CONSTANT, Ms Simone, Commissioner, Australian Securities and Investments Commission GREGSON, Mr Scott, Chief Executive Officer, Australian Securities and Investments Commission KIRKLAND, Mr Alan, Commissioner, Australian Securities and Investments Commission LONGO, Mr Joseph, Chair, Australian Securities and Investments Commission O'ROURKE, Ms Kate, Commissioner, Australian Securities and Investments Commission SAVUNDRA, Mr Chris, Executive Director, Legal Services, Australian Securities and Investments Commission Committee met at 09:00 CHAIR ( Senator O'Neill ): I declare open this hearing of the Parliamentary Joint Committee on Corporations and Financial Services into the oversight of ASIC, the Takeovers Panel and corporations legislation. I begin today by acknowledging the traditional owners of the land on which we meet, and I pay my respects to their elders, past and present. I extend that respect to Aboriginal and Torres Strait Islander people here today. The committee will be conducting today's hearing in person and, if needed, via teleconference. These are public proceedings being audiostreamed live via the parliament's website, and a Hansard transcript is being made. I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It's unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as a contempt. It's also a contempt to give false or misleading evidence. Witnesses also have a right to request to be heard in camera. If a witness objects to answering a question, they should state the ground upon which the objection is made, and the committee will determine whether it will insist on an answer, having regard to the ground which is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. I want to take the opportunity on this occasion to make clear, to those who are listening and to those who might engage with the transcript of this hearing, the terms of reference that this committee covers. The statutory basis for our inquiry is conferred by section 243 of the ASIC Act, and it specifies the committee's duties: (a) to inquire into, and report to both Houses on:    (i) activities of ASIC or the Panel, or matters connected with such activities, to which, in the Parliamentary Committee's opinion, the Parliament's attention should be directed; or    (ii) the operation of the corporations legislation (other than the excluded provisions); or    (iii) the operation of any other law of the Commonwealth, or any law of a State or Territory, that appears to the Parliamentary Committee to affect significantly the operation of the corporations legislation (other than the excluded provisions); or    (iv) the operation of any foreign business law, or of any other law of a foreign country, that appears to the Parliamentary Committee to affect significantly the operation of the corporations legislation (other than the excluded provisions) … In fulfilment of this statutory duty, the committee conducts an ongoing oversight inquiry for the life of each parliament. The committee has the power to invite submissions, to question witnesses at hearings and to require documents to be produced. The committee also has the flexibility to determine how it approaches this ongoing inquiry, including in relation to whether and how to invite written submissions and the frequency and structure of its hearings. The committee of course reports its findings and recommendations to parliament from time to time, at the committee's discretion. It is a pleasure to chair this very significant committee, so important to the fundamental workings of our economy. I thank you all for being here. Chair Longo, for the purposes of the Hansard, could I ask you to acknowledge that you have received information on parliamentary privilege and the protection of witnesses giving evidence to the Senate. Mr Longo : I can confirm I've received that information. CHAIR: I now invite you to provide the committee with a short opening statement, at the conclusion of which there will be questions. Mr Longo : Just before I do that—for completeness, my deputy hair, Sarah Court, gives her apologies. She's unable to be here today because she's attending OECD market committee meetings. I'm hoping she'll be back on the weekend and back in the jurisdiction next week. Thanks for the opportunity to appear again today. I'd like to first acknowledge that Senator Paul Scarr has rejoined the committee, and I want to acknowledge the contribution of Senator Jane Hume. As always, I'll make some observations about our enforcement. ASIC is one of the most active law enforcement agencies in the country. We're taking more cases to court, achieving record penalties and protecting consumers. I'm pleased to report to the committee that, through our ongoing determination to build up our enforcement capability, ASIC secured a record $350 million in civil penalties and returned $583 million to Australians from July to December last year—that's just half the year. This includes recovery of funds for those affected by the First Guardian and Shield matters. We are holding individuals to account for their actions, in civil and criminal matters. They are facing the consequences of their crimes, including jail time. Just yesterday, the federal court found two former senior executives of the Star Entertainment Group Ltd, the former CEO Matt Bekier and the former chief legal and risk officer Paula Martin, breached their duties in relation to their handling of the risks associated with money laundering and criminal activity at the casino. The court also found that seven non-executive directors did not breach their duties in this case. The matter will be listed for a further penalty hearing, when ASIC will ask the court to impose a financial penalty on Mr Bekier and Ms Martin and to disqualify them from managing corporations for a period of time. That matter will be listed shortly. ASIC pursued this case because of the fundamental questions it raised about trust, governance and accountability at one of Australia's largest casino operators. ASIC will always require directors and executives to meet the highest standards of corporate governance because of the crucial role they play in maintaining trust. In October the Supreme Court of Western Australia sentenced Mr Chris Marco to 14 years imprisonment, with eligibility for parole after 12 years. Mr Marco was found guilty of fraud offences against investors, totalling more than $34 million. The sentence was the highest imposed by an Australian court, following an ASIC investigation. We note that Mr Marco is currently appealing his conviction. In November Krishnakumar Agrawal was sentenced to four years and 10 months imprisonment, with a non-parole period of more than three years, for dishonest use of his position as a director. This matter related to a property group that collapsed, owing investors from Sydney's Indian community over $20 million. In January, just earlier this year, former investment manager Rodney Forrest was sentenced to six years imprisonment for insider trading and procuring others to trade, in more than $3 million of Platinum Asset Management Ltd shares. We note that, in February, Mr Forrest filed an appeal with the federal court against his sentence. This marks the first outcome for ASIC's new specialist insider trading team, which investigated and finalised the case within 16 months of the offending. We expect to make a number of criminal referrals for insider trading to the Commonwealth Director of Public Prosecutions this calendar year. We also continue our focus on pursuing enforcement actions that have the greatest impact on the most serious harms within our remit and that reverberate across the market. On ANZ, the bank was ordered in December 2025 to pay $250 million in penalties for widespread misconduct and systemic risk failures affecting the Australian government, taxpayers and at least 65,000 retail customers. This represents the highest ever penalties imposed on a single institution in ASIC's history as a regulator. Our banks need to get the basics right. We continue to prioritise pursuing misconduct affecting consumers, businesses and the economy. Separately, new ASIC data released just last week shows an increase in the reports of misconduct, driven largely by corporate governance concerns. Between 1 July and 31 December 2025, ASIC received 9,686 reports of misconduct, raising 13,036 issues. Corporate governance matters accounted for 40 per cent of these issues, with financial services and retail investor issues totalling 44 per cent. We believe the figures point to an increase in concerns being raised about corporate governance issues and underscore our enforcement priorities for 2026, which include tackling governance and directors' duties failures. ASIC has a number of active investigations into governance failures and directors' duties. Robust governance isn't just good practice. It's good for business, and it's good for the Australian economy. First Guardian and Shield is an enforcement priority for 2026. Our primary aim in these matters has been and remains preserving available money for the benefit of investors. We continue to work with all stakeholders, including government, on this. Last month, ASIC began a widespread communications to those who invested in First Guardian and Shield, including a link to a dedicated consumer website that contains trusted and independent support, and options to make a complaint. Our litigation continues at pace. Since our last appearance in September last year, we have taken action in court against SQM, the research house responsible for the ratings for the Shield fund; financial advice firms, InterPrac Financial Planning and MWL; the lead generator, Imperial Capital Group; and Diversa Trustees Limited, alleging failures concerning the First Guardian Master Fund. Around $300 million was invested into First Guardian through superannuation funds, of which Diversa was trustee. I want to thank and acknowledge all the ASIC staff involved in this work, with many working around the clock, after hours and over many weeks. Can I say to the committee that that's been happening for over a year. This is a major, major piece of work by a lot of people at ASIC and with the help of external solicitors and counsel. I would say it's almost of historic proportions. We will not rest until our work on these matters is complete and those responsible have been properly held to account. Now to the ASX. In December 2025, we announced a number of commitments that ASX Group have made to ASIC in response to findings in the interim report of the ASIC panel inquiry. These included a strengthening of the independence and governance of ASX's clearing and settlement facilities boards; a strategic reset of ASX's transformation program, Accelerate, with clear milestones and accountability for delivery; the imposition of an additional $150 million capital charge on ASX Limited to ensure that ASX maintains robust financial resources until remediation is complete. That's an unprecedented step that ASIC has taken. Perhaps we'll have a chance to talk more about that later. The capital charge will remain until ASX Group achieves the milestones identified in the Reset Accelerate program, and ASIC agrees to reduce or remove it. The charge remains until the change happens. This is in addition to existing capital requirements applying to ASX Group entities, including regulatory capital requirements on ASX's clearing and settlement facilities under standards set by the Reserve Bank of Australia. That capital charge is in addition to the capital requirement overseen by RBA. ASX has confirmed it has enough liquid assets to meet current requirements and will clearly show this in future disclosures. Finally, but certainly not most unimportantly, there is a commitment to stronger leadership. You will have seen that the ASX are looking for a new CEO as a result of an announcement made only a couple of weeks ago. These measures aim to strengthen confidence in ASX and Australia's critical market infrastructure and provide certainty about the market operator's reset. The inquiry's final report is due to be delivered to ASIC by the end of this month and will be released publicly shortly thereafter. We welcome the committee's questions. CHAIR: I thank and congratulate the people at ASIC who prepared the brief for today. It is detailed in a way that I can't say it has been. In the long time I've been on this committee I think we've developed much more robust processes, and I will come to some questions about the nature of papers that come before different committees, as much as they come before boards, and what it requires of us in terms of engagement. Congratulations and thank you. It has informed what I think will be good questioning throughout the day. I will go to the very significant finding yesterday. Right across this city certainly and across the nation, people have been watching the shameful story of what was allowed to happen at Star. It required extensive public investment of funding to get to the bottom of what was occurring and what appears to be a significant culture of wilful blindness or the determined ignoring of signals and information. In Justice Lee's judgement yesterday there were quite a significant number of comments that, in my view, go to the ethical disposition of people who are undertaking roles within the corporate sector in their professional capacity as corporate managers, in their professional capacity as legal advisers and in their professional capacity as members of the board. Mr Lee said that directors cannot be 'passive recipients of information' and that they needed to do more work on keeping management in check and to push back on large volumes of material given to them before board meetings. But he also indicated that there were some serious concerns about the culture at Star as being 'dysfunctional and unethical'. In my understanding there is a judgement, as you've indicated in your opening statement, against two of the management team. I know that you brought concerns about the behaviour of the board. This finding yesterday, I think, is a significant one. As I understand it, the board have not been sanctioned, but there are some very important signals for every board member in every entity that is operating, and I would like to give you the opportunity to put on the record your response to what the finding yesterday actually revealed. What does it mean for people in the corporate sector? Mr Longo : I might just start by saying it's a 500-page document, which I'm still digesting myself. CHAIR: A Lenten effort, according to Mr Lee, to read, apparently. Mr Longo : I've obviously received a lot of assistance overnight to absorb the finding and the judgement, so I'll do my best this morning, but I will be reflecting on this over the weekend. The first thing I really want to say about this judgement is what an extraordinary contribution to jurisprudence it is. It's over 500 pages. Clearly, ASIC is disappointed in aspects of the result—I'll come to that in a moment—but it's an extraordinary judgement. We're studying it very carefully, as is the market. Although the judge said there is no new law, he went on to make a whole range of observations and contributions around AI, technology, the significance of directors' duties. I really want to start with that. But we are going to take some time to absorb this judgement, and I think the market will as well. I should also say, of course, that the case is still part heard. It will go back before His Honour over the next week or two, where, as he said at the end yesterday, orders will be made that are in conformity with his decision. Let's just go there briefly. I think it's fair to say ASIC's allegations or contentions against Paula Martin, the general counsel, were upheld, and most of the alleged contributions—I think seven out of 10 or four out of seven; we give details in a media release—were upheld against Mr Bekier. Not all of them, but I think it's fair to say most of them. Finally, there are the independent non-executive directors, and, of course, there's a lot of interest in His Honour's reasons for not holding that they contravened the law. They were found not to have contravened the law and not to have breached their duties under the Corporations Act. I think there are a number of observations that can be made, and they might be better done through a question-and-answer conversation. I think the second proposition that comes from this is there can be no doubt—in my mind and in the commission's mind—that it was the right thing to commence these proceedings. There was widespread community concern about what happened at this institution. The judge himself acknowledged that. In terms of the circumstances of this company, there was the Bell inquiry. There was a lot of disquiet around what happened at Star. ASIC commenced its investigation early in 2022. From those inquiries and announcements, we discovered what was going on there, and, in the same year, we commenced these proceedings in December 2022. These are important proceedings. At their very heart is the role of directors, the board and the role of management. I'm happy to discuss that fundamental issue a little bit this morning. But His Honour really went to some effort and length to study the documents, find the facts, apply the law to the facts and, in a very nuanced way, go through it. Although he did not hold that the seven independent non-executive directors breached the Corporations Act, I think it's fair to say, and I think the way the chair asked the question shows, it wasn't a ringing endorsement of the board at all. There's something I would like to say about that. Let's put Star to one side. I'm often asked, 'Why didn't you go after those directors?' or 'Why didn't you take action?' It's very important to acknowledge that the legal standards around bringing litigation like this are very high, and the fact that community expectations, or indeed my expectations or parliament's expectations might be, 'Gee, that board could have done a better job or that director could have done a better job'—that may be true. Broadly speaking, it might be true that they could have done a better job. I'm not necessarily talking about Star just yet. This is as a general matter, but that does not mean— CHAIR: It's on the public record that they could've done a better job. I don't think you're impugning anyone there. Mr Longo : I want to be very careful here because I want to be very respectful of His Honour's conclusions. They're very carefully considered. What I'm trying to say, Chair, is the fact that the community might be unhappy with the performance of a board does not mean the law has been broken. CHAIR: This is why I wanted to explore this with you this morning. Justice Lee's reported comments are that directors are under a continuing obligation to keep informed about the company's activities, and their responsibilities are to interrogate, to probe and challenge where necessary. I'm quoting him directly, as reported in this article by the AFR. It must be the editorial. It states: Lee made clear they cannot be 'passive recipients of information'. Mr Longo : That's right. CHAIR: Furthermore, Lee commented that these roles are handsomely remunerated and are 'not just tokens or glittering prizes decorating a CV'. That's also very instructive—before we get to the AI issue. From that, a concern arises that I have with parallel reporting. I believe in the same paper, there is a report by Max Mason, who quotes a response from Rebecca Maslen-Stannage, a senior partner at Herbert Smith Freehills Kramer, who has advised boards of many large companies. According to this article, she indicates that Lee's ruling would be 'resoundingly a massive sign of relief for non-executive directors'. This poses quite a question for me. It seems that Justice Lee's volume of assessment is pointing to an ethical failure of the board and perhaps a quality standards failure to do their job properly but not sufficient to breach the law. I'm getting this vibe, if I can put it in that way, from Ms Maslen-Stannage's comments: 'Oh phew, we dodged a bullet there. It's okay. Let's go back to business as usual.' That is of grave concern to me, Mr Longo. What reassurance can you give me that Justice Lee's reporting and response to this case will not lead to a relaxation of a sense of responsibility for the corporate boards of the country. Mr Longo : I can't speak for Rebecca Maslen-Stannage, but one thing I can say with certainty is that the judge has spoken. He took some time, some 500 pages, and he has reconfirmed, reasserted, fundamental principles supporting the duties that explain and elaborate on the duties of directors. I don't think there's anything in this judgement that should suggest to directors, whether they're non-executive or not, that their duties are not still very high. So one should not confuse it. The judge was at pains to