Productivity

The Productivity Commission report Harnessing data and digital technology released today states 

Data and digital technologies are the modern engines of economic growth. Australia needs to harness the consumer and productivity benefits of data and digital technology while managing and mitigating any downside risks. There is a role for government in setting the rules of the game to foster innovation and ensure that Australians reap the benefits of the data and digital opportunity. 

Emerging technologies like artificial intelligence (AI) could transform the global economy and speed up productivity growth. The Productivity Commission considers that multifactor productivity gains above 2.3%, and labour productivity growth of about 4.3%, are likely over the next decade, although there is considerable uncertainty. But poorly designed regulation could stifle the adoption and development of AI. Australian governments should take an outcomes based approach to AI regulation – using our existing laws and regulatory structures to minimise harms (which the Australian Government has committed to do in its National AI Plan) and introducing technology specific regulations only as a last resort. Developing and training AI models is a global opportunity worth many billions of dollars. Currently, gaps in licensing markets – particularly for open web material – make AI training in Australia more difficult than in overseas jurisdictions. However, licensing markets are developing, and if courts overseas interpret copyright exceptions narrowly, Australia could become relatively more attractive for AI development. As such the PC considers it premature to make changes to Australia’s copyright laws. 

Data access and use fuels productivity growth: giving people and businesses better access to data that relates to them can stimulate competition and allow businesses to develop innovative products and services. A mature data sharing regime could add up to $10 billion to Australia’s GDP. The Australian Government should rightsize the Consumer Data Right (CDR) with the immediate goal of making it work better for businesses and consumers in the sectors where it already exists. In the longer term, making the accreditation model, technical standards and designation process less onerous will help make the CDR a more effective data access and sharing platform that supports a broader range of use cases. 

The benefits of data access and use can only be realised if Australians trust that data is handled safely and securely to protect their privacy. Some requirements in the Privacy Act constrain innovation without providing meaningful protection to individuals. And complying with the controls and processes baked into the Act can make consent and notification a ‘tick box’ exercise where businesses comply with the letter of the law but not its spirit. The Australian Government should amend the Privacy Act to introduce an overarching outcomes based privacy duty for regulated entities to deal with personal information in a manner that is fair and reasonable in the circumstances. 

Financial reports provide essential information about a company’s financial performance, ensuring transparency and accountability while informing the decisions of investors, businesses and regulators. The Australian Government can further spark productivity by making digital financial reporting the default for publicly listed companies and other public interest entities while also removing the outdated requirement that reports be submitted in hard copy or PDF form. This would improve the efficiency of analysing reports, enhance integrity and risk detection, and could boost international capital market visibility for Australian companies.  

The Commission's  recommendations are - 

Artificial intelligence 

Recommendation 1.1 Productivity growth from AI should be enabled within existing legal foundations. 

Gap analyses of current rules need to be expanded and completed Any regulatory responses to potential harms from using AI should be proportionate, risk based, outcomes based and technology neutral where possible. 

The Australian Government should complete, publish and act on ongoing reviews into the potential gaps in the legal framework posed by AI as soon as possible. 

Where relevant gap analyses have not begun, they should begin immediately. 

All reviews of the legal gaps posed by AI should consider: • the uses of AI • the additional risk of harm posed by AI (compared to the status quo) in a specific use case • whether existing regulatory frameworks cover these risks potentially with improved guidance and enforcement; and if not, how to modify existing regulatory frameworks to mitigate the additional risks. 

Recommendation 1.2 AI specific regulation should be a last resort 

AI specific regulations should only be considered as a last resort and only for use cases of AI where: • existing regulatory frameworks cannot be sufficiently adapted to handle AI related harms • technology neutral regulations are not feasible or cannot adequately mitigate the risk of harm. This includes whole of economy regulation such as the EU AI Act and the Australian Government’s previous proposal to mandate guardrails for AI in high risk settings.

Copyright and AI 

Recommendation 2.1 A review of Australian copyright settings and the impact of AI 

The Australian Government should monitor the development of AI and its interaction with copyright holders over the next three years. It should monitor the following areas: • licensing markets for open web materials • the effect of AI on creative incomes generated by copyright royalties • how overseas courts set limits to AI related copyright exceptions, especially fair use. If after three years the monitoring program shows that these issues have not resolved, the government could establish an Independent Review of Australian copyright settings and the impact of AI. The Review’s scope could include, but not be limited to, consideration of whether: • copyright settings continue to be a barrier to the use of open material in AI training, and if so whether changes to copyright law could reduce these barriers • copyright continues to be the appropriate vehicle to incentivise creation of new works and if not, what alternatives could be pursued.

Data access 

Recommendation 3.1 Rightsize the Consumer Data Right 

The Australian Government should commit to reforms that will enable the Consumer Data Right (CDR) to better support data access for high value uses while minimising compliance costs. 

In the short term, the government should continue to simplify the scheme by removing excessive restrictions and rules that are limiting its uptake and practical applications in the banking and energy sectors. To do this the government should: • within the next two years, enable consumers to share data with third parties and simplify the on boarding process for businesses • commit to more substantiative changes to the scheme (in parallel with related legislative reforms), including aligning the CDR’s privacy safeguards with the Privacy Act and enabling access to selected government held datasets through the scheme. 

In addition to the above, the CDR framework should be significantly amended so that it has the flexibility to support a broader range of use cases beyond banking and energy, by making the accreditation model, technical standards and designation process less onerous. 

Privacy regulation 

Recommendation 4.1 An outcomes based privacy duty embedded in the Privacy Act 

The Australian Government should amend the Privacy Act 1988 (Cth) to embed an outcomes based approach that enables regulated entities to fulfil their privacy obligations by meeting criteria that are targeted at outcomes, rather than controls based rules. 

This should be achieved by introducing an overarching privacy duty for regulated entities to deal with personal information in a manner that is fair and reasonable in the circumstances. 

The Privacy Act should be further amended to outline several non exhaustive factors for consideration to guide decision makers in determining what is fair and reasonable – including proportionality, necessity, and transparency. The existing Australian Privacy Principles should ultimately be phased out. 

Implementation of the duty should be supported through non legislative means including documentation such as regulatory guidance, sector specific codes, templates, and guidelines. 

The Office of the Australian Information Commissioner should be appropriately resourced to support the transition to an outcomes based privacy duty.

Digital financial reporting 

Recommendation 5.1 Make digital financial reporting the default 

The Australian Government should make the necessary amendments to the Corporations Act 2001 (Cth) and the Corporations Regulations 2001 (Cth) to make digital annual and half yearly financial reporting mandatory for disclosing entities. The requirement for financial reports to be submitted in hard copy or PDF form should be removed for these entities. The implementation of mandatory digital financial reporting should be phased, with the Treasury determining the appropriate timelines for this approach. 

Setting requirements for report preparation 

The existing International Financial Reporting Standards (Australia) (IFRS AU) taxonomy should be used for digital financial reporting. The Australian Securities and Investments Commission (ASIC) should continue to update the taxonomy annually. ASIC should be empowered to specify, from time to time, the format in which the reports must be prepared. At present, ASIC should specify inline eXtensible Business Reporting Language (iXBRL) as the required format. 

Establishing infrastructure and procedures for report submission 

ASIC, together with market operators such as the Australian Securities Exchange, should determine where and how digital financial reports are submitted. The arrangements should aim to minimise preparers’ reporting burden while keeping reports accessible to report users. 

Supporting the provision of high quality, accessible digital financial data 

ASIC should implement the measures necessary to ensure that digital financial reports contain high quality data. ASIC could (among other actions): • establish a data quality committee that would develop guidance and rules to improve data quality • integrate automated validation checks into the submission process • set guidelines around the use of taxonomy extensions and report format • maintain feedback loops with stakeholders. • To enable report users to harness the benefits of digital financial data, digital financial reports should be publicly and freely available, and easily downloadable.

