part of senate inquiry today

May take a little more than three days!




Transcript

ELEANOR HALL: A Senate inquiry today grilled executives from Australia's corporate watchdog over their investigation into share trading by two directors of the department store David Jones.

The David Jones chairman Peter Mason and two directors, Steve Vamos and Leigh Clapham, have resigned over the affair.

Today the Australian Securities and Investments Commission executives were asked why they did not find that the share deals amounted to insider trading when they took place before the release of positive sales data.

Business editor Peter Ryan is just back from the Senate inquiry in Sydney and he filed this report.

PETER RYAN: The Senate Economics Committee has started its long awaited probe into the performance of ASIC (Australian Securities and Investments Commission) and how it's handled recent corporate collapses and financial scandals.

Top of the list this morning was its investigation into the board of David Jones after chairman Peter Mason approved share purchases last October by directors Steve Vamos and Leigh Clapham.

ASIC found there was no case to answer despite the purchases taking place before the release of positive sales data and when a secret merger proposal from rival Myer had emerged.

ASIC commissioner John Price explained to the committee why the trading was not material or price sensitive.

JOHN PRICE: When we started the David Jones investigation we became concerned about the materiality of the information, that's not unusual in insider trading matters, and what we commonly do where we have concerns about materiality, is we use not only internal market experts within ASIC but we use external market experts and indeed in this case we did seek the advice of an external market expert on whether that information was material.

The expert in question has many, many, many decades of experience as a stock broker and that expert's conclusion was the information was not material.

PETER RYAN: Committee chairman Mark Bishop pressed Mr Price and executive Chris Savundra on what the directors might have been thinking when they proposed buying shares in light of information available in the DJs boardroom but not in the public arena.

MARK BISHOP: Was there any suggestion from either Mr Vamos, Mr Clapham or Mr Peter Mason that the quarterly sales data in question was not price sensitive? Did they ever put that proposition to you?

JOHN PRICE: David Jones held the view that the information was not material.

MARK BISHOP: Yes, I didn't ask you that. I asked you did those three gentleman put the proposition to you or argue to you that the quarterly sales data material was not price sensitive? That's a subset of materiality.

JOHN PRICE: When you say it's a subset Senator ...

MARK BISHOP: Is that the only thing you would consider?

JOHN PRICE: No Senator, that's not the relevant test. What they said is they turned their mind to the issue of materiality and formed the view that...

MARK BISHOP: Yes, but I'm not asking you that question. I'm not asking that question.

PETER RYAN: Senator Bishop maintained the pressure and asked for an assurance that DJs chairman Peter Mason and the two directors in question had acted legally and ethically.

MARK BISHOP: There's a lot of examination going on at the moment of politicians and former politicians as to their behaviour and whilst I don't equate the two, a high standard in public life and public companies is expected.

So the question is do you say to us that at all relevant times these three individuals conducted themselves in this matter, in this matter in a principled and ethical manner?

PETER RYAN: While not conceding any unlawful activity by the DJs directors, ASIC chairman Greg Medcraft sent a timely reminder to boards about their responsibilities.

GREG MEDCRAFT: There's the law and then there's the perception there is. I think it's sort of like anything in public life, it's the front page test which is the perception, and I think every director needs to think about it that even though it may not be illegal, you know, you want investors to be confident.

PETER RYAN: The inquiry quickly moved on to ASIC's handling of misconduct and cover-up at the Commonwealth Bank's financial planning arm.

Nationals Senator John "Wacka" Williams has been waging a long campaign about ASIC's slow reaction.

JOHN WILLIAMS: Why did it take ASIC so long to act, and I ask that in the, you know, hindsight is a wonderful thing. During 2009, the Commonwealth Bank, and I credit them for this, sent the file of Ricky Gillespie but it was November 2012 Ricky Gillespie was scrubbed out for life as a financial planner.

And my concern is, you know, it is almost three-and-a-half years, what other wrongdoings did Mr Gillespie carry out, and this is where I need you to help me. What needs to be changed?

PETER RYAN: The Senate inquiry is set to run for three days, but chairman Mark Bishop says the hearing could be extended if required.

The committee is due to present its findings to Parliament in May.

ELEANOR HALL: And that's our business editor, Peter Ryan.