talk about—ASIC's job was to lead the evidence and plead the contraventions. His Honour, in a very methodical way, talked about the tsunami of documents and submissions that were in front of him. His job was to look at the pleaded contraventions, look at the admissible evidence and apply the law to that evidence in circumstances where none of the directors was required to give evidence. They exercised their right to remain silent, and that was their right. I think what's really important here is that there are the legal standards, and then there are the standards that the general community would apply. But I don't think there's anything in this judgement that suggests a relaxation of duties. In fact, just overnight, I was given a copy of the Australian Institute of Company Directors' immediate. take on this judgement, and I don't see any suggestion that this is sort of a backward step for director's duties. This is a fact-sensitive judgement. It's nuanced. I think people need to be very careful about saying, 'Our duties are going to be pretty straightforward to exercise now.' I don't think that's the message of this judgement. ASIC did not succeed in establishing contraventions of the Corporations Act, but I think His Honour, in a very nuanced, carefully considered judgement, made a substantial contribution to our understanding of some fundamental director's duties. Let me be very clear about what I think some of that contribution is. What lies at the heart of the case is this question of reliance on management. You've got directors, and they're entitled to rely on management in terms of—I'm not talking about Star in particular now but just as a matter of principle, but Star is a really good elaboration, if I may say so, of the considerations and principles that are taken into account in what I'm about to talk about. If you're a director, particularly of a larger, complex entity, then you're entitled to rely on the information given to you by management. The critical question is: is that a reasonable reliance—were you reasonably relying on that? That's at the heart of what happens in boards. Without going into the detail in this hearing, His Honour meticulously went through the evidence and facts as he found them and applied the law to those facts, and he landed where he did. But, in doing so, I think it's fair to say, he said: … the issues in this case have not turned upon any novelty— no new legal principle— Its application, however, is necessarily contextual. Whether the statutory standard has been met is not determined in the abstract, nor by reference to how matters appear with the benefit of subsequent events. It requires an evaluative judgment … I think there are some other statements here where he's made it reasonably clear that he had significant concerns about what happened here: But one cannot fairly review all that material without a sense of disquiet. It is not a portrait of directors actively pressing management with difficult questions as to whether the business was being conducted ethically, lawfully, and to the highest available standard. …   …   … Given some of the lamentable events canvassed in these reasons, the more self-congratulatory submissions of the non-executive directors are jarring. This is a very complex, very long judgement. Stepping back from it, I think it deserves reflection and analysis. The court held that the law was not breached by these non-executive directors. In making that decision, His Honour has made a range of observations and statements that I think are very helpful and insightful about his view about the content and breadth of these directors' duties. I hope you can take from my remarks that I don't entirely agree with Ms Stannage's characterisation. We're still considering it, but I think this judgement is a serious contribution to what's expected of directors in this country, and we'll be acting accordingly. CHAIR: And the Australian Institute of Company Directors, I'm sure, will be taking this on board. I always think that, critically, the laws are what we resort to when ethics fails. Ethical judgement needs to be applied, and that's a professional responsibility, and we've gone around the table many times on that. Some of the words that are attributed to the directors in this case for Star by Justice Lee were 'incurious', 'complacent', and that they failed to apply an inquiring mind to those responsibilities and failed to step in to oversee properly Star's handling of those risks. The law expects significantly more from boards, to put that in summary. They retained their silence and they've walked away, at this point of time, without a formal judgement. Clearly this is significant reputational damage to all of those individuals who should have been more curious and less complacent. Mr Longo : I'm still studying this judgement. I might be assisted by Chris Savundra. His Honour did not find that they breached the law but that they hadn't discharged their duties, so one shouldn't—Mr Savundra might be able to correct me on this; it's been a long week. His Honour made a range of very interesting observations and insights and reflections about directors' duties, about the role of AI, about board packs, about what's expected in terms of keeping yourself informed of the business, about the seriousness of the casino business. But I think it's well to remember where he landed, and where he landed was that, based on the admissible evidence and what was pleaded against the directors, they didn't breach the law. I really want to respect that conclusion. This is a really long judgement. It's very nuanced. His Honour acknowledged the contributions of counsel on all sides. It was a skilfully presented case. Some of Australia's leading counsel were before His Honour. I think it deserves some time for us to think about it. CHAIR: Absolutely, I agree. It's clarifying, though. Mr Longo : I will be speaking to the AICD on Tuesday, so I have the weekend to continue my reflections. I'll be giving a speech. CHAIR: We might ask you to send that to the committee. I'm sure there'll be interest. Just before I share the call—I will have more questions, and I particularly want to come to the AI dimensions—can I just clarify this. Mr Savundra, you might have the detail of this. What are the qualifications of the two individuals who have been found wanting by Justice Lee? Do you know? Mr Savundra : I don't know off the top of my head. Obviously, Ms Martin was the company secretary and operated as a lawyer, so I take it that she's a lawyer—whether she's currently a lawyer, I'm unsure. So if I could take that on notice, we'll come back to you. Mr Longo : Just for completeness, we sued 11 individuals. Two of them actually settled with us—Harry Theodore and Gregory Hawkins, the former chief financial officer and chief casino officer, respectively. Of the 11, two admitted they'd breached, two were found to have breached and seven—the independent non-executive directors—were found not to have breached the Corporations Act in all of these circumstances. CHAIR: The two who admitted—could you restate their names and what their roles were? Mr Longo : It's in the media release. Star's former chief financial officer, Harry Theodore, and its former chief casino officer, Gregory Hawkins, admitted breaches of their duties as officers of Star before the trial. At that time, the court imposed financial penalties against Mr Theodore and Mr Hawkins and disqualified them from managing a public company for 18 months and nine months respectively. As Justice Lee noted yesterday, that was handled by a different judge—as it happened. But, for completeness, I thought I'd mention that. CHAIR: The next concern that I want to raise goes to a matter that this committee has taken very seriously, which is professional responsibility, professional certification and the gap between belonging to a professional body and discharging yourself from that body to take on roles that are similar—using that knowledge but there's no longer scrutiny over your work in the new role that you take on. We're not sure if Ms Martin continued to be certified under legal circumstances— Mr Savundra : I've just been informed that she's no longer practising. CHAIR: Was she practising at the time? Mr Savundra : She was. CHAIR: I don't know that you can answer these questions, but we will have the professional bodies for the accounting profession before us. Given our wide powers, and given what we've just discerned about Ms Martin here, I might ask the committee to consider whether we get some of the professional law bodies in as well, because there seems to be a very sophisticated tango, shall I say, going on between lawyers and financial gurus—particularly accountants and auditors—around the way in which some of the corporate activity is being undertaken. Saying you're a lawyer seems to give you entree to a whole series of behaviours, and we've seen the abuse of legal professional privilege in other contexts. Questions are really starting to come to the fore for me about ethical responsibility: the right to call yourself a lawyer, the right to call yourself an accountant, the right to call yourself an auditor; that professional oversight; the ability to either hang out a shingle or have that withdrawn; and the nature of the sanctions. All of those issues, for me, are absolutely coming to the surface again in my very brief encounter so far with Justice Lee's document. I think that there is work for the committee to do, and I'll be looking for my colleagues and their endeavours to try and get a little more on that. In your inquiries, did you have any interactions with the law society under which Ms Martin holds her authority to practice law? Mr Savundra : I'll need to take that on notice. I don't believe we would have, but I'll take it on notice. CHAIR: The two who admitted—who you just referred to, Mr Longo—in your interactions through the course of this inquiry, at what point were the professional bodies advised that there was concern or activity by ASIC with regard to these individuals? Mr Longo : Again, I think I'll take that on notice. But my understanding of the chronology here is that there was that inquiry, and ASIC commenced its investigation early in 2022 coming out of the public revelations in a 2021-22 inquiry initiated by the NSW Independent Liquor & Gaming Authority into Star's suitability to hold a licence. Alarming evidence emerged during the inquiry of the infiltration of organised crime syndicates and staff. That and other matters led to us commencing our investigation. Perhaps in the same question— CHAIR: If you can, have a look, because sometimes there's an assumption that if it's in the public the professional associations are aware of it and they will act. Sadly, that hasn't been the case in many of the circumstances that we've discussed to date. My question, then, is about to whom should reporting be done, and at what time should it be done? ASIC, as you have indicated, has received 9,686 reports of misconduct, raising 13,036 issues. What's the standard operating procedure in terms of 'this person is under investigation'? Is there a trigger for you to identify that individual to the body through which they are enabled to practise in this country? Mr Longo : Well, in this particular case, Ms Martin was not a director but an officer— CHAIR: Yes. Mr Longo : discharging the duties of a general counsel and company secretary, if my memory serves me. But we're happy to come back to the committee on notice to see what, if any, engagement we had with the relevant law society. But, as I've mentioned, this investigation was really triggered by the public revelation coming out of that New South Wales inquiry— CHAIR: Yes. Mr Longo : and indeed, the efforts of—even Justice Lee acknowledged them—investigative journalists. CHAIR: The people of New South Wales had to pay for that inquiry. I want to make sure that their taxpayer dollars—as a woman from New South Wales, our taxpayer dollars—are actually doing the job that they need to do. We want to get good outcomes for the Australian people out of all of that investment and your further action as well. Thank you for the responses, and I'm going to give the call to Senator Scarr. Senator SCARR: It's good to be with all my friends from ASIC again. I'm not sure I'm allowed to say that in terms of oversight inquiry. Mr Longo : Strike it from the transcript! Senator SCARR: I too have been reading the reports of the judgement that was brought down yesterday, as you'd expect. Congratulations to Justice Lee, in his inimitable way, bringing his forensic mind to bear on the case. I acknowledge the comments you've made, Chair, in terms of needing to respect his judgement. He's gone through the evidence in a very forensic manner, and that needs to be deeply respected. And that includes his decision that the non-executive directors weren't in breach. In terms of process—this is the judgement at the first instance—what's the process for ASIC now, after this judgement was brought down? Mr Longo : As I mentioned earlier, it's technically part heard. So, over the next week or so, if my memory serves me, from what His Honour said, a date will be fixed for orders to be made by His Honour in conformity with the judgement. The technical, procedural answer to your question is that he'll make orders dismissing the case against the independent non-executive directors and making appropriate declaratory orders—I'll get some help from Mr Savundra—declarations of contravention where we were successful against Ms Paula Martin and Mr Bekier. Then His Honour will make a decision about what the penalty should be for Mr Bekier and Ms Martin. Now, I've been very careful not to talk about appeals— Senator SCARR: I know. I've noted. That's where I'm driving. Mr Longo : I held out for as long as I could! But, seeing you asked me, I actually meant what I said earlier. It's a long, learned judgement. Senator SCARR: Sure. Mr Longo : I have an immense respect for the court in general and, of course, Justice Lee in particular. I'm working my way through the judgement. Although His Honour rather modestly says there's no new law, the way he talks about the law is very insightful—his points about documents and the control of information that goes to boards. His observations around AI are really fascinating. He makes a range of other observations that, I think, directors throughout the country are going to be very interested in—in fact, the AICD overnight has already published some good material—so I think, whatever happens, this judgement is highly significant. I don't know whether there's going to be any appeals. I think my focus at the moment is to understand what His Honour said and to complete the first part of the process, and we'll see. The commission hasn't had a chance to meet together and think about that or take advice or anything like that. What I can say, honestly and openly, is that it's obviously an immensely significant judgement, carefully thought through, and there's something for everyone in it. Senator SCARR: Just to tease this point out, in terms of appeals—and you said you don't know whether there are going to be any appeals—from a process perspective, what is the process ASIC will go to in terms of obtaining appropriate advice as to whether or not there should be an appeal with respect to— Mr Longo : Our normal process in any case where we've not succeeded is to take advice on whether or not to appeal. I want to be very clear that we're just going to follow our normal process. We're going to carefully consider this judgement—this one's a bit unusual because of its length, complexity and significance, but— Senator SCARR: In the public interest. Mr Longo : Yes. In the public interest we will study the judgement, and the commission will take advice from its counsel and make a considered decision on whether or not it's in the public interest to take the matter any further. Of course, there are some individuals that have had adverse findings made against them, and they may want to appeal. We'll have to wait and see what Mr Bekier and Ms Martin do. But, as far as we're concerned, our normal process—this judgement is a bit unusual because of its length and complexity and significance—is that we will carefully consider it, we'll take advice, the commission will meet and, if we think it's in the public interest and there are grounds for appeal, then we will consider that. But I really want to stress to the committee—obviously, these proceedings are public—that we're a long way from that. We are very focused on understanding this judgement and getting through the next hearing. We need to work with the court to make the appropriate orders in conformity with the judgement and make submissions in connection with penalties. So it's not really appropriate for me to talk about this any more than that, but that's our normal process. Senator SCARR: Sure. I just wanted it on the record that there is a process to be followed— Mr Longo : That's right. Senator SCARR: and what that process is from this point on. Whilst we've been talking about the findings in favour of the non-executive directors, if I can put it that way, that they weren't in breach of their duties, I should say that I fully support the fact that ASIC took the case on. I thought it was the right thing to do, and I think it was entirely appropriate. Having said that, there were no findings. Chair Longo, you were very careful to say that that was based on the admissible evidence that the court had to consider. Mr Longo : Yes. Senator SCARR: Rule of law—that's what the judge was obliged to consider. But there were still some disturbing comments made in the judgement that have been widely reported, including when Justice Lee was looking at what happened at Star. He said he couldn't do so 'without a sense of disquiet'. Mr Longo : That's right. Senator SCARR: He said: It is not a portrait of directors actively pressing management with difficult questions as to whether the business was being conducted ethically, lawfully, and to the highest available standard. In many ways, this is a disturbing observation for a company of this size that is dealing, as His Honour mentioned, in a very sensitive industry open to a range of risks. Mr Longo : That's correct. Senator SCARR: In this regard, something we haven't asked you questions about is the posture of the directors themselves in terms of how the proceedings were conducted. Is it correct to say that the non-executive directors chose not to give evidence—chose not to be cross-examined? Mr Longo : I'll try to be very careful in answering that question. Let's step back for a second, away from Star, just as a matter of principle. These are civil penalty proceedings. Under Australian law, there is quite a body of jurisprudence around what the law and procedure are around running such proceedings. We're one of the few jurisdictions in the world where there's public enforcement of directors' duties. The first proposition is, if you're sued for a civil penalty, you have a right to silence. So, when these proceedings were commenced, none of the directors were required to file a defence, so we didn't know what their defence was, which is their right—I really want to stress this—under the current law. This has been to the High Court. So it's their right. If you're facing civil penalty proceedings, there are a number of procedural protections that are akin to a criminal procedure. One of them is a right to silence. So, when we commenced these proceedings, obviously we filed our pleadings, and a lot of the aspects of civil procedure were observed, but one of the things that were not observed is being required to file a defence. So we didn't know what the directors were going to say in their defence until we'd closed our case. Secondly—I may need some help from Mr Savundra about this—it was the directors' right not to give evidence in the particular circumstances of this case. I haven't had a chance to study carefully what the judge said about it, but they chose not to give evidence. I'm not prepared this morning to comment any further adversely about that. They have certain rights, and the standards of proof and process in matters of this kind are very high— Senator SCARR: Well, can I— Mr Longo : Sorry. That is why I said earlier—and I've spent the last five years trying to talk about this—that we have such high expectations of directors in this country, and I don't resile from that, and I don't think Justice Lee's judgement in any way diminishes our high expectations, but we have a process, and the rule of law is very demanding. CHAIR: We make the laws, so we understand that they're important. Mr Longo : Yes, and the courts interpret them. In his summary yesterday, Justice Lee talked about the tsunami of documents, so there was a lot of material there. But, at the end of the day, the court's job is to look at the pleadings, look at what's