Capture

'Political Power and Market Power' (NBER Working Paper No. 33255, 2024) by Bo Cowgill, Andrea Prat and Tommaso Valletti comments 

Brandeis (1914) hypothesized that firms with market power will also attempt to gain political power. To explore this hypothesis empirically, we combine data on mergers with data on lobbying expenditures and campaign contributions in the US from 1999 to 2017. We pursue two distinct empirical approaches: a panel event study and a differential exposure design. Both approaches indicate that mergers are followed by large and persistent increases in lobbying activity, both by individual firms and by industry trade associations. There is also weaker evidence for an association of mergers with campaign contributions (PACs). We also find that mergers impact the extensive margin of political activity, for example, by impacting companies’ choice to establish their first inhouse lobbying teams and/or first corporate PAC. We interpret these results within an oligopoly model augmented with endogenous regulation and lobbying. 

Lobbying and campaign finance are essential elements of modern democracy (Ansolabehere et al., 2003; Cage, 2020; Grossman and Helpman, 1994). On the positive side, they can help elected officials gather information needed to make policy choices and can help voters become informed about candidates. However, they also raise legitimacy and fairness concerns, as agents with greater wealth can exercise greater influence over the political process. In this paper, we study the link between political influence and industry concentration. This link is important for two reasons. First, businesses represent the largest source of lobbying spend. According to data from OpenSecrets, businesses accounted for 87 percent of total lobbying spending in the US in 2019 and 36 percent of contributions from Political Action Committees (PACs) in the 2017/18 political cycle (where labor and ideological contributions also contributed a big share). 

Second, in recent years there has been rising concern that industrial concentration not only affects consumers directly through market power (potentially raising prices and reducing quantities), but also indirectly through politics (Wu, 2018; Zingales, 2017). Apprehension over the political influence of concentrated industries has appeared throughout the history of antitrust (e.g., Brandeis, 1914; Khan, 2017; Pitofsky, 1978). Incumbent firms could lobby politicians to erect barriers to entry and protect their market power. This is another form of consumer harm, but one that flows through the channel of regulation. If lobbying exhibits economies of scale, a rise in market concentration should lead to an increase in lobbying activity. If this hypothesis is correct, market power begets political power. 

To guide the empirical analysis (the core of this paper), we begin with a simple theoretical model capturing the relationship between market concentration and political influence. The model examines an oligopoly in which firms’ profits may be affected by regulation. Firms engage in lobbying activity to influence their regulation using the menu auction model by Grossman and Helpman (1994). 

We use our model to study how the political and product market equilibria change when two firms merge. A merger is a discrete event that leads to a change in concentration. We provide broad conditions for a merger to increase political influence activity. The intuition is that market competition within an industry partly dissipates the rents that accrue to firms from regulatory protection. By softening competitive pressure, a merger tends to increase the incentive of firms to lobby for regulation. Our model generates predictions for the merging entities and for the industry as a whole. It also distinguishes between the impact of mergers both at the extensive margin (firms’ choice to lobby at all) and the intensive margin (how much to lobby). 

The core of the paper studies data spanning almost two decades, 1999-2017, and asks whether mergers are associated with an increase or a decrease in political influence activities. We examine SEC-registered companies, matching each company with data about both its federal lobbying and its campaign contributions in the US (both before and after mergers). Lobbying money is mostly spent to influence specific administrations and committees, whereas PACs are geared towards getting a party or a politician elected. 

To investigate how political influence spending varies with a merger, we pursue two empirical approaches. In the first, we use a panel event study design (Athey and Imbens, 2022; De Chaisemartin and d’Haultfoeuille, 2020; Freyaldenhoven et al., 2021; Gentzkow et al., 2011; Goodman-Bacon, 2021). Qualitatively, identification in this approach relies on the idea that mergers are endogenous, but depend on fixed (or slow-moving) variables whose trends we control for. The identification assumption is that, after conditioning on all these other factors, mergers come from idiosyncratic shocks that are unrelated to the returns of political spending. Our second research design is a differential exposure design (Borusyak and Hull, 2023; Breuer, 2022; Goldsmith-Pinkham et al., 2020) that uses a logic similar to the Bartik (1991) instrumental variable design. Like other Bartik-like designs, ours employs a combination of time-varying shocks and initial characteristics of companies that are exposed differentially to those shocks. For time-varying shocks, we use economy-wide pro-merger shocks, following the well-documented pattern of mergers arriving in waves (Gort, 1969; Nelson, 1959; Weston et al., 1990). These waves span multiple sectors and have several proposed causes ranging from macroeconomic shocks to technology shocks. 

In both designs, our results suggest that mergers are positively associated with an increase in firms’ spending on political influence activities. The average merger is associated with a $70K to $180K increase in the amount spent on lobbying per period (half year) after the merger, or approximately 15% to 35% of the average per-period spend of merging firms. The average merger is also associated with an approximately $4K to $10K increase in campaign contributions per period, but this association is not statistically significant in all specifications. In particular, we link mergers to the extensive margin of influence – i.e., a firm’s choice to establish political operations at all. At the beginning of our sample, only 8% of firms lobbied, and only 5% of firms had a corporate PAC (a vehicle for corporate campaign contributions). 

During our sample period, the average merger is associated with a 1.5 to 2.1 percentage point increase in setting up an in-house lobbying operation for the first time in the company’s history (at least since government lobbying records were kept). Merging is similarly associated with a 1.6 to 1.9 percentage point increase in initiating a corporate PAC. Once initiated, political operations are highly persistent. Following the establishment of an in-house lobbying operation, an average business lobbies in 87% of the remaining periods in our sample. Once a business sets up a PAC, the average PAC is active in 76% of remaining periods. Kerr et al. (2014) find similar results about persistence. 

Across multiple specifications and outcomes, the association of mergers with influence activities is significantly stronger if the merging companies are larger, and if the merging companies belong to the same industry. Our results are consistent with the idea that lobbying scales with firm size. We find a similar positive association between mergers and political activity by the industry as a whole, and with the political spend of industry trade associations. Finally, we pursue several robustness checks, highlighting two here. First, we consider a possible mis-specification problem. Merging firms may ramp up their influence activities before the merger, perhaps to increase the chance of the transaction being approved by regulatory authorities. However, we find little evidence in the data for such an anticipation effect. 

This null result may be a reflection of the fact that most mergers during our sample period were not scrutinized by US antitrust authorities (Wu, 2018). 

Second, we measure whether firm-level political risk changes with mergers. Following a merger, firms may face more scrutiny from regulators if the merged entity becomes a politicized target of attack. The merged firm may increase lobbying, not because of rent dissipation and externalities (as in our theoretical framework), but because of a new adversarial environment. Hassan et al. (2019) develop methods for quantifying firm-level political risk based on the contents of quarterly earnings conference calls. Using this data, we find no evidence of higher political risk after a merger.

Coercion

The Parliamentary Joint Committee on Corporations and Financial Services report Financial abuse: an insidious form of domestic violence is claimed to mark "a crucial turning point in addressing financial abuse", characterised as "a tragically underacknowledged form of intimate partner and family violence that has often gone unseen or ignored": 

It has devastating effects on those it impacts. Financial abuse undermines the economic independence of the victim, often trapping them in cycles of financial hardship and dependency that can span decades, extending well beyond separation or divorce. This form of abuse is far more frequently perpetrated by men against women. It affects individuals at every stage of life. Women, especially those in vulnerable communities, are disproportionately affected by financial abuse, with women from culturally and linguistically diverse backgrounds, Indigenous communities, and women with disabilities facing even greater risks than the general population. This report exposes the shocking extent of financial abuse in Australia. 

