A Senate inquiry into the insolvency industry set up in November held hearings in Canberra on Friday and will hold hearings in Adelaide from April 9.

There is a lot of frustration at the approach of ASIC when dealing with complaints, and the time it takes to get results. There is also concern that many of the industries ASIC monitors have systemic problems that ASIC is failing to fix. One indication of ASIC's ineffectiveness is its revelation last week that one in five audits conducted by big accounting firms deliver an opinion the auditor cannot verify.

Many feel ASIC is too much like an undertaker: instead of conducting annual audits that would help it clear up problems, it often waits until it is dealing with corporate dead bodies.

ASIC lost a great deal of credibility over its dealings with Stuart Ariff.

Many complaints were made to ASIC in 2005 about Ariff but ASIC only started acting in 2007 after adverse media attention when a creditor revealed he had ripped out $13 million in disbursements and fees including lavish family holidays - almost three times the company's original $4.5 million deficiency Ariff declared just after his appointment in 2003. He was banned for life as a liquidator last year.

Not surprisingly, a great deal of lobbying is going on to strip ASIC of some of its powers. For instance, when it comes to regulating financial planners, some people are questioning whether another body should be set up to monitor, supervise and license the sector. This follows revelations that many financial planners wrote to ASIC well before Storm collapsed warning the regulator of questionable practices. And the need for a Senate inquiry into the insolvency industry - the seventh review in two decades - says it all about its efforts in this aspect of its job.

Between July 2006 and last December ASIC received 45,162 complaints and inquiries, 1647, or 3.6 per cent, of them regarding insolvency practitioners. Given there are fewer than 600 insolvency practitioners in the country, that is a lot of complaints and problems.

With so much criticism of the sector and ASIC, it makes one wonder why the government does not look at putting company insolvency and individual bankruptcies under one piece of legislation, similar to the Insolvency Act in Britain. In Australia company insolvencies fall under the Corporations Act and are monitored by ASIC, while bankruptcies have a dedicated Bankruptcy Act and a separate regulator, the Insolvency and Trustee Service Australia. Under such a move all company insolvencies and director-related cases would be heard in the Federal Court, instead of the state supreme courts and the federal court that now have judicial control over the Corporations Act.

There is little doubt that ITSA is more proactive with its members than ASIC. Indeed, ITSA lobbed a submission into the insolvency inquiry that questioned why its annual inspection program used to track bankruptcy trustees and debt agreements was not used by ASIC to monitor liquidators and administrators. One of the main benefits of having one piece of legislation and a dedicated regulator monitoring all types of insolvencies is that it more fully understands the industry because that is all that it does.

ITSA regularly audits bankruptcy trustees, and it interviews them before they can become trustees.

One idea covered in the 60 submissions and the hearing held in Canberra on Friday included creating a separate ombudsman that could handle complaints. Another was whether prospective liquidators and administrators should be interviewed by a panel before being licensed or registered. Other suggestions came from the Nationals senator John Williams, who heads the inquiry. He asked ASIC whether it should be compulsory for an insurance company to alert it if a liquidator cancelled or let lapse its professional indemnity insurance.

It is clear radical change is needed. Under the current system the requirements to register as a liquidator are minimal, yet it is difficult to deregister a liquidator.

Past inquiries on the industry have resulted in little action, but this inquiry has big ambitions. Combining individual and company insolvencies under the one law, one regulator and under the jurisdiction of one court would be a good start.