actually alleged, look at the admissible evidence and apply the law to those facts, and I think that has to be respected. As I said earlier, we would follow our normal process as to whether the matter should be taken any further. Senator SCARR: I want to make it clear I respect the right of the non-executive directors to make the choice they made on the basis of the law. That is entirely their right. But I do note that Justice Lee said: As it turned out, the forensic choice open to them of not entering the witness box has been vindicated. It doesn't exactly give you a sense that he's signing off on their conduct, if I can put it that way. Mr Longo : Senator Scarr, I hope you'll forgive me for saying I really can't take the matter any further than the judge's— Senator SCARR: No. Mr Longo : His Honour obviously put a lot of time and work into this judgement. It's very nuanced. I think all I'm prepared to say is what I've already said, and that is that, if one is objective and steps back from this, clearly ASIC is disappointed that we didn't get up, so to speak, on the independent non-executive directors, but I think it's equally fair to say that His Honour's observations and remarks that have been highlighted this morning are not a ringing endorsement of the performance of this board, including the independent non-executive directors. That's where we are. Mr Savundra : I might just add—again, not talking specifically about the Star decision—that, obviously, individual defendants to a civil penalty action have the right to silence. ASIC bears the onus, and I think His Honour in the Star decision referred to it as a heavy onus. If we don't meet the evidentiary bar to establish the contravention, the court is unable to make an adverse inference against someone who refuses to give evidence, and that's the law. The law is that, if you choose not to give evidence, the court can't make inferences against you until ASIC reaches that evidentiary threshold. That's why both His Honour and Chair Longo have referred to the case being based on the admissible evidence. Senator SCARR: Okay. You might be able to answer this question, or maybe not. Presumably there was expert evidence tendered by ASIC with respect to what a non-executive director would be expected— Mr Savundra : I don't think— Senator SCARR: There was no— Mr Longo : No, there's no need for expert evidence. I stand to be corrected. Mr Savundra : I will check, but I don't believe— Mr Longo : If I may say so, with respect, this is not a good question. In a matter of this kind, the court itself can form its own view about whether these duties were discharged or not, under the law. It might be— Mr Savundra : There was no expert evidence; that was confirmed. Mr Longo : Yes. And no-one should be surprised by that. In directors' duties cases of this kind, you wouldn't normally expect there to be expert evidence. I suppose we can elaborate on other matters, but certainly not in this case. Senator SCARR: The reason I asked that question was the comments made in relation to the tsunami of documents that were going to the board, and board packs being thrust upon the board at the last minute before board meetings start. It raises the question, in my mind, of what you would expect from a reasonably competent director in those circumstances where you have this culture of oppressive board papers being produced. This is a perennial question, right? When I was a company secretary, the issue of board packs was making sure that they were prepared in such a way that flagged the significant issues rather than the board being deluged in such a way that they couldn't discharge their duties. In that respect, the board isn't a passive recipient. The board has an ability to say: 'This is unacceptable. This is what I would expect you to do in the context of this organisation, in the context of the risks we need to assess. I'm not just going to sit here passively and accept that you're providing me with extensive board papers.' As His Honour said: … no rational person can evaluate all this material meaningfully in the time available, let alone do so repeatedly, meeting after meeting … One reads what appears central, scans what appears arguably material, and just trusts that anything alarming would have been signalled plainly. I must say, when I read that paragraph, it did disturb me to some extent. It almost indicates that, to some extent—I haven't read the whole judgement—the board has a role in terms of governance procedures, in terms of the architecture of governance, in terms of how board papers are presented, in terms of QA and QC processes, and in terms of internal audit processes within companies to make sure that the board papers are adequately flagging materials of concern. The board isn't just a passive vehicle just meekly accepting what's presented to them. Mr Longo : I think that's absolutely right. I think the technical answer, though, to the earlier part of your question, that this is not a matter for expert evidence is that no one suggested, in the course of this case, that someone should have called an expert on that point. From what His Honour did say—with respect, Senator, I think you've made all the appropriate points—I think the key point is that the flow of information to boards is in the control of the boards. His Honour went out of his way to remind everyone of the wisdom—I think he used a word like that—of Justice Middleton's observations in Centro all those years ago. In that case, a similar sort of problem was made. His Honour, in his remarks in the summary yesterday, drew attention to it. I think this topic is obviously related to his observations around AI and the use of technology and everything, but the fundamental point is that boards control the information that comes to them. There's a lot of material there, and it's an issue that Australian boards are still grappling with. A lot of the directors I speak to in the bigger institutions all complain about the body of material they're expected to get through for each board meeting. So His Honour's judgement will, I think, motivate or trigger another debate about what should go in board minutes. There are different approaches to that. Senator SCARR: No, no, and there are observations, as you're saying, in the judgement about conversations had which weren't included in the minutes. That again raises the question as to how extensive the minutes should be, which has been another perennial question. Mr Longo : If I may say so, with respect, Senator, you of all people would understand these issues better than most. Senator SCARR: Absolutely. CHAIR: I want to take the opportunity, because I expect it will never arise in my lifetime again, to note Justice Lee's use of the word 'Brobdingnagian' and pay respect to Jonathan Swift and Gulliver's Travels for what that actually does in enhancing the English language and our understanding. I note that one of the procedures of the Senate that has changed in the time that I've been on this committee is that there is a standing item of 'declaration of conflicts of interest' from our committee members. It's hard to actually declare, 'I don't have a conflict of interest,' if you haven't read the papers. I'm assuming there must be some expectation that boards would be required to declare a conflict of interest in any circumstance. Again, how would you make such a judgement and declare that you do or do not have a conflict of interest if the papers have not been read? And I say that as a former lecturer. Everything I did was about making sure people did their reading, because it's quite a challenge sometimes. I want to ask questions about the AI and the content as well, but I know that Ms Lawrence has the call now. Ms LAWRENCE: Good morning. I want to continue on the same theme. We'll cover different topics, no doubt, throughout the day, but I'll continue focusing on the context of the outcome of the Star Casino. My understanding is that, under the Corporations Act, auditors also have an obligation to report suspected contraventions. Did ASIC receive any such report from Star Casino's auditor during the relevant period? Mr Savundra : I'd need to take that on notice. I don't recall. It was some time ago. What generated our investigation, though, arose out of the Bell review. Ms LAWRENCE: Could I get you to unpack that further. What red flags came to you that initiated the investigation into the casino? Mr Kirkland : While Mr Savundra is considering that—I think we've just been informed that we didn't receive a report from the company's auditors to feed into our investigation. Ms LAWRENCE: Do you have a view as to whether that is because the reporting threshold for suspected contraventions is too high for auditors? Mr Kirkland : I don't think we could speculate on the motivations for any decisions the auditors would have made. Ms LAWRENCE: Do you have a view on what specific red flags you would expect a competent auditor in circumstances like those described by Justice Lee to come to ASIC about? Ms O'Rourke: I think it would be worth us reflecting on that question in terms of the sorts of issues. There is a clear obligation, as you've referred to, for auditors to bring suspected misconduct to our attention. Its application to directors' duties is one I'd like to reflect on and think about to give you a clear answer. Ms LAWRENCE: You might restate that same comment, but I'm going to continue asking more questions along these lines if you don't mind. Ms O'Rourke: That's no problem at all. Ms LAWRENCE: Obviously, we're all trying to digest Justice Lee's findings, but that serious misconduct at Star Entertainment Group did occur over several years. If external auditors did not detect or escalate these issues, what confidence should the public have that the audit regime can function as an effective early warning system for corporate misconduct? Mr Longo : Can I jump in there. There is a part of the judgement and indeed the summary from yesterday—it's a wide-ranging judgement—where Justice Lee talks about the regulatory architecture around gaming and wagering. I think it's well to remember that this entity in this business has its own regulator: the New South Wales Independent Liquor and Gaming Authority. His Honour went out of his way to point out that there's nothing wrong with the regulatory architecture and the basis on which it's intended to work. The only other unusual thing about this case is that ASIC's not actually the primary regulator of this casino. We decided that it was in the public interest to run these proceedings, and we are where we are today. But there have been other circumstances where we've chosen not to, for some of the reasons that are actually in this judgement—because of the higher bar. I do accept that you're focusing on the role of the auditor. I don't think, in these proceedings, we had any input. I think Mr Savundra is taking it on notice, but I'd be surprised if there were any auditor engagement or relevance to these proceedings or their commencement. Ms LAWRENCE: Just to be clear, you're not aware of any regulatory action being taken by another jurisdiction against the auditors? Mr Longo : No, but what I'm quite clear about is that I don't think there's been any auditor engagement or relevance to us commencing these proceedings. We commenced these proceedings as a result of the inquiry done by the liquor and gaming authority led by, if my memory serves me, Mr Bell, and other information. Mr Savundra : [inaudible] inquiry, and then there was the Bell review. So it was the— Mr Longo : Two things, wasn't it? Mr Savundra : Yes. It was the Independent Liquor and Gaming Authority inquiry and the evidence that was revealed through that inquiry that was—going back to your question—the red flag that alerted us to commence an investigation. Ms LAWRENCE: Do you think the current reporting framework, taking your point that there might be different jurisdictions with accountability in this space for auditors for casinos— Mr Longo : They're for casinos. Ms LAWRENCE: As a broader observation, do you think the current reporting framework is effective in detecting corporate misconduct in large listed entities? Ms O'Rourke: I might make a more general comment, if I may, about the auditor reporting requirements and frameworks, because they are a really important part of the story. I think the point Mr Savundra was making is that there are other parts as well, in terms of where flags are identified and where regulators can take action. But your question is: how did this part perform in these circumstances? Because it's an important part of it. There is that statutory requirement to have auditors, when conducting their auditing exercise, if they see possible contraventions of the Corporations Act or others, bring that to ASIC's attention. I think it's fair to say there's been uneven observation of that obligation. I don't want to comment on this one particularly, because I think we need to find out some more. We're not aware of any. Whether or not that [inaudible] a separate question, but, more generally, it's something that we explored in the last year when we were looking at the question of conflicts of interest and independence. ASIC did a particular deep dive last year, looking at the circumstances of auditors complying with their independence requirements, both the specific statutory ones about rotation and relationships and the general obligation of independence between an auditor and the company they're auditing. That's something we probably will talk about on 20 March and are happy to talk about today as well. The reason I draw the committee's attention to that is one of the three key findings that we made there was an expression of disappointment at the low levels of reporting to us about possible independence issues. That goes to both a self-breach and that reporting framework more broadly being an area that we think auditors could uplift. So we have made recommendations that go to that importance of reporting coming through to ASIC from auditors, either in relation to themselves or in relation to the things that they see when they're auditing. CHAIR: Just before you continue, can I just ask recommendations to whom and at what point? Ms O'Rourke: The report to auditors? CHAIR: Yes. Ms O'Rourke: It was in our media release 25-228MR, and the report is 817. It was in October 2025. That was on that specific point. I guess I'm drawing a thread that's connected to the wider point Ms Lawrence is making. CHAIR: My concern is what is the implementation of that, apart from the 'I want you to pay attention', 'put it out' real unprofessional, again, reading and then dispositional alignment with what is read and the ethical muscle in place not at odds with the financial incentive to do the exact opposite. What is happening to ensure that this is actually being implemented, given the massive concerns I have about ethical disposition, which have been revealed too often to this committee? Ms O'Rourke: Whether it's implemented or observed, there are enduring statutory obligations that apply. We've been looking at the number of reports that we get from auditors. We get information about that, and we have seen a significant increase in the number of reports from auditors. But that's a kind of— CHAIR: Of publicly listed companies or of smaller entities? We've had some concerns previously about the burden of paperwork for, perhaps, insolvency practitioners. Who is reporting? Who is being, if I can put it quite bluntly, herded into such practices? And who is being absolved? Ms O'Rourke: I'd be pleased to take on notice getting some more information for you on that breakdown by entity size, because the number I've got in my mind is at the collective level, rather than by size, sector, listed, unlisted—all those sorts of things. But I can see the interest in the issue of that information flow coming through to ASIC. It is a really important lead indicator along with reports of misconduct and other means by which ASIC identifies possible misconduct in companies. CHAIR: Maybe you can give us some ageing data, even from 2022-23— Ms O'Rourke: No problem. CHAIR: so that we get a sense of the change. Ms O'Rourke: We'll certainly have that available ahead of 20 March, when we'll be looking at issues in relation to audit in more detail. We can also cover that question of liquidator information and the burden of—I think, just briefly, you mentioned the question of how much information ASIC expects liquidators to provide to us. We've made some changes in relation to that to try and make that a more effective process so that less information but more valuable information is provided to us. That's something we'd be pleased to explore either later today or in a fortnight. Ms LAWRENCE: I think you've answered my next question in part, but, to clarify, if regulators, inquiries and courts can identify systemic misconduct years later but auditors can't identify it at the time, are you suggesting or are you confirming that the current audit regime is fit for purpose or not fit for purpose? Ms O'Rourke: I would not reach the conclusion that it's not fit for purpose, because I think the audit function is quite specific. Auditors don't go into a company to explore for misconduct; they have quite specific tasks to undertake in relation to the verification of the financial information, or they may be auditing sustainability information under our new framework. Those are quite specific standards about whether information is accurate, is supportable and is verifiable. It is specific and important—absolutely important—but it's not a wholesale investigation or exploration of the company's activities, behaviours or issues. The statutory requirement to tell ASIC of any of the issues that you've referred to is triggered when, in conducting their specific duties and activities, auditors encounter something. But I would be concerned if there's an expectation beyond that, because it's partial. That's why we describe it as being a partial contribution to other means by which misconduct is brought to our attention or to other regulators' attention or, indeed, to shareholders' attention. Implicit in Chair Longo's comments earlier about it being a little bit unusual for ASIC to be able to commence directors' duties was, of course, that shareholders can as well—breach of directors' duties. They are to whom the duties are owed. So there are different parts of our system that quite properly fit together in holding directors and officers to account for their behaviours, but the one that you're highlighting is an important one. Ms LAWRENCE: I appreciate what you're saying. I still wonder, though, if the audit framework under the Corporations Act is too narrowly focused on financial statements and if it's not capable of detecting broader compliance or governance failures of the kind identified by Justice Lee. I can appreciate that they intersect with the obligation of directors, but, if we're also finding now that the directors are not responsible for the same, then who is? How do we manage to get the—while there's a perhaps a bit of tension. Or there might be a complete demarcation of responsibilities. Have we got the audit framework too narrowly focused, or can this be something that could be looked at to work in harmony to support the directors in discharging their duties with that assurance from the independent auditor. We've got an example of a dedicated room for high-stakes rolling, which I would have thought would be high risk, an area of focus, yet clearly there was not enough focus applied. Ms O'Rourke: We're not making that assertion that that's an area that's required to change, the role of the auditor, in relation to this issue. I don't think that's something that has been suggested either in relation to this case or more generally in relation to our work in relation to auditors. Ms LAWRENCE: So is there a zero expectation that they should have raised red flags with you, that there is something— Ms O'Rourke: No, I didn't say that. There are statutory requirements. We understand that there weren't any brought to our attention. There weren't any statutory requirements that came to us. I think you said there was zero requirement on them. We're not concluding that. Your prior question, though, posed: Well, what do we take from that? Are the pieces of the puzzle enough? What I'm saying in response is there are different parts of that and all need to be working well. We haven't talked about whistleblowers. We haven't talked about other means by which reports of misconduct can be identified. I think there are different parts of the system that all are important. Ms LAWRENCE: So what can we take away from this though? I appreciate you're going to provide some additional information on notice, but what can we take away from it? I know we need time to read the full 500 pages. What message do we want to give to auditors about