The financial toll on victims of financial abuse is estimated at $5.7 billion (around $3 billion more than the amount lost to scams in Australia in 2023. The abuse is often absent from mainstream discussions of domestic violence,.

The report calls for comprehensive reforms across multiple sectors to address financial abuse, with 61 recommendations aimed at both preventing and mitigating the impact of financial abuse. The report contains five chapters. Chapter 1 includes information on the conduct of the inquiry, acknowledgements and background on the prevalence of financial abuse in Australia, how financial abuse sits with domestic and family violence and previous inquiries and reports.  Chapter 2 examines current legislation, common law and regulatory arrangements that govern the ability of financial institutions to prevent and respond to financial abuse. It also considers t the role of advocacy bodies in responding to financial abuse. Chapter 3 examines how financial providers identify, respond to and prevent financial abuse. Chapter 4 examines proposed areas for reform to better support victim-survivors of financial abuse.  Chapter 5  examines the role of government, and how government services can be manipulated by perpetrators to financially abuse victim-survivors. 

The Committee's recommendations are 

Recommendation 1  That the Australian Government establish a mechanism for co-design with victim-survivors of financial abuse (including through representative groups) in relation to the implementation of legislative, regulatory and sector-driven reforms aimed at mitigating the prevalence and impact of financial abuse, including the recommendations of this report. 

Recommendation 2   That the Australian Government amend the National Consumer Credit Protection Act 2009 and ASIC’s Regulatory Guide 209 to specifically require:  that the lender must take reasonable steps to be satisfied that a borrower and any guarantor is not experiencing financial abuse; and  that the lender must take reasonable steps to verify the lending requirements and objectives of each borrower and any guarantor. 

Recommendation 3  That the Australian Government establish a review of Responsible Lending Obligations and the National Credit Code, informed by the lived experience of victim-survivors, to consider options for:  protecting victim-survivors of family and domestic violence to obtain credit; and  the inclusion of specific conditions to support victim-survivors of family and domestic violence to stay in their own homes. 

Recommendation 4 That the Australian Government amend the National Credit Code to require financial institutions to inform all borrowers of changes to joint credit contracts in circumstances of reasonably suspected family and domestic violence, including financial abuse. 

Recommendation 5 That the Australian Government consider how to best allow financial institutions to document and/or flag actual or suspected financial abuse against their customers when detected or reasonably suspected, including without explicit consent from customers. This may include amendments to the Privacy Act 1988. 

Recommendation 6  That the Australian Government amend the Credit Reporting Code to specify that financial abuse is considered ‘circumstances beyond the individual’s control’; and that ARCA develop a best-practice financial abuse guideline for credit reporting bodies and credit providers. 

Recommendation 7 That the Australian Government undertake appropriate action, including legislation, to clarify that circumstances of family violence, elder abuse and homelessness constitute a serious threat to the life, health and safety of an individual. This may include amendments to the Privacy Act 1988. 

Recommendation 8 That the Australian Government amend the Insurance Contracts Act 1984 to allow insurers to deem a joint insurance policy to be a composite policy in situations involving separation or divorce of co-insurers, and in situations where a victim-survivor’s claim would ordinarily be denied due to the conduct of their perpetrator of financial abuse or coercive control. 

Recommendation 9 Recognising the legitimate choice of Australians to have self-managed superannuation funds, the committee recommends that the Australian Government undertake a review of the intersection between financial abuse and the superannuation system, particularly in relation to self-managed superannuation funds; and ensure that the review is informed by the lived experience of victim-survivors. 

Recommendation 10 That the Superannuation Industry (Supervision) Act 1993 be amended to provide a mechanism so that a beneficiary who has perpetrated domestic or family abuse, including financial abuse, and domestic violence related suicide, against the superannuation account holder can be declared an invalid beneficiary of the account holder’s superannuation death benefits. 

Recommendation 11 That the Australian Government undertake a review of all financial products and services and government services to ensure that a perpetrator cannot financially benefit from the death of victim-survivors, including in circumstances of domestic violence related suicide. 

Recommendation 12 That the Australian Government continue to monitor the effectiveness of the Family Law Act 1975 in recognising financial abuse. 

Recommendation 13 That state and territory law societies undertake a review of the ethical obligations of legal practitioners in relation to receipt of instructions which may have a financial abuse motive and available penalties for members who actively enable or facilitate financial abuse on behalf of their clients where there is no other reasonable basis underlying the instruction given by the client. 

Recommendation 14 That the Australian Government implement measures to achieve greater consistency in state and territory EPOA laws applying best practice to prevent financial abuse; and to promote education and awareness programs aimed at reducing elder abuse occurring through misuse of EPOAs. 

Recommendation 15 That the Australian Government implement a mandatory requirement for providers of financial services and products, as well as government agencies to include a ’quick exit’ button on webpages (in accordance with current best practice) to assist victim-survivors of family and domestic violence and financial abuse. 

Recommendation 16 That financial institutions introduce minimum operating standards, with a view to achieving best practice standards through continuous improvement over time, for including increased friction points in relation to online application processes and electronic transactions to better protect against financial abuse on online platforms. 

Recommendation 17 That the Australian Banking Association, the Australian Federal Police, victim-survivor advocate organisations and relevant government departments and other stakeholders co-design standard operating guidelines for the referral of reasonably suspected or reported financial abuse to the financial institutions used by suspected perpetrators and victim-survivors. Triggers for referral should include credible reports made to anonymous law enforcement hotlines, informal and formal reports made to law enforcement, and court proceedings such as the attainment of AVO’s. The Australian xiii Government should consider any legislative amendments required to give effect to such standard operating guidelines. 

Recommendation 18 That financial institutions be required to maintain anonymous reporting mechanisms through which victim-survivors of domestic and family violence, or other individuals, can report actual or suspected financial abuse of the institutions’ customers. 

Recommendation 19 That financial institutions ensure that a referral or report of suspected family and domestic violence involving one of their customers triggers immediate engagement with that customer, preferably through in-person attendance at a physical branch or office, to determine the suitability of their current and future financial products. 

Recommendation 20 That financial institutions immediately review the accessibility of their in- person banking services and, where necessary, take steps to ensure that customers have reasonable access to in-person banking services or banking support services. 

Recommendation 21 That the Australian Government, in conjunction with the Australian Financial Complaints Authority, consider potential remedies for customers suffering financial abuse who have suffered loss after a financial institution has failed to provide reasonably appropriate access to in-person banking services or other support services in circumstances where the financial institution was aware (or should have been aware) that the customer was at high risk of financial abuse. 

Recommendation 22 That financial institutions, government and relevant stakeholders all increase financial literacy education and in-person support to assist older Australians to use electronic banking services and reduce the risk of financial elder abuse. 

Recommendation 23 That the Australian Banking Association develop and implement minimum operating standards, with a view to moving to best practice standards through continuous improvement over time, applying to all authorised deposit-taking institutions in relation to identifying and responding to abusive descriptions in electronic money transfers. xiv 

Recommendation 24 That the Australian Government consider introducing appropriate penalties for the use abusive descriptions in electronic money transfers to harass, intimidate or harm the holder of the account. 

Recommendation 25 That, prior to approving joint banking or credit products, financial institutions implement reasonable and practical continuous disclosure requirements relating to family and domestic violence to assist with the identification of financial abuse. 

Recommendation 26 That the Australian Government legislate to require financial institutions to ensure the following requirements for establishing a joint account:  that each joint account holder has their own access to the account;  that each joint account holder is aware of and has consented to what information will be visible and/or shared with the other account holder; and  that each joint account holder understands the mechanisms available to ensure the safety of the account, such as ’two to sign’, before withdrawals can be made. 

Recommendation 27 That financial institutions implement the recommendations of ASIC’s report titled Hardship, hard to get help: Findings and actions to support customers in financial hardship relating to identifying and providing additional support to vulnerable consumers experiencing financial hardship. 

Recommendation 28 That ASIC conduct a review within 24 months on the implementation and operation of the recommendations of its report titled Hardship, hard to get help: Findings and actions to support customers in financial hardship relating to identifying and providing additional support to vulnerable consumers experiencing financial hardship. 

Recommendation 29 That the Australian Government implement a legislative requirement for financial institutions to report periodically on the number of customers identified as experiencing financial abuse, similar to the current requirements for financial hardship. 

Recommendation 30 That the Australian Government undertake a review of the amendments to the National Consumer Credit Protection Act 2009 in the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024, to commence within 24 months of the amendments coming into effect, to consider their effectiveness in supporting victim-survivors of financial abuse, and specifically the inclusion of Buy Now Pay Later products under Responsible Lending Obligations. 

Recommendation 31 That the Banking Code of Practice, Customer Owned Banking Code of Practice and the Buy Now Pay Later Code of Practice be amended to:  include specific reference to financial abuse under ’vulnerable customers’; and  require banks to develop systems to proactively identify (to the extent reasonably practical) and offer support to customers who may be experiencing financial abuse. 

Recommendation 32 That the general insurance industry implement minimum operating and customer-service standards, with a view to moving to best practice standards through continuous improvement over time, relating to identifying and responding to financial hardship being experienced by victim-survivors of financial abuse. 

Recommendation 33 That the Australian Government amend the Insurance Contracts Act 1984 to require a ’conduct of others’ clause in all retail insurance policies. 

Recommendation 34 That Part 9 of the General Insurance Code of Practice and the Life Insurance Code of Practice be amended to define family violence and financial abuse and to better promote the financial safety of victim-survivors of family and domestic violence. 

Recommendation 35 That the Australian Government undertake a review of the COVID-19 early release of super scheme, with a focus on the number of members who may have withdrawn superannuation savings under coercion and the retirement and other impacts on victim-survivors who accessed their superannuation as a result of financial abuse; and consider an appropriate scheme for the xvi repayment of superannuation by individuals whose withdrawals were the direct result of financial abuse, to enable them to restore their superannuation balances. 

Recommendation 36 That the Australian Government consider the implementation of minimum operating standards, with a view to moving to best practice standards through continuous improvement over time, to mitigate the risk of elder abuse in relation to superannuation. 

Recommendation 37 That accounting bodies, financial advice and planning peak bodies, and victim-survivor advocate organisations co-design education resources for service providers to enable increased identification of financial abuse and timely reporting of suspected abuse to financial institutions and law enforcement bodies. 

Recommendation 38 That accounting, financial planning and financial advice industry bodies develop and review ethical obligations of their profession in relation to receipt of instructions which may have a financial abuse motive and institute accompanying penalties for members who actively enable or facilitate financial abuse on behalf of their clients where there is no other reasonable basis underlying the instructions given by the client. 

Recommendation 39 That the finance sector develops a financial Safety by Design framework and assessment tools. The committee further recommends that the framework is developed in consultation with the financial services industry, victim- survivors, family and domestic violence academics, community service providers and regulatory design experts. 

Recommendation 40 That financial institutions that provide mortgages implement the standard practice of offering multiple offset accounts for joint mortgages. 

Recommendation 41 That the Australian Government expand the Design and Distribution Obligations to include consideration of customers impacted by family and domestic violence, including financial abuse, and the potential for perpetrators to cause harm by misusing products and services. 

Recommendation 42 That financial service and product providers ensure that financial abuse is explicitly referenced in the terms and conditions for all financial products. 

Recommendation 43 That financial institutions implement minimum operating standards, with a view to moving to best practice standards through continuous improvement over time, for the introduction of positive friction points to minimise the risk that a customer is applying for a product under coercion or duress or without providing free and informed consent. 

Recommendation 44 That financial institutions ensure that, in addition to general training about family and domestic violence, all employees have training in financial abuse that is appropriate to their level and role. 

Recommendation 45 That financial institutions, government and relevant stakeholders all provide appropriate support to culturally and linguistically diverse consumers through:  culturally appropriate financial literacy programs and plain language product descriptions or ways of talking about financial abuse to promote financial awareness and help-seeking; and  where a language barrier is identified, the provision of interpreters and employees trained in providing interpreting services in the family violence context. 

Recommendation 46 That the Australian Government support Aboriginal Community Controlled Organisations to develop training and education programs for financial providers to increase understanding of financial and economic abuse of Aboriginal and Torres Strait Islander Australians. 

Recommendation 47 That the Department of Defence and financial institutions co-design best practice guidelines to assist financial services to address the specific needs of defence force families who may be experiencing financial abuse. 

Recommendation 48 That the Australian Government consider the establishment of a reporting process relating to the relative effectiveness of financial products and xviii government services in preventing and addressing financial abuse. This may include a benchmarking process or reporting framework administered by a government agency or through funding provided to an independent non- government organisation or body such as the Australian Banking Association. 

Recommendation 49 That the Australian Government make the necessary legislative and regulatory changes to enable the Australian Taxation Office to assume responsibility for government child support collections, replacing the Agency Collect program currently managed by Services Australia. 

Recommendation 50 That the Australian Government mandate annual payer and payee declarations to the Australian Tax Office for individuals in private child support payment arrangements; and require appropriate acquittal documentation, including but not limited to bank statements, to substantiate all declarations. 

Recommendation 51  That, where an annual payer declaration shows that child support payments are not reasonably aligned with payee child support entitlements, or where an annual payer declaration is not made, Private Collect child support payment arrangements automatically convert to Agency (Australian Tax Office) Collect child support arrangements. 

Recommendation 52 That, at the end of each financial year, the Australian Government provide child support payees with refundable tax credits equal to any shortfall in child support payments for the preceding year; and raise a corresponding tax debt against the relevant child support payer, collectable by the Australian Tax Office as a debt owed to the Commonwealth. 

Recommendation 53 That the Australian Government undertake a review of the formulas used to determine child support payments; and ensure that the review is informed by the lived experience of victim-survivors. 

Recommendation 54 That the Australian Government develop a tax relief model for victim- survivors of financial abuse similar to the United States IRS ‘innocent spouse relief’ provisions. 

Recommendation 55 That the Australian Government amend the Corporations Act 2001 to ensure that the company director provisions appropriately recognise family and domestic violence, including financial abuse, as a reason why a director may be regarded as not in fact managing a company. 

Recommendation 56   That the Australian Government extend the time period allowed to respond to a Director Penalty Notice in cases of reasonable claims of financial abuse. 

Recommendation 57   That the Australian Government undertake a review of current legislative and regulatory settings relating to trusts, with a view to addressing the abuse and misuse of trusts as a mechanism for financial abuse and coercive control. 

Recommendation 58  That the Australian Government amend the Social Security Act 1991 to:  remove the requirement that a person has to have left their home to qualify for crisis support payment;  lengthen the time in which a person has to apply for a crisis payment; and  ensure that a victim-survivor is not precluded from accessing a ‘special circumstances’ waiver if a perpetrator lies to Centrelink without the debtor’s knowledge or consent, or the debtor makes a false statement or misrepresentation as a result of coercion or duress by a perpetrator. 

Recommendation 59   That the Australian Government establish a standing inter-departmental taskforce to oversee the implementation of safety-by-design principles into all government services. 

Recommendation 60   That all relevant government agencies provide training to frontline staff on the identification of domestic and family violence, including financial abuse, and require mandatory reporting of suspected financial abuse 

Recommendation 61   That all relevant government entities providing frontline services establish dedicated teams with

Professional Ethics and Corporations Law

The Parliamentary Joint Committee on Corporations and Financial Services report Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry features the following recommendations 

 1  The committee recommends that the Australian Government not permit PwC or any of its related entities to tender for government work until the completion of all ongoing investigations including but not limited to those by the Tax Practitioners Board, Australian Federal Police and Australian Taxation Office. Prior to PwC being eligible to tender for government work, PwC must demonstrate it has taken all appropriate remedial action in response to the outcomes of the investigations. 