their obligations to identify where there may be red flags to regulators? Mr Longo : I don't think this judgement has anything to say about that. Ms LAWRENCE: No, I appreciate the judgement may not, so I'm asking what does ASIC have a message in support of— Mr Longo : I think the premise of your question is that the auditors should have said something earlier to somebody about these matters. I just don't know whether that's a takeaway from these facts and circumstances. The casinos have their own regulatory framework in Australia. I don't know whether that affects the duties of auditors. We can take that on notice. But as things stand this morning, I don't think this case or these circumstances raise any particular issue around the role of auditors. But we will give it some further thought. As Commissioner O'Rourke says, it's a good question to take up next time with the committee. We'll take the next two weeks to think about it. Ms LAWRENCE: I appreciate that very much. CHAIR: Just following up on that excellent line of questioning from my colleague from Western Australia, can I refer to an article by Michaela Whitbourn published 12 April 2022, which reports on Ms Martin being questioned. It indicates that the inquiry was refused a request in September 2018 from the financial crimes watchdog AUSTRAC for a copy of the KPMG report into matters relating to money laundering risk on the basis of legal professional privilege. From what I quickly read in these articles, KPMG was involved in both internal and external audit work for Star. An independent report from KPMG—it's reported—found that it's anti-money-laundering team wasn't adequately resourced, and identified the money-laundering and terrorism-financing risk as high. How might ASIC interact with such a document? What responsibilities would the auditor have in your regulatory oversight given you've already put on the record today that this is oversight territory for the New South Wales racing and gaming entities? Would they be required to send something to you? Mr Longo : That's my understanding. I don't know whether Mr Savundra can. The KPMG report was a critical part of the case. The way I took Senator Lawrence's question, I thought it was a bit of a broader question about the role of auditors. But there's no question the KPMG report was a critical part of the case. I can't remember who commissioned that report, but I don't know whether it even went to the New South Wales Gaming Authority. Do you happen to know? Mr Savundra : I don't. But to the extent they are operating as an external auditor, they're under statutory obligation to report misconduct to us. That falls within our jurisdiction. But I think we need to remember here that the primary or front-line conduct regulator, both for the casino—the corporate entity and individuals within that entity—is the state gaming authorities. CHAIR: I don't doubt that. You've made it very clear that they're the primary regulator. I am hearing a little bit of a soundtrack from being on a London train—mind the gap, mind the gap, right? Mr Savundra : Yes. CHAIR:  Because there's a primary—there's a reason—a secondary line of risk management and a third line. There's an integration of these entities. Certainly, we've taken evidence with regard to money laundering, and significant changes have occurred in that area in recent years. There are ongoing conversations between ASIC and AUSTRAC on a regular basis. I'm just following down the line. I think that has been well delineated here by Ms Lawrence who's not watching. If information is being reported, how is it being shared? How is it being identified? How is it being flagged? What is the system response capacity at every point? It's not just directors who then are responsible for paying attention; it's that regulatory architecture—not one brick, the whole building. Mr Longo : When it comes to casinos, it's basically state based regulation. So New South Wales, Victoria and Western Australia all have their own gaming authorities. Obviously, we administer and are very interested in director's duties generally in corporate governance. CHAIR: And audit quality and auditor responsibilities. Mr Longo : But just sticking to casinos for a minute, that's a highly specialised, very risky business, which has its own particular regulatory oversight, which Justice Lee went to some trouble to describe and to recall the work of Sir Laurence Street, 1991. I don't resile from ASIC's interest in director's duties and corporate governance in general. But while we're talking about casinos, we are not a casino regulator. We don't have expertise in that area. There are specialised state based regulators that do that work, that deal with the auditors, that have the duty of approving personnel at these casinos. It's a very specialised area and His Honour, if I may say so, in a very clear way spelled out what the issues and risks were of that business right back in 1991. So our interest in this case was the role of the directors in the particular circumstances of this case. But there's a lot to do with casinos. It's just not our area of expertise and it's not an area that we take any particular regulatory interest in. CHAIR: It's already been said here this morning that casino in particular is a high-risk place for money laundering and terrorism finance. Our AML/CTF laws took a very long time to actually be implemented. It's happened under this government after many public promises from as far back as the 2017 declarations of support for the second tranche of reform, and Australia gave its dissent but didn't do the legal work that needed to happen. If we take on board that whole context—and mindfulness in the public place, even if there was slow implementation—how could it be that auditors would not be informing the board? How could it be that auditors weren't sufficiently flagging that with the board? What do they see as their responsibility? And I am so over the self-absolution mantras that keep coming from, 'Well, we only check what's there.' What are the professional responsibilities of people in this particular circumstance, which has captured the public imagination and made things that were opaque a little clearer to the Australian people? Where are the auditors in the middle of all of this is a really important question, so I look forward to the responses to Mr Lawrence's questions. I see her and I raise her—to use a gambling analogy! Ms LAWRENCE: My interest there will be a thread throughout the day because I think there are different sectors including superannuation. I think even in real estate we're seeing some troubling areas of concern around money laundering, no less. I am trying to understand: are the auditors a means to at least identify where there are red flags to support that whole ecosystem? I appreciate the point that you made that it's not something that you have immediate carriage of but it still seems to be a principle throughout. Have we got the framework cast wide enough or is it still fit for purpose? CHAIR: We're just four minutes off the scheduled break. I want to come back with some questions around AI, not only in this circumstance with regard to Star but also within the auditing firms. Proceedings suspended from 10:26 to 10:45 CHAIR: We will resume. I'll come back to Star in just a moment, but can I go to AI more broadly. I note that Deloitte Australia has ordered its audit staff to stop uploading confidential client or firm information into ChatGPT. Deloitte produced a $440,000 government report with fabricated citations. That's when Australians learned that AI hallucinates—an interesting learning moment for the community. In 2024, KPMG Australia staff used AI tools to cheat on internal exams. Corporate Travel Management, CTM, has uncovered potentially years of material accounting errors, putting renewed scrutiny on PwC's longtime audits and the company, after Deloitte—its new auditor—identified issues while they were reviewing PwC's work. That little snapshot certainly causes me concern. I give you an opportunity to respond, in the general, immediately. Mr Longo : I'm not sure what— CHAIR: AI and its intersection with the audit world. Mr Longo : I'll hand over to Commissioner O'Rourke. AI is obviously a very big, wide subject—transformative of our community, our society and the community in general. As it applies to auditors, I'll ask Commissioner O'Rourke to comment. Ms O'Rourke: Thank you for reminding us of those recent examples about some of the issues that have emerged in relation to the increasing use of AI. ASIC did some general work in relation to the use of AI, published back in 2024—it feels like a long time ago in the AI world. At that point we did note the use of AI, predominantly in financial services but across sectors, and that tipping point which we've tried to observe over the last 18 months. It's just been an extraordinary increase in the use of AI in both financial services companies and more broadly within the economy. I think those particular examples that you cite in audit firms are instances where people—staff and organisations—are using AI in different use cases and in areas, in those cases that you've alluded to, that can generate real concerns. What we see are the efforts of firms—I think you refer to the response in your first case—to set guardrails. I think there is that wider sense in the community that the government's been grappling with: do we have AI bespoke guardrails or do we use existing guardrails to control the use of new tools, including AI tools. Where we've landed, I understand from the government's perspective, is the latter. We're using existing guardrails and identifying if additional safety steps are required. But we certainly have said publicly that there are plenty of rules that apply—existing rules that currently apply to the use of any tool, including AI tools—and we'll be able to consider how they are used. Responsibility for actions remain with people or with the firms in those cases that you're referring to—making sure that information is properly protected, making sure that training is done appropriately and the rules that apply to those. We talked about those being professional accounting body responsibilities with respect to discipline. I think Senator Pocock was keen to understand exactly how that worked at the last Senate estimates hearings. That's an example of existing provisions that apply—reporting and disciplinary action that can apply. I hope that's a helpful starting point, but I'm happy to go into any of the more-specifics, if that would be helpful. CHAIR: Thank you. We do know that AI, like any new technology, has potential for incredible good but also is subject to abuse. There have been discussions at estimates in recent weeks about the productivity dividend that we all hope to get from AI used responsibly and for improved outcomes in everything from efficiency to governance standards. And, of course, it was worthy of comment in Justice Lee's much discussed judgement this morning. What do you know of this alleged email sent to Deloitte's audit and assurance staff, ordering them to stop uploading confidential client information into—nothing secure—ChatGPT and their use of personal emails rather than internal systems? How do you know of it? Was it the Tadros article of 24 February that alerted you, or have the big four and other players in the audit space been advising you about what they're doing with regard to professional management of the AI opportunity threat? Ms O'Rourke: As I think we've talked about at the Senate estimates discussion in a separate instance, we do have ongoing discussions and regular meetings at the operational levels with both the firms and the professional accounting bodies, at which issues- and information-sharing can occur. I think we unpacked whether that happened, and the circumstances in which information was shared, in relation to the KPMG issue at estimates. In relation to this Deloitte one which, I understand, you're asking me about, I'll need to take on notice whether that's something that was alerted to ASIC ahead of 25 February or after. I don't have that immediately to hand. I'm very conscious of the article you refer to—the 25 February article—so we've got that information to hand. But, as to whether there was additional or earlier information, please let me take that on notice. CHAIR: Thank you. In this article by Mr Tadros to which I'm referring, he indicates: The firm declined to specify the number of incidents or whether any were reported to the privacy commissioner. The spokeswoman said the firm had "robust monitoring systems" to detect incidents and that the email reflected the firm's strong stance on protecting confidential information. Are you confident that the Privacy Commissioner is being informed, and do you have any intersection with that part of professional behaviour? Ms O'Rourke: I think the Privacy Commissioner would be able to more directly assist you with that inquiry, rather than ASIC. CHAIR: Do they talk to you? Ms O'Rourke: We have engagement with the OAIC. I can't speak to how frequently that is—I'm sorry—or whether that information-sharing included this particular instance. CHAIR: How critical is it for the clients of the large auditing entities to be confident that their confidential information is secure within Australian borders? Are you confident that is the case? Ms O'Rourke: I think the response that you've cited—the email that was circulated, or exposed, through that article—does show the firm responding and expressing the importance of that issue and reiterating that with their staff, and I would agree it is important for all of the firms to observe those controls. Information provided to auditors is sensitive, important and confidential, so those controls are important as well. CHAIR: We agree in principle. My question is: Who's watching this? How involved are you in that role? Whose role is it? Ms O'Rourke: I think you referred earlier to the role of the Office of the Australian Information Commissioner for Privacy Act breaches, and I think you made reference earlier to there being, in circumstances of corporate activity, whether it be in a casino or whether it be in relation to other issues or matters, multiple regulators. CHAIR: Yes. Ms O'Rourke: So, yes, there are multiple regulators in relation to the provision of confidential information. CHAIR: I accept and understand that, but what's your role in this? What are you doing about the professional responsibilities of the auditors that you are overseeing in terms of this? I think it's shocking that it's happened. What are the consequences for doing this? If it becomes efficient and the whole goal is simply about grabbing every dollar, no matter how that might breach ethical standards or privacy legislation, then we've got a problem of incredible scale in this sector. So what are you doing? Ms O'Rourke: I think we've canvassed this in earlier hearings of the PJC and otherwise where we've described ASIC's role in relation to auditors as being reasonably confined. As you know, we register particular individuals—registered company auditors. We do not register or license firms. We do not regulate audit firms. If your question is: 'What are we doing in relation to the firms?' that is not something that we have regulatory oversight of. We've had that discussion around all of the architecture. It's been canvassed in some policy papers and in other reports. I can't add to that earlier evidence about how the framework sits at the firm level in relation to ASIC. CHAIR: I accept all of that. That is now a matter of fact, and clearly there's a very big hole there; right? But for the limited number that you do have oversight of—I don't recall the number off the top of my head—how many— Ms O'Rourke: There are approximately 3,000 registered company auditors. CHAIR: So what directions have you given that cohort of 3,000 for whom you are directly responsible with regard to AI principles? Is there a note that they are required to comply with? Ms O'Rourke: Thank you for raising that. We haven't had any direct or specific engagement with or communications to the individual registered company auditors that I'm aware of, and, of course, I'll correct the record if that's not so. But I'm not aware of any direct engagement with the individual people registered under the Corporations Act framework with respect to AI. Having said that, we—our chair and more generally—have been speaking about AI in a way that I think is of wide application in relation to the careful and responsible use of AI. I think you alluded to the possible benefits associated with its use in terms of economic activity, productivity and otherwise, and I think that, to the extent auditors have identified use cases about efficiency and the capacity to look at a vastly larger range of underlying documents, rather than sampling, there might be ways of thinking about the positive benefits of AI across the board. I hope that the wider comments that we've made in relation to AI are apt and relevant to sectors, including auditors. But have we given specific guidance to registered company auditors? We have not. CHAIR: I'll be seeking what happens in that space as we go forward. Given that you're not responsible for the large four companies that do audit— Ms O'Rourke: They're partnerships; they're not companies. CHAIR: Sorry—'entities' is what I've been calling them. The partnership structure is another issue which is well considered in one of our reports. But they do auspice the company auditors—the registered auditors that you have. They sit within that; they are partners within that. Ms O'Rourke: Many of them are. There are plenty of those registered company auditors who are in their own firms or in smaller practices. I should also have added that, as well as registering company auditors, we do register what we call AACs, audit companies, but very few people choose to use that company form. I think, as you've observed, it is predominantly partnerships that are used in relation to these professional services for historical and other reasons. So, yes, there are registered company auditors, plenty of them, in the larger partnerships. There are plenty who are in the smaller firms— CHAIR: Is it your practice to only communicate with those individuals directly, or do you communicate with the partnerships, the CEOs and the leadership team who oversee those particular ones for whom you have direct responsibility? Ms O'Rourke: The answer is all of the above, in the sense that we have a range of different engagement and communication channels. CHAIR: So you do talk to them? You do write to the CEOs on matters? Ms O'Rourke: I'll draw an example. We have reports. They're published. We have engagement with the professional accounting bodies, who are sometimes able, on specific issues or more generally, to do that additional transmission of key ASIC issues and messages. We have engagement with firms, and we have engagement— CHAIR: The partnerships? Ms O'Rourke: Yes. CHAIR: That's my question: do you communicate with the CEOs who are the heads of these partnerships? Ms O'Rourke: Amongst other communication methods, we do. We do also have engagement with the RCAs but only occasionally directly. An example is that, when we commenced the work— CHAIR: Can I just stop you there, Ms O'Rourke. I know that you'll give me a very long answer to all of that, and that is worthy of consideration. But my question is the following. While I understand and accept that there are the 3,000 that you look after directly, the people you communicate with directly, there is the opportunity—in fact, you take the opportunity—to communicate with the CEOs of the partnerships under which those registered auditors sit. Given that you do that kind of communication on a regular basis—I'm assuming that you do discuss critical issues with the leaders of the big four auditing companies—have you raised concerns about AI practices, whether it's regarding the cheating on exams or the ChatGPT email information sharing risk? Ms O'Rourke: Certainly those engagements at the commission level have not occurred in the time since the Deloitte issue associated with ChatGPT that you mentioned. So there haven't been any since 25 February that I can recall. I think I might have to take that on notice and review the agendas from those discussions. CHAIR: Could you take on notice communications that you've had directly with the CEOs of the partnerships under which the auditors sit, who take the role of partners alongside—I'm not a lawyer, but this is how I understand it—joint and several liability. That's the argument; they say that they're all in this together. Can you take on notice what communications you've had with those CEOs about guidance on acceptable and unacceptable uses of generative AI generally and then specifically with regard to matters that are now emerging and what directions