2  The committee recommends that the Australian Government implement the recommendation of the Senate Finance and Public Administration Committee that the government commission an appropriate body to review and make recommendations on the long-term goal of regulation of large partnerships, including in relation to: the appropriate regulator and its powers, applicable governance principles, transparent reporting obligations, penalties for breach, and a roadmap for implementation given the complexities of overlapping jurisdictions. 

3  The committee recommends that the Australian Government reduce the allowable size of partnerships for accountants to a maximum of 400 partners, to align with the limits of legal partnerships. The government should establish a suitable transition period of up to 5 years for this change to enable the implementation of this recommendation whilst minimising disruption to the sector. A review of progress to this end should be conducted after 2 years, if at that time the entity has not chosen to incorporate. 

4  The committee recommends that the Australian Government consider increased accountability and response mechanisms, including a suitable penalty regime calibrated to the seriousness of the misconduct, for partnerships who have engaged in misconduct. 

5  The committee recommends that the audit, accounting, and consulting partnerships of firms with greater than 3000 staff be required to implement the Corporations Act 2001 requirements for governance and accountability, if appropriate through the adoption of the Australian Securities Exchange Corporate Governance principles. This should include the requirement for multidisciplinary partnerships to prepare their own general purpose financial reports, including remuneration disclosures and other obligations which may be applicable to partnerships. The government should review the operation of this measure within 3 years, with a view to extending its scope to mid-size partnerships. 

6  The committee recommends that the Australian Government enhance the transparency of large professional service firms by designating them as Public Interest Entities and requiring them to: subject them to audit if they are not already subject to these requirements, which would be filed with ASIC and be available for public inspection; and potentially be required to implement the Global Reporting Initiative Standards or the Public Interest Firm Code. 

7  The committee recommends that the Australian Government ensure that the financial statements disclosure requirements cover all relevant fees (that may raise a conflict of interests) paid to the entity’s auditor for audit and non-audit services. This should cover any single entity and their associated entities in Australia or overseas. 

8  The committee recommends that multi-disciplinary large accounting firms (and their associated entities both in Australia and internationally) should not be permitted to supply both audit and non-audit/consultancy services to the same client (and their associated entities both in Australia and internationally). 

9  The committee recommends that multi-disciplinary large accounting firms (including those required to lodge annual transparency reports under section 332A of the Corporations Act 2001) should be required to implement operational separation of their audit practice from their non-audit practice. The principles of operational separation should be materially consistent with those applying in the United Kingdom or other global best practice. 

10  The committee recommends that the Australian Government legislate to give further powers to the Australian Securities and Investments Commission to oversee audit to cover all partners within multidisciplinary firms regardless of which part of the firm they work in, as required in the UK Financial Reporting Council Audit Firm Governance Code. 

11  The committee recommends that the Australian Securities and Investments Commission: re-establish a program of random audit inspections; supplement its existing risk-based approach by also reviewing audit files where conflicts of interest arise from the Big Four firms providing other services to their audit clients (noting that such conflicts should not occur from the time of implementation of operational separation); and increase the level of resources that it devotes to financial report inspections and audit inspections until there is a significant improvement in audit quality. 

12  The committee recommends that the Australian Government implement a legislative requirement that the Australian Securities and Investments Commission publish all individual audit firm inspection reports. 

13  The committee recommends that the Australian Government implement the Financial Reporting Council recommendations to the Minister to pursue legislative change on disclosure of auditor tenure and audit fees in directors’ reports and going concern assessments in directors’ declarations. 

14  The committee recommends that the Corporations Act 2001 be amended to expand the auditor’s independence declaration to require the auditor to specifically confirm that no prohibited non-audit services have been provided. 

15  The committee recommends that the Corporations Act 2001 be amended to implement a mandatory tendering regime such that Public Interest Entities (including listed companies and the large multidisciplinary partnerships, such as the Big Four) required to have their financial reports audited under the Act must undertake a public tender process every ten years. 

16  The committee recommends that the Corporations Act 2001 be amended (following consultation with relevant stakeholders) such that entities required to have their financial reports audited must establish and maintain an internal controls framework for financial reporting, including requirements that: management evaluate and annually report on the effectiveness of the entity’s internal control framework; and the external auditor report on management’s assessment of the entity's internal control framework. 

17  The committee recommends that the Australian Government: consider mandating digital financial reporting for listed companies and other public interest entities in Australia; and following such implementation and evaluation: consider options for resolving barriers to implementing digital financial reporting for privately owned companies, not-for-profits and charities in Australia. 

18 The committee recommends that the Australian Government legislate to enhance the Australian Security and Investments Commission’s power to take enforcement action against audit firms, not just individuals, including for quality management standards. 

19  The committee recommends that the Australian Government consider requiring audit firms, or the audit section of multidisciplinary firms, to incorporate. 

20  The committee recommends that: the Australian Government adopt a phased approach and proceed with its proposal to integrate the accounting and audit standards boards with the Financial Reporting Council; and the Australian Government then establish an organisation in Australia equivalent to the United States Public Company Accounting Oversight Board. 

21  The committee recommends that the Australian Government reform the Companies Auditors Disciplinary Board (CADB) to improve its efficiency and effectiveness by: implementing improved, more stable and transparent arrangements for staffing and resourcing auditor disciplinary functions; providing more clarity around what cases trigger referral to CADB; removing the Australian Security and Investments Commission’s (ASIC’s) discretion over whether auditors can avoid a disciplinary process by resigning; compelling the findings of ASIC audit surveillance reports to be automatically referred to CADB; and giving CADB the power to make own-motion investigations, in addition to receiving referrals from ASIC or the Australian Prudential Regulation Authority. 

22  The committee recommends that the Australian Government consider additional mechanisms to ensure the Financial Reporting Council and any related standards boards, the Companies Auditors Disciplinary Board, the Australian Securities and Investments Commission, the Tax Practitioners Board, and the Australian Taxation Office and other government regulatory bodies are independent and are seen to be independent, including by ensuring that the bodies do not include individuals with a current financial interest in entities under the direct governance of the body. This may include revision of internal governance structures, independent review or audit of decision making and internal governance structures by an external third party, such as a government department or parliamentary committee or appropriate expert to ensure that the revolving door between the public and private sectors does not lead to perceived or actual conflicts of interest. 

23  The committee recommends that the Australian Government ensure that the new Financial Reporting Council has structural, governance and administrative arrangements which are independent from Treasury, including by ensuring that the new Financial Reporting Council do not include individuals with a current financial interest in entities under the direct governance of the body. 

24  The committee recommends that the Australian Government enhance and harmonise codes of conduct and requirements for disclosure of conflicts of interest for all bodies established under the Australian Securities and Investments Commission Act 2001, including the new Financial Reporting Council. 

25  The committee recommends that the professional accounting bodies’ reports to the Professional Standards Councils are published on the professional accounting bodies’ websites. 

26  The committee recommends that the Australian Government review the professional accounting bodies’ investigatory and disciplinary processes and, if appropriate, establish a single, independent body to perform these functions. Such a body should incorporate a positive disclosure standard so that relevant entities would be required to disclose incidents that are flagged to the Australian Securities and Investments Commission and the new integrated Financial Reporting Council. 

27  The committee recommends that the Australian Government bring forward legislation to make the term ‘accountant’ a protected term, so that only qualified accountants who are members of a professional body can use it. 