you have given to those who are registered with you about their professional responsibilities with regard to AI. Ms O'Rourke: I'm happy to take that on notice. CHAIR: Thank you very much. I'll come back for another line of questioning. but I'll go now to Senator Scarr. Senator SCARR: Thank you. Chair Longo, I was reading your opening statement. You say: I'm pleased to report to the committee that, through our ongoing determination to build up our enforcement capability, ASIC secured a record $350 million in civil penalties and $583 million back to Australians from July to December last year … I think that, from an enforcement perspective, that is a pleasing outcome. I recognise that and I acknowledge the work of all of ASIC's staff and also of external law firms and whoever assisted in that process. However, the flip side is that we still seem to be dealing with issues, including with respect to our banks, that have been the subject of discussion and court cases over many, many years. We still have a situation where ASIC is securing civil penalties against some of our largest companies and super trustees in the financial ecosystem—ANZ, NAB, CBUS, RAMS, Australian Unity Funds Management. Of course you have to bring these enforcement proceedings, but why are the same issues arising years and years and years after, say, the banking royal commission et cetera? It's quite disturbing in some respects. I'd like to give you an opportunity to reflect on that. Mr Longo : I might need some help with those reflections. Really stepping back, superannuation trustees, telcos, insurance companies and, in particular, banks are heavily regulated entities. So the question we should be asking ourselves is: are we going backwards? Are the standards of governance and the outcomes for consumers and account holders of these major institutions going backwards? My personal view is we're not going backwards. Having said that, I think reasonable people can differ about this, but we actually don't have metrics that say, 'In 2025, the banks behaved better than they did in 2024,' or, 'They went backwards.' To be objective about it, I think that those metrics don't exist. All we really have is what the banks say about themselves, the court cases that we bring and the reports that we publish—for example, the better banking report that Commissioner Kirkland and I were part of. There are a whole range of reports that we publish. Overall I think Australians should continue to have confidence in their banks. But we have to be ever vigilant. History tells us that, in heavily regulated institutions like banks, which are very complex places that are very reliant on technology and very reliant on people, things are going to go wrong. Our job, APRA's job, the RBA's job and the system's job is to hold these institutions accountable. They are critical parts of our economy. But, in terms of conduct, I personally don't think we're going backwards. Senator SCARR: I want to refer to your opening statement. You are someone who's not prone to hyperbole and you're very considered, which I deeply respect. However, you did choose to put in big, bold print in your opening statement: Our banks need to get the basics right. We continue to prioritise pursuing misconduct affecting consumers, businesses and the economy. Mr Longo : I wouldn't draw too many inferences from the bold face. I think I've learnt a lesson there, if I may say so with candour! CHAIR: I suggest you continue with your candour, Mr Longo. I appreciate it. Senator SCARR: I do too. I think it's great. It takes me to Justice Lee's comments about signalling and flagging for boards. Mr Longo : I worked for a big international bank for nearly 18 years. I'm very, very familiar with what can go wrong in banks. I think the critical role that ASIC and other regulators play is holding the banks accountable. I think part of that message is getting the basics right. For example, we've had issues around promises around interest being paid on accounts and hardship. There are a lot of important things the banks do that they've got to keep doing. I think the community expectations are rising. The banks have got to use technology and AI properly. I don't make any apology for saying to the banks, 'You've got to get the basics right.' That wasn't quite your question, though, if I may say so with respect. I don't think we're going backwards. I think the senior management of our banks are serious people. We have continuous engagement with the major banks through our institutional supervision team. Commissioner O'Rourke and I have regular interactions with the banks. I think the banks are very conscious of the responsibility they owe to the Australian people to run a safe, stable banking system. As far as conduct goes, which I think is probably really at the heart of your question, I don't think we're going backwards. Senator SCARR: Are we going forwards? Mr Longo : I think the Australian banks are widely admired outside of Australia. It's not for me to be an apologist for the banks, but, for what it's worth, our banks are respected globally. The Macquarie Bank probably has the biggest international platform. As far as the domestic banks go, I know from my own engagements that some of them are at the cutting edge of the use of AI. They're very curious, and they're very conscious of the need to harness technology to serve their customers. So I think, in that broad sense, that our banks have a very good reputation. But, having said that, we hold them to high standards. It's a very highly regulated activity. We expect them to look after our First Australians, we expect them to keep their promises of what interest they pay on accounts, we expect them to take hardship applications seriously, and we expect them to provide a service in accordance with the promises they made to the Australian people. I would be interested in what Commissioner O'Rourke and Commissioner Kirkland think because, between the three of us, we have a lot of engagement. Ms O'Rourke: I would agree with that characterisation of the chair. As to where we are up to and our sense of progress backwards or forwards, I would absolutely agree with that approach. For us it's about holding banks to their conduct obligations, identifying where they might not be meeting them, through early signals, and then really carefully inquiring of them in those areas. We've talked about some—hardship and better banking, the use of basic bank accounts—but another area that's really important is scams. Senator SCARR: That's a good example. Ms O'Rourke: It's about how are banks meeting their expectations and the risks associated with that. Senator SCARR: Protecting the customers. Ms O'Rourke: There is the Scams Prevention Framework rollout. The proposed designations, and the codes in relation to those, are prospective, but there are existing requirements that we're really keen to make sure are held to. Another example, which we are looking at currently, is effective linking of offset accounts. We've heard anecdotally that some of the banks may not be properly linking offset accounts, so people's mortgages aren't offset. CHAIR: Due to negativity. Ms O'Rourke: Yes. CHAIR: It was advertised. Ms O'Rourke: So that's something we are currently looking at. Senator SCARR: Is this something across the industry generally, this linking of offset accounts? Ms O'Rourke: We're doing what we call a surveillance in relation to that. As I said, when we hear of an emerging issue we can think about whether that is best to tackle through supervision, through surveillance or through enforcement. In this case, what we're doing is what we call a surveillance. We have chosen some sample banks. We are trying to get a variety of size and type of bank so that we can have a look into that issue and make sure that it's sufficiently broad to draw conclusions that we hope others can apply. Senator SCARR: Sure. Can I just tease this out a little bit on the public record, because I think this is important for customers to be aware of so that they can do their own personal due diligence with respect to whether or not they're getting the deal they thought they were getting through the offsetting accounts. What's the particular issue? Could you describe it in very basic terms. If I'm a customer of a bank and I understand I've got an offset account, what is the particular issue I need to be aware of in terms of making sure, from a self-protection point of view, that I'm getting what I was told I was going to get. Ms O'Rourke: The particular issue is whether or not the two accounts—the mortgage account and the account with funds in it, for which there should be offsetting—adjust the interest payments. It's whether a payment is going to interest or principal and whether that has been effectively linked by the bank. The reason I think your inquiry is a good one is it's actually quite difficult to know because, predominantly, people's mortgage repayments are the same amount. So you can't necessarily see—it's not like it's gone down or up—what proportion of that money has been offset in a way that changes whether or not each repayment is going to principal or interest and the proportion going to each. We're looking at whether people who wanted an offset have been given an offset, whether the mechanics are working for people who think they've got an offset and what information is available to customers so that they can test that question. Your question about self-help is part of the thing that we're looking at. Senator SCARR: What should someone do? Mr Longo : I think Commissioner O'Rourke has nailed it there. It's a classic example from a consumer perspective: how do you interrogate the system that you're getting what you're supposed to be getting? It's quite a nuanced issue. Your offset account is going to go up and down. The idea, as I understand it, is that whatever's in your offset account goes against your mortgage amount, so that the interest levied against your mortgage amount goes down. At the same time the real benefit is you don't change your mortgage repayments. If it all works as intended, it's quite an efficient way of people managing their mortgages. But from a consumer perspective, it's very hard for ordinary people—any of us, actually—to interrogate whether that's working. I might hand back to Commissioner O'Rourke or Commissioner Kirkland as to how we got onto this as a potential problem. Going back to your earlier question, that's how we approach things. We look for problems and we try to solve them. Overall, we think bank conduct is going in the right direction, but that doesn't mean things are always working. Ms O'Rourke: In answer to your question, what a customer should do is ask their bank to demonstrate to them that they have effectively linked their— Senator SCARR: And hope the chat bot works! CHAIR: You've named the problem, haven't you—that you're working hard, you're putting your money in there and there's a degree of trust that the bank is doing the right thing. Mr Longo : That's right. CHAIR: Surely it can't be too hard to direct banks to say, 'You have had this much in your account, and this is what you have saved on your mortgage'—that clear information that doesn't involve you spending 45 minutes on a phone to ask a question. Mr Longo : Like so many things with banks, if I may say so, it all comes back to systems, technology and data—and the same goes for superannuation funds, I might add. We live in a digital world, and if those systems and processes aren't working as intended we're not going to get the outcomes we want for consumers and members of superannuation funds. I don't think bank executives get up every morning intending for things to go wrong, but if those systems don't work then things are going to go wrong. We're worried, in the examples we're giving now, that the systems supporting this promise to mortgage holders may not be working as intended, and that's what we're investigating. Mr Kirkland : A lot of our enforcement work against banks, including major banks, in recent years has been linked to that failure of basic processes. My colleagues have both mentioned our work on financial hardship. We've successfully taken action against ANZ and NAB. We've got a matter against Westpac where judgement is reserved. In the ANZ matter, which is part of those matters for which the court approved an agreement last year, there was a $40 million penalty for failure to respond to hundreds of customer hardship notices. In the NAB matter, there was a $15.5 million penalty for failing to respond to hardship applications within the 21-day timeframe. These are matters that come about because it appears banks don't have the right processes in place to guarantee that they can respond in line with their legal obligations to their customers. That's particularly important where people are facing financial hardship. That's why there's a clear obligation to respond. That's why it has to happen within a certain timeframe. Those systems issues that the chair has spoken about are a key part to all the problems that we see and take action on. Senator SCARR: Can I move to another subject. I don't want to give you advice on your opening statement— Mr Longo : We're always open to advice, particularly when it comes from a senator who's on the committee! Senator SCARR: but you could have put in big, bold print, 'ASX needs to get the basic rights, especially with respect to the CHESS system.' Mr Longo : I was wondering whether I might get some questions from you about ASX. I've been very patiently waiting. Senator SCARR: I left this committee and I've come back to the committee, and it's the same old issues. CHAIR: The problem's still there. This is a concern. Senator SCARR: The interim report from the inquiry panel that was established in December 2025 is just astounding. I am gobsmacked that in December 2025, given everything that has occurred over the last five or so years, we have these findings: Resiliency of critical market infrastructure has been compromised to deliver high shareholder returns— which is quite a damning finding. Also: Governance arrangements fail to provide the necessary focus on critical market infrastructure— and this is a terrible finding: ASX lacks the aspiration to be a steward of critical market infrastructure. …   …   … Capability and cultural barriers hindering transformational change— at ASX, and: The current regulatory approach has not delivered the desired outcome. I congratulate you on the public comment you've made with respect to the performance of ASX over a number of years. ASIC and the RBA are increasing regulation. We've introduced new governance arrangements, panels and independence. You referred to the additional $150 million capital charge. But still, in December 2025, we're getting these findings. What's going on? Mr Longo : That's a terrific question. Unlike the banks and superannuation funds, ASX has a mountain to climb; I've said that publicly. When I first started the role, we imposed additional licence conditions in November 2021. Since then, we've had the CHESS problems. We've had to commence proceedings against ASX, alleging misleading the market arising out of progress with CHESS—these are just the highlights—and there are three independent reports under 825B of the Corporations Act, that have been audited, into various aspects of ASX. The RBA have been doing their work. Frankly, it's been disappointing. We needed something that was going to break the cycle. The thinking behind the appointment of the panel was to step back and say: 'Look, the tools we've been using are not working. We need an independent panel of experts to do a root cause analysis and look at ASX as a whole, and come back with findings and recommendations.' What happened? They came up with an interim report, and ASX have now made a series of commitments to ASIC and, in some respects, to the RBA to address these fundamental issues. As you know, ASX have announced that the current CEO will be leaving and there'll be a replacement in the leadership. At this stage, we still have a way to go to deal with ASX's issues. They are a unique entity in the Australian economy. They're a public company. They're self listed. They're regulated by us and the RBA, and to some extent the ACCC in connection with pricing of some of their services. But they have a long way to go. There's been a lot of engagement with ASX over the last few months. In fairness to the ASX board, they have engaged with us intensely, which is arising out of this interim report; I'll ask Commissioner Constant to comment on some of that. We're doing a lot of work with them continuously on the re-signing of the Accelerate program; I'll ask Commissioner Constant to talk about that in detail. The other part of this is our regulatory strategy, to be frank. In fact, the committee asked us to review the way in which we supervise the ASX. I think it's fair to say that we're changing too. We're looking at our capability. We're rethinking our regulatory strategy and supervisory strategy. The letter of commitments itself has a paragraph in it about the RBA and ASIC working differently together in the future to look for a better, more effective regulatory outcome. We have a way to go. I don't think there's any quick fix here. But I think I'm more optimistic now, than probably at any time in the last four-and-a-half years, that we've finally got a grip on these issues. We have public acknowledgement of them by the ASX and we have a strategy for dealing with them, but there's a mountain to climb. I might ask Commissioner Constant— CHAIR: On notice, because I don't want to interrupt the flow, could I ask you to give some shape and form for the committee in writing to the way in which the RBA and ASIC are working together or separately? What has emerged in the time since you've been on this journey together? Are you on the same page? Are you doing different things? Just reveal a little more to the committee about the intersectionality there, on notice if you can. Mr Longo : Yes. I'm very happy to do that. In fact, the final report that's due at the end of the month will have something to say about that as well. I'm very happy to brief the committee on the work we're doing with the RBA. I've been in regular contact with the governor. I've had a couple of meetings with her. I'm confident that, between the RBA and ASIC, we would make whatever changes are required to provide more effective supervision and oversight. Before I finally hand over to Commissioner Constant, this is on the ASX. I've made this point before. I don't run the ASX. They have to make decisions about how much they're going to invest in their technology. It's their problem to solve. CHAIR: But Australia needs the exchange. Mr Longo : And we will do whatever we can to monitor and supervise. Commissioner Constant? Ms Constant : I don't have much to add. I'm in complete, emphatic agreement—perhaps in your bold type, I think, Senator Scarr—with what the chair has said. Firstly, to give more colour and to restate: we would agree with the premise of the question, which is that all the indications were that something needed to be done in terms of reset and refresh, and there were serious questions. This isn't about isolated incidents. It's not even only about the critically important replacement of CHESS. It's more comprehensive, hence the inquiry, with that comprehensive risk management, governance and capability scope. We did make use of our powers, including our enhanced powers and responsibilities, to initiate the compliance assessment, which is the framework for this. But this is a broad-reaching inquiry, as I mentioned, with three experts, because of the depth, breadth and importance of the issues. Secondly, I think we'd say that the panel, too, in its interim report, agreed with the premise of your question and the premise of the inquiries that this committee has continued to make, as you say, for the years on which you've served on it, before and after the break period. The panel report came from the panel, and ASIC agree with the premise of the question—so much so, that an interim report was brought forth. The panel actually had a short timeframe in which to bring forward the report. They did so much work—I think they did 140 interviews and read something like 10,000 documents—in time to bring forth the interim report, which they did pre-Christmas. That initiated the commitments letter. That was brought forth because of the agreement with the premise of the question, the seriousness of the issues. Finally, I'd say really importantly, so too does the ASX— Senator SCARR: I don't want to interrupt you, but I want to tease out that point. Is it fair to say that the inquiry panel was so concerned about what it found that it made a decision to issue the interim report in December 2025 to accelerate the release of those findings so that action could be taken? Ms Constant : I think