28  The committee recommends that the Australian Government, as part of establishing the new integrated Financial Reporting Council (FRC), consider how ethical standards and professional matters are to be treated (including the FRC’s role in creating standards, and the role of the Accounting Professional and Ethics Standards Board). Appropriate measures should be adopted to address the conflict of interest inherent in professional bodies setting and enforcing their own standards whilst overseeing entities who are their own fee-paying members. 

29  The committee recommends that the Australian Government consult with industry with a view to creating a consultancy code and associated consultancy code compliance body (with sufficient powers to ensure compliance with the code) within government that will register individual consultants and have graduated registration requirements for firms based on firm size. Government entities, including Corporate Commonwealth Entities, should be required to only engage consultancies who are members of this body. At a minimum the body should apply to persons providing consultancy services not subject to other mandatory obligations and membership requirements should include mandatory reporting of misconduct witnessed by other consultants. This should be reviewed three years after implementation. 

30  The committee recommends that the Australian Government consider the creation of a voluntary industry code for public interest entities’ engagement of consultancies, which includes the exclusive use of consultants subject to the code and/or registration body determined in recommendation 29. After three years, the government should review the capacity and effectiveness of the code becoming mandatory for public interest entities. 

31  The committee recommends that consulting firms undertaking government work be required to make a declaration if subject to supervised remediation whilst undertaking government work, and the exact terms of such supervised remediation. Upon tendering for government work, consulting firms should also be required to provide specific information regarding the engagement of the firm with global leadership, including but not limited to the provision of information regarding what oversight, if any, exists with respect to that firm’s engagement with Australian regulatory and legal bodies. 

32  The committee recommends that the Australian Government explore options to enhance accountability for consultants, potentially including the establishment of a public register (maintained by the relevant registration body) to record for public view all instances of malpractice. 

33  The committee recommends that the Australian Government and professional bodies develop mechanisms to enhance the transfer of misconduct information between regulators and all relevant professional bodies. 

34  The committee recommends that the Department of Finance consider further mechanisms to increase usage of small and medium-sized consulting firms in government procurement, including firms which exclusively undertake government work. 

35  The Committee recommends that the Australia Government consider options to improve the Australian Taxation Office’s tax settlement procedures with a view to making their details more transparent to all taxpayers and setting out appropriate procedures and protocols for their use, negotiation and terms. 

36  The committee recommends that the Australian Government take action to ensure greater alignment of whistleblower protection laws across the public and private sectors. 

37  The committee recommends that whistleblowing protections be applied to large audit, accounting and consulting firms. 

38  The committee recommends that the Australian Government consider options for greater practical support of whistleblowers such as a Whistleblower Protection Authority (covering both the public and private sectors), including access to civil remedies and financial compensation particularly in instances where disclosures result in the imposition of a penalty on the relevant entity or organisation. 

39  The committee recommends that the Australian Government continue to monitor and review legal frameworks and regulations that have been implemented to protect workers from harmful internal cultures and unsafe working environments in the form of bullying, sexual harassment and exploitation. 

40  The committee recommends that the Australian Government consider mechanisms to increase competition within the audit sector. This may include mandating tendering, mandating firm rotation for auditors, and mandating public interest entities be subject to joint audits which include smaller firms.

Compliance

'Compliance Gatekeepers' by Roy Shapira and Asaf Eckstein in Yale Journal on Regulation comments 

What determines the effectiveness of corporate compliance programs, and who is accountable when they fail? Scholars and policymakers tend to answer these questions by focusing on internal compliance actors: directors, CEOs, general counsels, chief financial officers, and chief compliance officers. Yet in reality, all these corporate insiders rarely perform compliance tasks on their own. They rather heavily rely on outside compliance advisors. In this Article we spotlight the understudied role of outside compliance advisors and make the following three contributions. 

First, we document the various functions that outside compliance gatekeepers play these days: from designing reporting systems, to conducting internal investigations and monitorships, to performing “racial equity audits” and verifying ESG disclosures. Along all these dimensions, there exists a gap between the high level of expectations for compliance gatekeepers to improve corporate behavior and their low levels of accountability for compliance failures. 

Second, we examine the causes of compliance gatekeepers’ lack of accountability. Compliance gatekeepers rarely face litigation, even after colossal compliance failures, because an amalgamation of doctrines set a very high pleading hurdle across all potential claims against them. Private ordering is ineffective too. The buyers in the market for compliance gatekeeping – namely, corporate insiders – do not necessarily want outside compliance gatekeepers to hinder their company from making profits by skirting regulations in real time. Nor do corporate insiders want outside gatekeepers to probe their internal affairs diligently after the fact and place the blame for corporate wrongdoing at their feet. By paying outside compliance gatekeepers with shareholders’ money, corporate insiders buy plausible deniability for themselves. From the sellers’ (gatekeepers’) perspective, it is convenient to ramp up expectations while not being too stringent with their clients, because this keeps a newfound revenue stream alive and growing. The gap between high expectations and somber reality may therefore be a feature rather than a bug. 

Finally, we propose concrete policy measures that could improve corporate compliance. For example, public enforcers need to rethink the practice of providing lenient treatment to corporate wrongdoers who rely on outside experts. Credit to wrongdoers should be conditioned on outside experts facing a meaningful threat of liability or at minimum transparency. Courts need to rethink the applications of doctrines such as “in pari delicto,” which blocks claims of professional negligence and breach of contract against gatekeepers. And corporate law courts should interpret shareholders’ right to inspect their company’s books more liberally, so that it includes access to documents pertaining to gatekeepers’ work, thereby enabling shareholders to investigate potential gatekeeper misconduct.

Ouch

In Stergiou v Citibank Savings Ltd [2005] ACTCA 15  Crispin P states

 [8]. .... On 12 May 1995 Higgins J gave judgment for the appellants. His Honour observed, in passing, that the pleadings, even then, had followed a "tortuous and confusing course" and noted that Citibank Savings Ltd had been unable to provide an adequate explanation for certain debits from the appellants’ accounts. Consequently, despite the appellants’ failure to make the agreed payments, it had not been demonstrated that, as at 22 January 1992, there had been a default under the mortgage for the period of one month required to justify the issue of a notice under s 93 of the Land Titles Act. 

[9]. Citibank Savings Ltd appealed from this decision and on 13 June 1996 its appeal was upheld by a Full Court of the Federal Court, apparently on the basis that the claim had required proof that the appellants had been in default as at 23 March 1992, when the ejectment proceedings commenced, rather than 22 January 1992. 

[10]. However, this victory was again short lived. The matter was remitted to Higgins J for rehearing. On 28 August 1997 his Honour again found for the appellants on the basis that Citibank Savings Ltd had been equally unable to demonstrate that they had been in default for the requisite period by the later date. 

[11]. The appellants were left to enjoy their apparently crushing victory without having to fend off any further attempts to obtain possession of their house until 2003. However, they obviously did not subscribe to the view that ‘sleeping dogs should be let lie’ and Mr Stergiou continued to pursue his claim and that of his fellow plaintiffs with remarkable diligence. He almost invariably appeared in person and his face quickly became familiar to counsel who frequented the Friday motions list. He sometimes made apparently wild allegations against bank officers, lawyers and other people. He seemed convinced of the truth of such allegations, despite the absence of any evidence to support them, though it was not always easy to determine whether they were intended to be taken literally or were mere hyperbole. On at least one occasion he responded to my entreaty to seek legal advice by telling me that he had seen many lawyers but that none had agreed with him. 

[12]. The appellant’s claim alleged, in essence, that Citibank Savings Ltd had been involved in a conspiracy with various members of the legal profession against the appellants and the other plaintiffs and that they were entitled to damages for "mental anguish" in respect of certain errors that Citibank Savings Ltd had made and for ejectment from the house. There were also actions against various firms of solicitors and these claims involved proceedings in this Court, the Federal Court and the High Court of Australia. The appellants consistently failed but no fresh proceedings were brought against them and it appeared that Citibank Savings Ltd had simply decided to keep its corporate head down until this spate of proceedings had been completed. ... 