it would be fair to say that it's not so much that they were so concerned, or changed the level of concern and the gravity of the considerations they had going into the process; it's the significance of the ASX being stewards of critical national markets' financial infrastructure. And having done that work and seeing the need for a reset, not just a refresh but a reset—and ASX would concur with that themselves—and being in that position to make that diagnostic that you read out that it was time to act, with time being of the essence and this year being a really important year for ASX in terms of delivery, it's a really important inflection point, as the ASX themselves have noted in their recent public remarks, for ASX and indeed for public markets. The final point I was going to make—and thank you for letting me go with the flow—and I think, Senator Scarr, you stated that ASX, importantly, agreed with the premise of this themselves. So their 27 February public remarks—I won't spend too much time taking us back to the chair's remarks—importantly, that reflection of the need to be stewards of critical market infrastructure held to high standards, and acknowledging that they've not always met them, they make that commitment in their public remarks about the need for delivery of sustainable outcomes and the importance of this step in both the interim report and the forthcoming final report. So take the premise of your question as absolutely understood. I just wanted to really reiterate the chair's remarks. Senator SCARR: We're coming up to a big day—20 April 2026. It is, as I understand it, the day of Release 1, with respect to replacing the CHESS system and clearing. I note Chair Longo's point, of course, that ASIC isn't running this program, but what confidence does ASIC have that this targeted date of 20 April 2026 is going to be met? Mr Longo : I think Commissioner Constant should answer that question. I just have a long memory. Senator SCARR: I know you do Chair Longo. Mr Longo : So I'm going to be really careful. I'll start with Commissioner Constant and then I'll take it from there, if that's okay. Ms Constant : It’s probably only fair, because this is a long program with years to run—we won't give you an assurance on behalf of the ASX for what the ASX should assure. However, as the regulators, we have confidence that we have the skills, processes, capability and focus internally to hold them to account against the milestones. So, of course, we are into the real crunch time for Release 1, as you note. Across the next few weeks, we'll be receiving really important assurance reports and sign offs that go toward their commitments about being ready for that go live of Release 1. We've absolutely stepped up our engagement as well at board level down and through, not just on the commitments work—and I shouldn't say 'just'; that's absolutely fundamental—but on the specifics of how, from governance down and through, they are assuring themselves that it is appropriate for the release and the readiness on Release 1 and also being assured, importantly, of their rollback capability in case something does go wrong. CHAIR: On notice, can I ask for a comparison? We had those assurances publicly at this committee before the first effort went belly up. So that's a compare and contrast—a great essay topic. I sense that there's quite a significant change and I'd like to understand what that looks like between what was then from ASIC's engagement and the assurances and the sense of what was needed to be done and what it looks like now. The proof of the pudding is going to be in the eating. Mr Longo : I'd like to be quite clear as to what assurance we're talking about. We're not giving an assurance that they're going to meet 20 April; we are giving an assurance that we're going to do our part in holding them accountable for 20 April. I suspect I'll have one more opportunity personally before I go into the sunset to address this. That will be after 20 April and before the end of May. It's obviously a very serious subject. As things come to an end in my term, I have to say to this committee that we're doing everything we can. It's a top priority for me personally as chair and for the commission for ASX and for its problems and challenges to be finally addressed in a systematic way that gives the public confidence and the government confidence that there's a plan and that, if we stick to that plan, the issues that that's entity is facing at the moment will be addressed within a reasonable time. There's no doubt that this is a top two or three priority for me personally to leave the place with a viable plan. Early indications are, as Commissioner Constant said, that ASX have stepped up. They've responded to the interim report in a constructive manner, and we can hold them accountable to that. Senator SCARR: I have one last set of questions in relation to insider trading. I note the sentencing of a former investment manager to six years imprisonment for insider trading and procuring others to trade in more than $3 million of Platinum Asset Management shares, which is a very, very significant sentence. I note that the parliament has, in the past, increased the maximum penalty in relation to insider trading from five years to 10 years to 15 years. I was reading the judgement, and the judge actually referred to the fact that the parliament had increased the sentencing. Six years imprisonment is a significant sentence. I'm interested in your comments with respect to what ASIC is doing in terms of addressing the issue of insider trading. Historically, it's always been notoriously difficult to prove. Yet we have a positive example here—at least in terms of enforcement process—of a successful outcome from an enforcement perspective that, hopefully, will serve as a considerable deterrent to those who perhaps consider embarking on this unlawful path. So I'm interested in any comments you have on this, on the structure within ASIC in terms of addressing insider trading—your investigatory team focused on that—and on insights you can give us. Mr Longo : I'll pass to Mr Savundra in a moment, to give you a bit more colour, but there are a couple of points you've already made in your question. Insider trading will continue to be notoriously difficult to investigate and prosecute. The thinking behind this team is to concentrate our expertise— Senator SCARR: The team you're talking about? You might just— Mr Longo : Yes, and I'll get Mr Savundra to give more colour there—and also to work even more closely and systematically with the DPP. But I really do want to say that these are hard cases to run. I occasionally hear people say, 'Oh, it's obvious that there was insider trading. It's obvious.' It's a little bit like an echo of the Star case. It ain't obvious; there has to be admissible evidence that can secure a conviction beyond reasonable doubt. So these are very difficult matters to investigate and prosecute. I'll hand over to Mr Savundra to comment more, who's had a lot of experience in this area. Mr Savundra : Despite the difficulties that Chair Longo referred to, and you referred to, in terms of prosecuting insider trading, I'd start by saying that Australia and ASIC have a strong track record of enforcing the insider trading laws. It continues to be an enforcement priority for ASIC in 2026. We've increased our monitoring of insider trading. As Chair Longo mentioned, both in his opening statement and again just then, we've stood up a dedicated criminal investigation team to swiftly progress insider trading investigations and to deepen that expertise through a team which is dedicated. Insider trading happens in the dark or in the shadows. It's, firstly, phenomenally difficult to detect, and then, where a suspicion is identified, it's even harder to prove. What we're seeing is that not only investigations but conduct is becoming increasingly sophisticated through a number of means, in particular facilitated by the use of technology. That means we need to respond in the same way. So, as an agency, we continue to invest in our real-time surveillance capabilities, and we've developed our data analytics detection capabilities to great effect. I mentioned the specific insider trading team. Going back to where I started, I think on any measure we do have a strong record in Australia relative to many of our international peers. I think we have a strong enforcement record, particularly a criminal enforcement record, in relation to insider trading. Senator SCARR: This is a very significant penalty. Six years imprisonment is a significant penalty. Where does that stand in the continuum of penalties that have been imposed? Mr Savundra : I think it's up there, but I don't think it is the most significant there. You may recall the Kamay and Hill matter, which involved an Australian Bureau of Statistics staff member leaking information. I think that might have been seven years plus. Again, I'm operating from memory; I'll correct the record if any of that's wrong. I think it's towards the upper end. I know it's going back a long way, but, from 2009, 47 people have been criminally convicted for insider trading, and I think that rates well to our international peers. There are also the proxies or the work that's been done both by ASIC and by others to assess Australia's market cleanliness. We score well as a market, and I think that is in part or in significant part due to the strong enforcement posture we have both on insider trading and on other market misconduct, like market manipulation and continuous disclosure. CHAIR: Thank you. We'll rotate the call now to Mr Moncrieff. Mr MONCRIEFF: Following up on Senator Scarr's line of questioning around the ASX, I know you mentioned that the ASX is keen to resolve it and so is your team. I want to get your perspective on whether you think the incentive structure is right for the ASX to be doing this in a timely fashion and whether, comparing it to other entities regulated by ASIC, you would be giving them a comparable incentive structure to make sure that they're keeping up with the expectations of the Australian market participants. Mr Longo : That's a really insightful question. With respect, I sort of alluded to this in my opening, and I will ask Commissioner Constant to give more colour here. The critical incentive, if that's the right word, is the capital charge—the $150 million—because that has a direct impact on dividends and dividend policy. Shareholders are not going to get what they've been getting historically because of that capital charge. One of the key findings of the interim report is—and I think this actually does go to the heart of many of ASX's problems—is shareholder primacy, using that concept. For too long, in the panel's view, the entity was run for the benefit of shareholders and there was a lack of ambition and investment in the core business of ASX. Now, normally that's none of our business. It's up to the entity what the dividend policy should be. But, in the case of the ASX, it's very much our business. I thought one of the interesting things coming out of the panel inquiry was confirming that. I think a critical part of the commitment is stepping up for this capital charge, and it'll take some time for them to deliver, I think, on that. I'll ask Commissioner Constant to give a bit more colour there, because I think we were all involved that weekend in dealing with this very issue. Ms Constant : Thank you, Mr Moncrieff, for the question, which I expect, is informed somewhat by your own background. It's an excellent question. To emphasise what Chair Longo has said, the commitments letter itself and the approach agreed in response to the insights of the interim report in part really pivot around not just root cause but incentives as part of root cause. To give some detail that sits behind the chair's statements, the first part is the capital charge. If you think about that root cause of shareholder primacy being an aggravating factor, not having that level of investment and the stakeholder interests, including customers' interests, being subjugated—the capital charge in that regard is a new tool. It's a tool that is available to us. It's a tool that our sister regulator, APRA, uses really effectively. I'll circle back to that. That capital tool, that capital overlay, is to deal with that incentive and get that balance. It looks to the risk associated with the capital program as well and has got a big few years ahead for the ASX. It deals with an overlay that will have milestones and teeth according to the remediation program. There are incentives. It's the first incentive. It's not just going to that root cause of potential shareholder primacy and not prioritising dividends over investment but also having teeth associated with this reset-remediation program, this Accelerate program that's part of the commitments, which also looks like a more traditional, for example, APRA program with the entities that they have prudential supervision of. The second part in terms of incentives would be—as part of the reset of Accelerate, their program and the response to us—that we've already got the plan for a plan around that. That plan is due over the coming months. It's a comprehensive, integrated plan of response. The allocation of responsibilities for those key outcomes in delivering this complete reset and response to the inquiry's findings is going to have clear executive accountabilities with that level of board accountability. That's important because executive remuneration is going to be in part going back to incentives of people who are accountable and linked to delivery against some of those milestones and some of that reset program. The final piece of incentive that's worth noting is the governance aspect of both what the panel had said and what the response and commitment to ASIC from ASX is, which is also around incentives of the clearing and settlement entities—that independence of the boards of the clearing and settlement entities to get full independence to ensure the incentives are right there too in terms of the infrastructure that they operate. To round out, in terms of learning, I think you talked about learning from how others are supervised. We're working really closely with APRA in this regard. This is all part of our supervisory remit at ASIC, but it's always excellent when we can learn from the close work that we continue to have with APRA, both inside the inquiry team—you'll be unsurprised to hear we've had excellent people from RBA and also from APRA be seconded into ASIC as we transition into this period of further enhanced supervision. Further on my answer previously—and we'll be coming back with some of that detail—we're ensuring we're capturing the insight of some really excellent people we've got the benefit of having on secondment and perhaps more permanently from APRA. Thank you. It's an excellent question, and I intend for us to be giving more colour on this when we take that question on notice and come back with a response. Mr MONCRIEFF: Have you got the ability to pursue that similar charge with any other entity that you've got, or is that solely with the ASX? Is there any similar power that you've got with any other regulated entity? Mr Longo : We've been given some new powers of supervision over the ASX coming out of the market infrastructure reforms and the competition in clearing and settlement reforms. I seem to have been corrected by someone, but I think we could have compelled, probably by court action, the imposition of this capital charge, but it would have taken us some time. From a strictly legal perspective—I'm just trying to be careful here because I actually haven't got it in front of me—I think we do have the power now to impose this charge over ASX, but it is a power that we haven't previously had, and it's a power that, if I may say so, is untested. If there were resistance to the imposition of this charge, we could be keeping the federal court busy for a while, but that's all a bit academic, if I can use that word. The fact of the matter is that we made it very clear to the ASX how strongly we felt about the need for a comprehensive, credible response to this report. We thought the imposition of a capital charge had to be part of it. We felt very strongly about it. Really, whether or not we actually had a legally enforceable power—I think we do. We would have been prepared to test that, but, as things played out, it wasn't necessary. CHAIR: In what year did you acquire that power? Mr Longo : In the last 12 months. Ms Constant : In the last 12 months, as you know, partly through the work of this committee, we've got enhanced powers. That's also relevant for the establishment of the inquiry—in the compliance assessment approach that we took to the inquiry. As the chair has said, we're quite committed to the importance of dealing with that root cause, that being that incentive, and also a capital management program and capital overlay consistent with the risk and importance of capital delivery, including tech delivery, over coming years, and hence looking into the availability and being ready to test it. But, pleasingly, this was an agreed and offered commitment from the entity itself. Mr Longo : Just to answer the question comprehensively, this is not a power we—we're not APRA. The imposition of capital risk charges is a well-understood and critical feature of APRA's toolbox. It's not part of our toolbox normally. The ASX situation is pretty unusual. Mr MONCRIEFF: Okay. Excellent. Just changing tack a little bit, I'm just wondering if you could give us a bit of an update on the Financial Services and Credit Panel and how that's going operationally, especially around the non-publishing of the names of the providers—how that's working and whether that's effective. Mr Longo : I'll ask Commissioner Kirkland to comment on that. Mr Kirkland : Certainly. It is now a regular part of our regulatory framework to have access to the Financial Services and Credit Panel. By way of a general update, as at 26 February, we had convened, since it commenced, 51 panels, and the FSCP had made 39 decisions. There are 10 panels with decisions pending, and there were two where panels lost jurisdiction because the individual ceased to be a relevant provider or a financial adviser. I think that gives you a sense of the scale of the panel's operation. We, of course, publish all of the decisions on the FSCP Outcomes Register, which is on our website. From my engagement with industry, I would have a few observations that go, hopefully, to the heart of your question. We see great value, in particular matters, in having industry peers evaluate the conduct of advisers and express a view on whether that conduct was appropriate and also identify what sanctions within the remit of the FSCP might be appropriate. So we see value in having industry peers play that role as members of the panel. Also, from my discussions with industry, I know that key people in the industry look closely at the panel decisions, and there's often commentary on the work of the FSCP and some of the outcomes in individual matters in the industry media, particularly in the media that services the financial advice industry. So we think it's a really useful part of our framework, and we continue to support it appropriately and refer matters there as appropriate. Mr MONCRIEFF: Yes, it's interesting. So the names aren't published? Is it more useful to have the names not published during the process where they're being worked out? Is it more for the independence of the panel than for any legal protections? Is that the main purpose? Mr Kirkland : The panel works as established by the law. That framework was established by the legislation. I would say that referral to the panel is one of the range of options that we have available where we investigate a matter and determine that some regulatory action might be appropriate. At the most serious end of the spectrum, we might take court action and seek orders or declarations in relation to the conduct of a particular adviser. ASIC can also ban advisers. We can determine that we think it's appropriate to ban an adviser. That's something we do for protective reasons. If we form a view that there's evidence that, for the purposes of protecting the public, it's appropriate to ban an adviser for a period of time, we can do that. In terms of how that works internally, we have a panel of delegates that make those decisions. Matters are referred to them, and they make an appropriate decision under the applicable law. In those cases, if an adviser is banned, that is a public outcome: the adviser is named, and we announce that via media release. One of the considerations we'll make if we're looking at a matter is: 'How serious is it? What's the most appropriate sanction?' and one of the considerations in that will be: 'To what extent will there then be a public outcome that includes naming the adviser?' The FSCP is just one of the options available to us, depending on what we find through our investigations. Mr MONCRIEFF: I'm changing track again. Thank you for your updates, last time we met, around the Centrepay issues. I just wondered whether you had any update on any enforcement actions for those businesses. Has there been any update on that since the last hearing? Mr Kirkland : I think the key actions that we had underway involved matters where we had applied stop orders, in relation to particular businesses that were on the Centrepay register; they had appealed to the Administrative Review Tribunal, and we were awaiting the hearing and outcome of those reviews. In the meantime, the Centrepay reforms have commenced, which have, in effect, prevented the sorts of activities that we were concerned about continuing to occur as part of the Centrepay regime. In particular, businesses that were using Centrepay to finance the sale of household goods are being removed from the register or have been removed, and, following those changes, the appeal proceedings before the ART have been discontinued. So that would be the best update I can give you. Because of the reforms to the Centrepay regime that have removed a number of the harmful practices, in relation to which we were taking action, from the Centrepay regime, I would say, in general, we are less likely to take that form of action in the future, because the Centrepay reforms have effectively dealt with the cause of the problems that we were seeing. Mr MONCRIEFF: So do you think that those businesses had been appropriately held to account, before further actions, before those changes came into effect? Mr Kirkland : Our investigations in these matters didn't focus on whether businesses had breached the law in a way that would mean that we might take action. Our investigations were very much of a protective nature—and that was really very much informed by the reports that we were getting from financial counsellors, many of them working in remote communities, that there was harm being caused in real time to consumers who were buying goods from these businesses, with the cost of those goods being financed out of their Centrelink payments. We applied stop orders as a way of trying to immediately prevent that harm, and that was effective for a period of time, but now, of course, the reforms have taken over. It hasn't been a focus of our work to identify whether there were any contraventions of the law, and that's partly because the particular credit facilities involved here in general don't fall within the credit act. When we take action against credit providers, it's normally because they're providing credit products, as defined in the credit legislation. In this case, we were dealing with credit facilities that didn't fall within the credit act, but there is another regime, called the design and distribution obligation regime, that you're aware of, obviously, that imposes certain obligations on businesses, and it's linked to the definition of 'financial product' in the ASIC Act, which is slightly broader. So we were able to take action under the ASIC Act to apply those stop orders, but we wouldn't be able to, in those cases, take the sorts of action that we might otherwise take against credit providers under the credit legislation. Mr MONCRIEFF: If a gap like that came up in another setting, do you think that ASIC has the appropriate powers to deal with that in a comparable setting? Mr Kirkland : There have been many reviews, many inquiries, that have looked at the credit legislation over time. What I would say, in general, is that we continue to find conduct that seeks to evade the boundaries of the credit legislation, but I would say we were also very active in that space. We've had a number of actions in recent years that have been for unlicensed credit activity, and we've had a lot of success in that area. I think people seeking to offer credit products in ways that try to evade the regime is likely to continue to be an issue, but they also need to know that we're onto it and it's a key priority of ASIC to take action in relation to those practices. Mr MONCRIEFF: Thank you. CHAIR: Ms Lawrence, you have the call. Ms LAWRENCE: I'd just like to circle back to the AI questions that the chair asked earlier. Obviously, our regulatory framework is centred around human decision-making. Particularly now, in the context of Justice Lee's findings around non-executive directors not breaching their responsibility to act with care and diligence, who do you think is legally responsible and accountable when companies are deploying AI for decision-making and where harm is caused, for example, in finance, credit denial, flawed investment advice, financial market manipulation or algorithmic trading? Do you have a view? Is it the company? Is it the software company? Is it the directors? Where will the accountability sit? Mr Longo : I think the general principle is that we are technology neutral. AI just affects everything, so I think the starting point is that there's no special law governing how AI is used. We have a whole range of existing laws that can be adapted to dealing with AI. If AI creates a problem in the market, it's a new mechanism for creating a problem in the market, but there's still a lot of law relating to market abuse and market manipulation and matters of that nature. So I think my starting point is that there's no general law in Australia—it's not: 'Here's the AI Regulation Act.' We use existing laws, so if AI is used in a way that causes harm to consumers, then we have existing laws that can deal with that. Justice Lee, I think, spent some time talking about AI. I haven't had an opportunity to read into that as much as other things he had to say. But my view at the moment of what he had to say is that AI has potential benefits for directors in dealing with the range and amount of material that they are asked to deal with in the discharge of their duties. I think he mentioned some work the Australian Institute of Company Directors has done in this space. I personally think the AICD's work supporting how directors should approach AI is very good work. I've publicly supported it. Ms LAWRENCE: Sure. I definitely do see benefits with AI. I'm not trying to be— Mr Longo : No, I understand that. I'm just saying that, from a legal, regulatory perspective, we absorb the impact of AI and see whether it's causing harm, and if it is and it's within our jurisdiction to deal with it, then we'll deal with it. Ms LAWRENCE: Do you feel that boards actually understand how AI systems are being used within the company so they can actually oversee the risks associated with it? Mr Longo : We published a report about 18 months ago where we did a thematic surveillance of the use of AI by Australian financial services licence holders. I haven't got that in front of me, but we saw varying standards of governance around the use of AI by licence holders. There's just so much happening in this space. I did a speech about six months ago at the ABA annual conference on the use of AI by the banks, and all the Australian banks are adopting or using AI in ways that are designed to enhance the customer experience. Ms LAWRENCE: But has ASIC issued any guidance on when the use of AI could become a material governance risk? Mr Longo : Not in particular. We certainly— Ms LAWRENCE: What about on AI washing? Mr Longo : I could be corrected about this, but I don't think we've published any particular guidance or policy or views about it. AI infects everything. What I've said to company boards, for example, is that they all need to be curious about AI and how it affects their business and the opportunities—and vigilant. And if they are going to use AI, they've got to have proper data governance and protections about using it in a way that doesn't cause harm or lead to odd results. ASIC doesn't direct the market on how to use AI or when to use AI, but it is encouraging the market, and, indeed, itself. We published an AI responsibility statement in accordance with government policy a couple of weeks ago—I don't know if you've seen it—where we talk about how we're using AI. Ms LAWRENCE: Yes; hopefully we'll get time to come back to examine that a bit further. Should our auditors also be expected to review or test the AI systems as part of their audit process, do you think? Mr Longo : That's a matter between the auditor and the entity it's auditing. I might ask Commissioner O'Rourke to comment on that. The remit of an auditor of an entity, what they look at, will be determined by the risks or issues that they think ought to be audited for that entity. Commissioner O'Rourke, could you talk a bit more about that? Ms O'Rourke: We started to touch on this topic about core responsibilities earlier with respect to verification of the financial information that's published and relied upon as something that is at the heart of that auditor role when they step inside a company. Going to the questions earlier about who did what, so what did KPMG do in relation to Star, they recognise that sometimes companies ask their auditors to do other work, whether it be in relation to risk management or other services. You can set aside anything that's not audit adjacent as an issue that we've canvassed otherwise, but that question of what a company's board chooses to ask their auditors to assist with—either their external auditors or their internal auditors, which is another function we haven't really touched on the yet—does vary. We see that acceleration of use of AI to the extent we have engagement that's informal. As the chair has said, we haven't given directions, but we are very actively interested to see the uses of AI and the acceleration. We see part of that is about governance growing to match the use, so the breadth of the use or the customer-facing aspects of use. They are important developments, and so the matching governance and care and guardrails that are being developed—that was one of the key messages that came out of report 798 that our chair referred to earlier. Ms LAWRENCE: Okay. Ms O'Rourke: Unless the governance is there—who's making the decision and who's accountable for decisions, if at all, if AI is used; explainability and those sorts of things—then we're very careful to be watching out for any harms that could occur. Ms LAWRENCE: Perhaps we might explore that a bit further at the next session. Ms O'Rourke: On the 20th? Sure. Ms LAWRENCE: I have a couple more questions before we go to a break. I'm going more to your own capability around this space. Ms O'Rourke: Sure. Ms LAWRENCE: Firstly, how many staffers within ASIC have the technical capability to audit or interrogate AI or algorithmic decision-making used by regulated entities? Mr Longo : We have a wide range of skills internally that are designed to be able to investigate effectively whatever it is we're investigating. We have data analysts; we have data analytics experts. We built up our intelligence function. Ms LAWRENCE: So you feel confident that ASIC has the capabilities to detect manipulation by AI driven— Mr Longo : I think we do. At the moment, for example, we're running a couple of court cases against insurance companies where AI type technologies are at the bottom of those cases. It's generating renewal notices where we think the underlying algorithm isn't delivering what is promised to consumers. My general response to your question is that I think we have the capability to conduct investigations that have a component involving AI type technologies. I should hasten to say that, in the market area, for example, the use of algorithms has been going on for years. The idea of technologies being used in the market has been going on for years. The difference with AI is that it's an enhanced technology that has the prospect of providing predictive capability to traders. There are issues around automation of trading strategies— Ms LAWRENCE: Yes, and to that end I've been interested because I've also been looking at what's been happening in the US in particular. Obviously, they've been successfully prosecuting cases there of spoofing, or something like that. I'm learning all these new words within the AI context of market trading. But I was certainly concerned by their warning about the risk that AI trading systems could learn to coordinate and essentially collude. We've got potentially multiple AI trading systems interacting to distort market prices. Mr Longo : Some of that is in the realm of the imagination, rather than the realm of reality. There's been a lot of discussion about, for a start, reaching agreement on what we mean by 'AI technology'. We need to be very specific. The use of agentic AI in trading is very much an idea at the moment, rather than actually happening. Ms LAWRENCE: That's some comfort. Mr Longo : So I think that we need to be— Ms LAWRENCE: So you've assessed the extent to which the Australian market faces that risk? Mr Longo : No. We just need to be careful about what we're talking about. That's all. What I've noticed in more recent times is a lot of— Ms LAWRENCE: I was looking up the Sigma— Mr Longo : discussion about AI technologies. People are— Ms LAWRENCE: I was looking at the Sigma research of fraud—AI washing in trading. There was a case I thought was quite interesting. Mr Longo : Right. Ms LAWRENCE: It was about misleading hedge funds and so forth with the different algorithmic trading models. I'm trying to get a sense of how ASIC feels the Australian market could cope with any volatility and if there are suddenly—what do they call them?—flash crashes and so forth. How robust is our market to stand— Mr Longo : We have a very good reputation for running a stable market with integrity. I think generalised concerns about the use of AI are interesting. Yesterday, for example, I went to a briefing about the use of technologies, including AI, by a market maker. There are a lot of controls around that under existing law, practice and market rules. My present thinking on this is that there are a lot of opportunities with the use of AI to increase liquidity and actually increase market resilience and for better pricing and matters of that nature. I think we should be encouraging innovation in this area. As things stand, of course there's a potential for abuse, but that's always been there. We've had algorithmic trading and black-box issues for the last 20 years. It's interesting. We need to be vigilant. But I think the opportunities for innovation through using AI technology are really significant. Ms LAWRENCE: So you're satisfied that the Corporations Act provides sufficient surveillance and sufficient tools for ASIC to be able to detect and monitor and, ultimately, enforce any action in relation to AI? Mr Longo : I would approach the issue slightly differently. The regulation in markets, for example—we have some prescriptive regulation. A lot of it's principles based. I'm not calling for any particular new law on regulating AI. What you're more likely to see is the evolution of market conduct rules that we might develop with industry to deal with specific parameters or standards that we'd like to see in how the market actually operates. But I think the existing legal framework is flexible enough to deal with AI—if we're talking about markets regulation. It's a bit of a truism to say AI affects every aspect of our community and our lives. Lots of reasonable minds are differing on whether we need to regulate AI in a different sector of our economy or a different sector of our community. But, in terms of markets regulation, I think the current legal and regulatory framework is fit for purpose. What I'm more concerned about is innovation. I gave a speech yesterday on this very topic. I think we have an opportunity in Australia to encourage innovation through tokenisation of AI technologies and the use of our sandbox. I think that's where the opportunity is. There may be a gap somewhere in our law relating to AI, but I don't think that's the big issue at the moment. The issue for us as a country and for ASIC is to encourage innovation and to make sure that we're ahead of these technologies for the development of our markets. That's really what the challenge is for us at the moment. Ms LAWRENCE: Thank you. I would like to explore the tokenisation and innovation ideas a bit further, but perhaps that's for after lunch. CHAIR: We're pretty close to lunch. You referred to markets. Can I ask, on notice: what about AI and audit? What sort of prophylactic action, if I can put it that way, is being anticipated that you're aware of within the profession? And what is your intersection with that? I will close with one quick question. Clearly, the ANZ matters that have been mentioned here this morning were profoundly important in clarifying appropriate behaviours in the banks. I note Mr Elliott determined to take some action, and that has since ceased. Have you had communications with either Mr Elliott or ANZ around that change of behaviour? Mr Longo : If you're referring to the former CEO's court case in connection with his bonus—is that what— CHAIR: Yes. Mr Longo : That's a private matter between Mr Elliott and the bank. I'm not aware of any communication with ASIC, and I wouldn't expect there to be any communication about that. That's an entirely private contractual matter between Mr Elliott and the bank. I don't know anything more about it than what's in the press. CHAIR: Going back to consideration of professional responsibilities once such a matter has been traversed in the public place and settled in such a way, I'm assuming many of the people that we discuss here who have fallen foul of the law in a particular way are people of high skill level. Perhaps they've fallen foul of the law in one instance, but their skill set doesn't disappear. What's your view about the rotation of what are declared as independent directors through the corporate sector? What penalty, for example, would Ms Martin or Mr Elliott have in terms of reputational risk, generally, in going on to secure board memberships in the corporate sector of Australia? Mr Longo : Would you like me to have a go at that now, or after lunch? CHAIR: Would you like to chew on that thought and come back with an answer after lunch? Mr Longo : Very briefly, there's one very brief answer, and that is we'll be seeking disqualification orders when we next appear before Justice Lee in light of the findings His Honour has made. We'll be seeking not only a pecuniary penalty but a disqualification order so that she'll be unable to be a director for whatever period of time the court is prepared to ban her, and similarly in the case of Mr Bekier. Perhaps the balance of my answer, we could, if that's okay with you, Chair, discuss after. CHAIR: Absolutely. Mr Elliott had a quite glowing career until it wasn't, right? What happens after? After what's happened to Mr Elliott has occurred, what happens then in terms of eligibility? Have a think about it. Mr Longo : In the case of Mr Elliott, again, it's a fairly straightforward answer. To the best of my understanding, he can do whatever he wants. If somebody wants to appoint him to a board, that's fine. He had a contractual matter that he wanted to raise with the ANZ in court, I gather from press reports. I have no other knowledge that that action has been discontinued. I'm not aware of any settlement, as far as I know from press reports. He's simply dropped that case and is not taking it any further. But, if Mr Elliott wants to serve on another board— CHAIR: He could become— Mr Longo : That's right. CHAIR: a technically described independent director. Mr Longo : He's at liberty— CHAIR: I often hear this is the fix, right? This is the fix. PwC—they've got independent directors. Who are they? Who's eligible? Who's not eligible? You can have this sort of story and still become an independent director, and the title— Mr Longo : Perhaps, on the idea of what's independent, we really do need to wait till after lunch. Is that a fair? CHAIR: Right. The committee will suspend. Proceedings suspended from 12 : 18 to 13 : 15 CHAIR: To those who are listening, I hope you are finding this a very informative session of the oversight of ASIC by the Parliamentary Joint Committee on Corporations and Financial Services. Mr Longo, just before we parted for lunch, you were going to chew over, literally, not only your lunch but the concept of the eligibility criteria for people who are declared as independent directors and how that intersects with the sorts of, at best, questionable and, probably more commonly, shameful behaviours that we've seen that breach all sorts of ethical codes and community expectations but don’t' actually breach the law as it stands. What is the situation with regard to directors' responsibilities and duties, given the pool of people who could end up on boards in corporate Australia? Mr Longo : I think the way I'm interpreting your question is the idea of what an independent director is. The Corporations Act is silent on the question of what an independent director is. So we look to the general law and general practice and codes of conduct to help define what an independent director is. I haven't got in front of me the current edition of the ASX corporate governance. Ms O'Rourke: It's being revisited, remember. Mr Longo : Yes, it’s being revisited. So the concept of independence is a question of fact in the particular circumstances. The different codes and different situations might lead to different conclusions. The idea of an independent director is not mandated by law. It's something that boards have to decide for themselves what constitutes independence. I think the ASX has these—I think they're still with the fourth edition, aren't they?