[16]. This notice also failed to elicit any response and on 19 February 2003 the current proceedings were commenced on behalf of Citibank Savings Ltd against the appellants. This time the bank trimmed its case, avowedly to give the appellants the benefit of any doubt and, perhaps, to avoid becoming embroiled in arguments over any disputed items. Reliance upon any default prior to 1 July 1992 was abandoned and the claim was founded upon a notice that had claimed only the sum of $160,000 secured by the mortgage rather than the full amount borrowed. 

[17]. The proceedings were duly heard by Connolly J who gave judgment on 21 May 2004, finding for Citibank Savings Ltd and making orders for the possession of the house and payment of costs. The appellants promptly appealed. 

[18]. Since any claim for the disputed amounts had been abandoned and no payments of principal or interest had been made for twelve and a half years, one might have thought that the appeal would have had little chance of success. Furthermore, the years had apparently taken their toll, not only on Mr Stergiou’s businesses but also on his health. He was unable to prepare the appeal books normally required and when the matter was called on for hearing before the Full Court of the Court of Appeal on 16 February 2005, it became obvious that his hearing had deteriorated. He appeared a small, tired, sick David forced to fight a corporate Goliath without any sling or stones. 

[19]. Yet, unexpectedly, he launched one legal missile. He handed up an historical company extract provided by the Australian Securities and Investments Commission that revealed that Citibank Savings Ltd had been deregistered on 13 June 1996. 

[20]. That was, of course, the day upon which the Full Federal Court delivered judgment on the original claim in its favour and remitted its earlier claim for rehearing. There is no reason to suppose that this act of corporate suicide was precipitated by the prospect of further litigation with the appellants but it was immediately clear to the respondent to the appeal and the Court that its consequences for the ensuing litigation had been nonetheless catastrophic. All proceedings for or against a deregistered company are a nullity: see for example, International Bulk Shipping & Services Ltd v Minerals & Metals Trading Corporation of India [1996] 1 All ER 1017. 

[21]. At this point Mr Meagher SC, who appeared for the respondent and until then had believed he had been appearing for a company that was registered and entitled to be represented by him, understandably sought an adjournment to enable those instructing him to verify the accuracy of the record and consider their position. 

[22]. It was, of course, startling to find that legal proceedings had been maintained by and against Citibank Savings Ltd throughout a period of nearly nine years after the company had been deregistered. However, the solicitors ostensibly retained to act for the company throughout that period had not been informed either of its deregistration or of the assignment of its rights under the mortgage. They presumably acted upon an assumption that those operating a major banking institution would have known whether the company they thought they worked for actually existed. Nonetheless, the potential implications for them and the bank officers that instructed them were at least interesting. The adjournment was duly granted. ...   

[27]. First, I am unable to see how orders could be made in proceedings that are a nullity that would not equally be nullities. 

[28]. Second, the application is made by two companies, one that is unregistered, and hence has no standing to make any such application, and the other that is not a party to the proceedings. 

[29]. Third, I am unable to accept that it would be an appropriate exercise of the power conferred by s 601AH of the Corporations Act (2001) (Cth) to reinstate a company, not for the purpose of asserting any rights of or against it, but merely as a technical device intended to retrospectively validate proceedings that have been a nullity since their inception. Even if so validated, the proceedings could ultimately have no effect on the rights or obligations of the reinstated company because it had divested itself of any rights under the mortgage. 

[30]. Fourth, even if the proceedings could be retrospectively validated, the appellants would not only be entitled to succeed in their appeal but to an order for summary judgment. The proceedings were founded upon the service of a s 93 notice invalidly issued by a deregistered company demanding payment of a debt which had not been owed to it. 

[31]. Fifth, I am unable to see anything in s 601AH that suggests that the power thereby conferred was intended to permit the retrospective validation of orders made in proceedings that were a nullity at a time when the orders were made. 

[32]. Sixth, no issue as to whether Citibank Pty Ltd was entitled to possession of the appellants’ house or had any rights against them was ever litigated before Connolly J and I do not accept that they could be effectively denied a hearing on such issues by an amendment of the judgment in the manner suggested. 

[33]. Seventh, it would in any event be inappropriate for such an approach to be taken on appeal. 

[34]. Accordingly, I can see no basis for the exercise of any discretion provided by s 601AH and the application must be dismissed. 

[35]. In view of the concession that the proceedings before Connolly J were a nullity, the appeal will presumably proceed unopposed and the appellants will live to litigate again should Citibank Pty Ltd decide to start a new action against them.

Corporations

In Australian Securities and Investments Commission v GetSwift Limited (Penalty Hearing) [2023] FCA 100 Lee J comments 

 To adapt the famous remark of Ted Heath, GetSwift Limited (in liq) (GetSwift), and those primarily responsible for its wrongful conduct, could be described as representing the unacceptable face of start-up capitalism. 

GetSwift was a public “early stage technology company” that generated operating losses in every year of its existence. Notwithstanding this, from an issue price of 20 cents in December 2016, within a year, its share price had risen to well over $4, prior to a trading halt announcement. It raised a total of $104,000,000 from investors in two placements. It became a market darling because it adopted an unlawful public‑relations‑driven approach to corporate disclosure instigated and driven by those wielding power within the company. 

This eventually became apparent. Three days after the publication of an article in January 2018 in the Australian Financial Review entitled “ GetSwift : Too Fast For its Own Good” (cogently explaining that GetSwift had failed to update the market about losing materially significant contracts), Get Swift Logistics Pty Ltd (Get Swift Logistics) (a wholly owned subsidiary) transferred $72,000,000 to a bank account held by GetSwift , Inc (another wholly owned subsidiary incorporated in the United States). On 22 August 2018, following the commencement of an investigation by the Australian Securities and Investments Commission (ASIC) in February 2018, Get Swift Logistics transferred an additional $8,500,000 to an offshore bank account held by GetSwift, Inc., bringing the total funds transferred to $80,500,000. These transactions were unexplained by any evidence before me. 

More remarkably, well after the balloon had gone up, the share price had plummeted, a class action had been started, and at around the same time the evidence concluded in the liability phase of the ASIC regulatory case before me, GetSwift sought to re-domicile to Canada. GetSwift convinced another judge of this Court to allow it to do so, partly on the basis of an undertaking that GetSwift Technologies Limited (GetSwift Technologies) would not take any steps to wind up GetSwift and would indemnify GetSwift in relation to penalties imposed in this case or in relation to an adverse judgment in the class action. ASIC did not pre-emptively make an application to me to restrain the removal of GetSwift from Australia when the highly unusual course was proposed during the pendency of the regulatory proceeding (although it is fair to record it did oppose the scheme approval in the separate proceeding). 

The undertaking was not worth the paper it was written on. GetSwift Technologies (as GetSwift ’s only member) resolved in July 2022 to place GetSwift into voluntary liquidation. The absence of any likely return means the class action brought by shareholders (Webb v GetSwift Limited & Anor, NSD 580 of 2018) has now settled with no recovery by those who suffered loss by reason of GetSwift ’s breaches. In approving settlement of the class action on 2 February 2023, Murphy J observed that GetSwift’s “own misconduct has now brought it to its knees” and that its actions represented a “scandalous episode of corporate misconduct”. One can only agree with his Honour’s observations. 

What is the response of the people responsible for this dreadful state of affairs? 

Mr Bane Hunter, the former executive chairman and chief executive officer, and principal instigator of the wrongdoing of GetSwift , has not returned to Australia to defend his position and did not appear at the penalty hearing. His lieutenant, Mr Joel Macdonald, after initially appearing at a case management hearing, has also not turned up to defend himself. He also signed the resolution winding up GetSwift . 

After putting ASIC to proof in every aspect of its intricate case and requiring expenditure of vast public resources, neither Mr Hunter nor Mr Macdonald have shown the slightest degree of remorse or contrition, nor have they made any acknowledgment they behaved improperly. Additionally, ASIC has been unable to explore where all the money raised from investors went. 

It is against this singular background that I am required to consider the civil penalty to be paid by the liquidated malefactor, Messrs Hunter and Macdonald and by Mr Brett Eagle (a solicitor who remains in Australia and who has, by contrast, engaged with the penalty case). I am also required to consider whether each of the individuals should be disqualified from managing corporations in the future and, if so, for how long. I have already said enough to make it obvious that this is an unusual civil penalty case, which has no ready analogue. 

My mercifully unreported liability judgment in this matter (Australian Securities and Investments Commission v GetSwift Limited (Liability Hearing) [2021] FCA 1384 (Liability Judgment)) was 2,618 paragraphs long. As I then explained, its size was the result of the case advanced by the ASIC being vast in scope, involving the need to wade doggedly through a prodigious documentary case and make innumerable findings. These reasons assume familiarity with the findings relevant to each the contraveners, and adopt the definition of terms in the Liability Judgment.

Lee further comments 

... I observed (at [13]) that Mr Hunter displayed a management style that owed little to the influence of the late Dale Carnegie. I further noted that he was demanding, forceful and regularly brusque to the point of rudeness. Upon re-reading the evidence and reflecting on my findings, including after listening to the evidence of Mr Eagle, and in the absence of any explanation by Mr Hunter, I would go further: Mr Hunter was not only a bully, but also someone who had a laser-like focus on making money for himself and Mr Macdonald. If that involved breaking the law regulating financial markets, or exposing GetSwift to third party liability, that was of little concern to him. ...

Regulation

'Testing the Regulator's Priorities: To Sanction Wrongdoers or Compensate Victims?' by Lachlan Peake in (2020) 39(2) University of Queensland Law Journal comments

As Australian corporate conduct came under intense and highly publicised scrutiny during the banking Royal Commission, so too did the conduct of the conduct regulator: the Australian Securities and Investments Commission (‘ASIC’). Following the Royal Commission, the regulator has adopted what it describes as ‘“Why not litigate?” operational discipline’ — a concept elaborated and recommended by Commissioner Hayne which is now the central tenet of ASIC’s updated enforcement model. This article discusses the hierarchy of strategic priorities evident in that enforcement model and asks: should the regulator focus its resources on compensating those harmed by regulatory contraventions rather than sanctioning those who have broken the law? 

Peake states

In the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (‘Final Report’ and ‘Royal Commission’, respectively), Commissioner Kenneth Hayne said:

The Australian community expects, and is entitled to expect, that if an entity breaks the law and causes damage to customers, it will compensate those affected customers. But the community also expects that financial services entities that break the law will be held to account. The community recognises, and the community expects its regulators to recognise, that these are two different steps: having a wrongdoer compensate those harmed is one thing; holding wrongdoers to account is another.

In response to the Royal Commission, and specifically the ‘Why not litigate?’ mantra elaborated and recommended by Commissioner Hayne, the Australian Securities and Investments Commission (‘ASIC’) has significantly reshaped its enforcement model. It is quite clear that this model prioritises the sanctioning of wrongdoers over the delivery of redress to victims. The aim of this article is to test the theoretical and practical justification for such a preference. The central question — should the regulator focus its resources on compensating those harmed by regulatory contraventions rather than sanctioning those who have broken the law? — arises because, while it will sometimes be possible to achieve both goals simultaneously, the prudent allocation of finite resources usually dictates that the enforcement strategy be tailored to the regulator’s priority. As Commissioner Hayne put it, the ‘regulator must approach [its] work ... with a clear view of what kinds of outcome’ it wants to achieve; those desired outcomes — especially the most desired outcome — will guide the regulator’s choice of enforcement tools.

Part II of this article demonstrates, as a preliminary factual matter, that ASIC’s current enforcement model does not prioritise the delivery of redress to victims of misconduct. Part III examines whether, if such a priority were adopted, it would be theoretically justified, evaluating insights from regulatory scholarship, social psychology and sociology. The discussion commences with an analysis of the breadth of the regime that ASIC is required to enforce and the considerable discretion it is given to calibrate its enforcement style and determine its priorities when regulatory objectives conflict. The Part concludes that regulatory and interdisciplinary theory does not provide a secure foundation for either a punitive or a compensatory priority where those aims are in tension. As such, the article turns to resolve the question by reference to two key practical issues: whether regulatory mechanisms are more effective than others at achieving compensation, considered in Part IV; and whether, assuming a compensatory priority were adopted, this would unduly hinder the fulfilment of other regulatory objectives, considered in Part V. 

Part IV commences with the recognition that the regulator ought properly to be mindful of both the availability and efficacy of alternative avenues for victims to obtain redress before determining its strategic priorities and resource allocation in response to a particular contravention or class of contravention. Interestingly, however, the analysis finds that regulatory mechanisms are among the most available and effective in delivering compensation when compared with private litigation, alternative dispute resolution (‘ADR’) and external dispute resolution (‘EDR’). Despite this, Part V argues that a compensatory priority would unduly impede both the regulator’s ability to achieve deterrence through enforcement and to improve compliance through its softer activities of persuasion, education and policy advice. The article therefore endorses ASIC’s updated enforcement model to the extent that it conceives the agency’s statutory role as best fulfilled where it prioritises the punishment or censure of regulated entities who contravene the law.

Peake concludes 

As Australian corporate conduct came under intense and highly publicised scrutiny during the Royal Commission, so too did the conduct of the conduct regulator. ASIC has fully embraced the recommendations made by Commissioner Hayne that deal with its own approach to enforcement. In updating its enforcement model, ASIC has been and will continue to be supported by legislative reform, both to its own powers and to the scheme of duties and penalties that apply to regulated entities. The central change to ASIC’s enforcement approach is its adoption of the ‘Why not litigate?’ operational discipline. That mantra effects a renewed strategic prioritisation of the need to ensure appropriate punishment or censure of those who break the law, above and beyond other goals that the regulator may be interested in achieving, such as the delivery of adequate redress to victims of misconduct. The purpose of this article has been to interrogate that prioritisation and consider whether it would be preferable for the regulator to adopt the opposite position, and more readily focus its resources on the delivery of compensation to victims of misconduct. 

The central argument advanced in this article — that a regulator compensatory priority would be an effective way to deliver redress to victims but would unduly impede other desirable regulatory objectives — used the assumptions and logic of responsive regulation as its yardstick. It was beyond the scope of the article to engage in a substantive critique of that theory or its symbolic manifestation in the enforcement pyramid. However, given the extensive adoption of responsible regulation, including by ASIC, it is logical to discuss the merits of a compensatory priority, or indeed any shift in regulator focus, from that perspective. The article began by considering the underlying theoretical question: whom or what does the regulator serve? This discussion was approached broadly, evaluating insights from diverse sources: conventional regulatory scholarship, social psychology, and sociology. The answer was the amorphous ‘public interest’, which leaves little secure theoretical footing for a compensatory priority. As such, the practical implications of such a shift were taken to be the most important considerations. There is sufficient evidence, in my view, for concluding that regulatory mechanisms are among the most effective at delivering compensation. However, a regulator’s choices are complex and its resources must be deployed to ends other than compensation alone, particularly deterrence and compliance. My analysis suggests there is a credible risk that substantial violence would be done to the fulfilment of those goals if the interests of victims were to be preferred in a case of conflicting regulatory objectives. Such a priority should not be adopted.