—governance principles, which are about to be reviewed by a committee chaired by the former governor of the Reserve Bank Dr Phil Lowe. So I think that's really the long and short of it. CHAIR: Does it matter in your view, as the chair of ASIC, Mr Longo, that the people who are serving on our boards, who are governed by the corporations law, have displayed such qualities as we have had cause to consider this morning revealed in Justice Michael Lee's review of Star? There have been references to the four big auditing companies, PwC, KPMG, Deloitte and EY. There have been references to all of the major banks. Does it keep you up at night, Mr Longo, thinking about who's out there in these positions of responsibility and the consequences of failing to have the right people with respect for the law in a black-letter way as well as in a dispositional way? Mr Longo : That's a very broad question. We have a wide range of companies in Australia, from the small companies to the large, publicly listed companies. My personal view is that most of the time directors of Australian companies are striving to do the right thing—and do the right thing—by their companies and by their shareholders. Now, clearly— CHAIR: I'd be comforted by that, but can I take you to the examples that have been the subject of discussion today. We're not talking about backyard operations here; we're talking about large entities. Mr Longo : So am I, Chair. I think the vast majority of directors of companies—large, small and in between—in Australia are trying to do the right thing. Our job, obviously, is to deal with situations where directors have contravened the law, or are suspected of contravening the law, but, in my view, they do not represent the general standards of conduct of directors in Australia. CHAIR: That is good, in the same way it's good that not all Australians are in jail, only a few are. Nonetheless, we've got a few in the jails, and we've got a few who are on corporate boards right now and who I'm pretty sure—after all the years I've spent on this committee so far—are doing the wrong thing. I'm asking: what degree of scrutiny is in place to undertake the necessary protection for Australian consumers and shareholders so that they aren't being exploited by people sitting on boards, handsomely remunerated, who think of directorships as 'tokens' or 'glittering prizes decorating a CV', as I think Justice Lee described yesterday, rather than taking the role seriously? Mr Longo : Well, those remarks were made by the judge in the context of a particular case involving serious issues at a casino. I'm trying to answer your general question about directors in Australia in general, and my answer is: directors in general in Australia, from small to large businesses, are trying to do the right thing and comply with the law. CHAIR: Let me be specific. The board that's overseeing PwC has embedded in it some of the 3,000 registered auditors that you oversee. Are you confident that the people who are on that board, whether independent or non-independent, are doing the right thing? And, if you're not in charge of that, who's watching and what standards are they going to be held to? Mr Longo : I've got no comment to make, either in general or in particular, about that board. I actually think it's an advisory group, isn't it? Ms O'Rourke: Yes. It's a partnership; it's not a board. CHAIR: That matters to us. Mr Longo : I don't mean to be uncooperative— CHAIR: I know you're not, and I'm pressing— Mr Longo : but I think it is an unfair premise to ask the Chair of ASIC to comment on the standards of governance of directors of every company in the country, when we have over three million of them. The vast majority of entities in Australia are behaving lawfully, and where we see evidence of unlawful behaviour that we think warrants attention and investigation, within our resource envelope and in accordance with our enforcement priorities, we will take action. I just don't think I can take it much further. CHAIR: No, I don't believe you can. I thank you for your candour, and I know that what you're saying is true and accurate. However, Australians who are relying on the information flow across corporate Australia don't give a damn or couldn't care to find out about the difference between a partnership structure and a company structure. People put themselves out as directors, and they don't specify which they belong to. Australians look to big companies, with their signage written all over the skylines of our major cities, and they want to have confidence that no-one's gaming it, with perceptions that once you get the title 'director' there's something superspecial about you. Australians want to know that somebody's watching what those directors are doing, whatever structure they might be in. That is our part. We're looking to you for corporations, but our part is ordinary Australians. They don't need to understand the ins and outs of every single part of a regulator's role to need to be reassured that the ecosystem is working in their interests. Mr Longo : I think Australians can have confidence that— CHAIR: Shayne Elliott, PwC, the Star board—you put it all together and people are rightly going, 'Who the hell is watching this stuff? Have we got the right people in there? How do they get away with this?' They're the questions that we get asked. So what comfort can you give me, Mr Longo? Mr Longo : In addition to the responses that I've given? CHAIR: Is there anything that you can say? Mr Longo : I think Australians can have confidence in the rule of law in this country and the independence of its institutions and its parliament. We all have a role to play in giving ordinary Australians confidence that they're living in a society and a country where they can go about their lives and move on. I don't think I can take that question any further, with great respect. CHAIR: Thank you. Ms Jarrett. Ms JARRETT: Good to see you all again. I'm going to change tack a little bit and go to auditors. As you'll appreciate, audit assurance and the role of auditors are integral to trust and confidence in our financial markets, and the activities of the auditors are not foreign to this committee in any way. I read with interest that you had published a report in October last year about auditors' compliance with independence and conflict-of-interest obligations. I understand that many auditors, for whatever reason, aren't complying with their prescriptive and general independence and conflict-of-interest obligations. First of all, for the record, what are those obligations? Ms O'Rourke: I'd be happy to help. We have touched on auditors a couple of times this morning, and I did make brief reference to this report, but I'm pleased to provide a little bit more information about it. For the record, it's report 817, published in October 2025, and it's called Building trust: auditors'compliance with independence and conflict of interest obligations. In designing our work on this piece, we started with quite a widespread data-matching exercise. Ms JARRETT: Before you start, though, just for the record, can you explain what those obligations are. I think that's important for the people listening to really know what we're talking about here. Ms O'Rourke: Yes. I'm happy to explain those. The report that I referred to describes, on page 9, what those independence requirements are—the legislative and regulatory framework. As I think you acknowledged in your question, there are quite specific ones as well as a general independence requirement. The prescriptive independence requirements go to rotation requirements, and they're contained in division 5 of part 2M.4 of the Corporations Act. That's a requirement to rotate that applies to auditors for particular engagements. The second prescriptive set of independence requirements goes to a non-exhaustive list of prohibited relationships. If you've got former relationships between the auditor and the board, then that can similarly be a breach of the independence requirements. So they're the prescriptive ones. I do need to just clarify one thing in your question. To the extent we found breaches of those—yes, we found some breaches of those for this project, but they were not widespread, and the breaches that we did find were in smaller firms of practitioners. On top of those two areas of prescriptive requirements for independence, there's a general independence requirement that applies, which is that all reasonable steps be taken to ensure that the audit activity does not continue in conflict-of-interest situations. That's a more general requirement for people to test if, in the circumstances, there is a conflict of interest and, if there is, to discontinue that audit relationship. That's an ongoing obligation on auditors to ask themselves, at a general level, whether there's a problem with a conflict. In relation to that, we saw concerning behaviours across large and small firms. I'm happy to unpack either of those further. You did ask for the specific provisions—forgive me. That general independence requirement is in subdivision A of division 3 of part 2M.4 of the Corporations Act. Ms JARRETT: Again, for the benefit of those listening, why is it important that we have these conflict-of-interest obligations? Why are they there? Ms O'Rourke: The financial information or sustainability information that auditors are auditing is absolutely in order for people to make good decisions when they are engaging with a company, whether they're engaging as an investor or a supplier, or even an employee—as one of the stakeholders. What you hear about the financial position that's included in those reports you need to be able to rely on. Relying on that—this is the step that we've taken as a society—is to say that it needs to be independently assured and that it's the auditor who does that assurance with an independent mind, looks at the financial information and says, 'I assure it.' Ms JARRETT: It gives confidence, right? Ms O'Rourke: It's confidence, it's trust, and it's reliability. And it's about impartial judgement that's brought to bear on that information to achieve that confidence and trust. Ms JARRETT: In your report, you say 'many auditors'. Can you unpack that? Where are we seeing this anomaly? I wasn't going to say 'anomaly', but where are we seeing this happening? Ms O'Rourke: In the report, we describe three key finding areas. The first was with respect to those prescriptive independence requirements—rotation and relationships. I was starting to say we started this work by looking very broadly at auditors. We found the data points, both internal and external, that we could match to see if we could find issues with rotational relationships from different data points and then kept funnelling them down. We found that there were nine auditors in that area that were unable to demonstrate how they met the rotation requirement and then five auditors that had relationships that we thought were prohibited under the Corporations Act, and they were from the small to medium-sized audit firms. That's the first area of findings. Would you like me to pause before going on to the general one? Ms JARRETT: Yes. If I could, I'll just ask one question. Ms O'Rourke: Of course. Ms JARRETT: In relation to that, what this creates, to me, is a risk to investors or to workers or businesses in terms of their future planning et cetera. Do we know how much capital could potentially be at risk, as well as how many jobs, businesses et cetera? I know you say it's small— Ms O'Rourke: Small practices. Ms JARRETT: Small practices. Ms O'Rourke: There were nine auditors with a rotation problem in the audits of 14 listed clients and five auditors with a relationship problem for six clients—in total, 20 clients affected. Ms JARRETT: And they're companies? Their businesses? Ms O'Rourke: Yes, and I could take on notice the size of those entities. Generally, we find smaller practices audit smaller firms but not exclusively so. There are some circumstances in which quite a big company could use a smaller auditor. So I'd be happy to try and get some size metrics around that for you so you can calibrate that concern you have around the impact. Ms JARRETT: I understand, though, that we do need to keep it in perspective, in terms of the overall size of the capital markets. Ms O'Rourke: Yes—and, I think, also the consequence of the breach. The rotation requirements are such that, if you've been the signing auditor for five to seven years, then you need to rotate off. So, in circumstances where a person does a sixth, it's a breach. But does that mean that the financial information is flawed? No, it doesn't mean that. Ms JARRETT: I agree. Ms O'Rourke: But I hear you, that it's nonetheless a concern. That's why we did the work. We are concerned if people aren't complying with these requirements. These ones are quite clear. You've got rules, and we wanted to check if they were being followed. Ms JARRETT: What are the penalties? Not just the penalties—what happens to these 14 auditors? Ms O'Rourke: The report also does describe the actions that we can take or did take. Some of them we were able to describe at that point in time, and some of them were ongoing then. I will draw you to—sorry; it might be in a separate report. We set out— Ms JARRETT: You can take that on notice. Ms O'Rourke: Yes. We found breaches where we could take relevant enforcement action. The range of enforcement action that ASIC can take does vary from the Company Auditors Disciplinary Board. It does court enforceable undertaking—I have found a summary of it here. We did have three court enforceable undertakings relating to registered company auditors. One auditor voluntarily cancelled their registration, and we did issue an infringement notice. Those were at the point in time of this October report, and I suspect some of our enforcement activity was ongoing after October. If there's additional information, we'll be sure to have it available. We're meeting again on 20 March with a focus on audit, so we'll make sure I've got the most up-to-date stats on that enforcement action in relation to independence and otherwise, because there are other issues that we are concerned about as well. CHAIR: Can I ask a clarifying question here? Do you do a data-scraping exercise to find out who's auditing whom and if they've complied with internal rotation of staff et cetera? Is there a requirement for reporting, either from the listed companies or from the auditing companies, about what they're doing? I note that CTM shifted from PwC to Deloitte after 14 years, so that could have been a seven-year rotation and a seven-year rotation with a different head of audit. That would be compliant, but— Ms O'Rourke: In answer to your question around the data collection and analysis, in relation to this independent surveillance question, we did a specific data-matching piece, like I mentioned at the beginning, where we had both internal and external, and that was around rotation and relationships. And then we did some sort of deeper dives once we narrowed that information, including making inquiries. CHAIR: Is there a public list, or was this for a specific purpose— Ms O'Rourke: That was for a specific purpose. CHAIR: time-limited, one-off dive? Ms O'Rourke: Listed companies in publishing their annual reports and indeed public companies when they lodge their financial reports with us include the statement from their auditor as to the audit. So it's publicly available in the sense that, when filed, financial reports have that information on them. CHAIR: But do you have in place a system where that data is regularly updated annually as those reports come in, and you go, 'Okay, trigger warning. They've been doing this for'—well, I think in one case previously it was 75 years since it actually had an audit— Ms O'Rourke: There's a difference between a firm relationship, as you know, and the person who's signing. The provisions that I'm describing apply to the people, to the individuals, to the registered company auditors. They don't apply at the firm level, an issue that I know we've otherwise talked about. Sorry, I should have been more clear on that. This applies to people. I think the direct answer to your question is no, but, separately from that deep dive on independence, we do do work on file reviews, on financial reports and on audit files. In assessing which ones might be appropriate for us to do about the file review piece, we do look at both risk rated and random elements to choose both the financial reports and the audits. And so it's a little bit different from what you've described in terms of that, but that idea of being— CHAIR: That's helpful. It's an answer to my question. Thank you. Back to you, Ms Jarrett. Ms JARRETT: Can you elaborate now on the second piece of this—the general independence? Ms O'Rourke: Sure. The second finding that we've described in our report is about the general independence requirement, and our observations there were ones that we were concerned about some auditors taking a narrow approach to that general independence. Ms JARRETT: What does that mean? Ms O'Rourke: What we saw was gaps in what they looked at—a tick-box approach to compliance and to considering potential threats to independence. It wasn't a comprehensive consideration of what threats to independence might be and how they might together cumulatively raise concerns about a perception or a conflict of interest. So auditors could tick the box with respect to the prescriptive ones on the Corporations Act—and I should also draw attention to the APES 110, which is a standard that's not part of the Corporations Act—whether they considered more generally that either some facts and circumstances weren't considered or they were very superficially considered or they did not consider how they cumulatively might impact their independence. It was just disappointing to see some of these—a very limited focus on independence, a point-in-time consideration rather than over time, an inadequate assessment of safeguards and a lack of documentation. So they were some of the areas that we've unpacked in the report and how we've then flipped into suggestions about how auditors might address these concerning areas in future. Ms JARRETT: To what extent were the large accounting firms— Ms O'Rourke: Those findings weren't just confined to the small firms. Ms JARRETT: So you've seen them in the big four, for instance— Ms O'Rourke: We did. Ms JARRETT: or even the mid-tier firms, even after everything that they've been through. Have there been actions out of that? Ms O'Rourke: We also, in that category, saw gaps in provision, in how non-audit services were assessed—an area, I know, of ongoing interest—and also limited consideration of long association with clients. Even if there are not the prescriptive rotation requirements, that long association can, over time and in combination with other aspects, lead to genuine questions, and we weren't sure people grappled with those appropriately. The last of those subset areas to draw to your attention is a narrow focus on relationships with office holders who were ex-partners of the firm. There were also multiple areas giving rise to potential independence threats. I think you were about to ask about the next step. Because a general independence requirement has more lack of specificity in relation to it, it's more difficult to draw out a definite breach—five years or seven years, where you can say it's breached or not. In this area it's a case of being concerned about practices and describing case studies—trying to pull out the particular drivers or elements of it—in an effort on our part to bring to the attention of auditors practices we think can genuinely jeopardise their independence, with guidance on those. Ms JARRETT: What percentage of the auditors that you looked at were actually in breach? Is this a reflective sample of what's going on in the broader community? Ms O'Rourke: We've been careful to describe the methodology in our report. While we started very broadly, we narrowed down the areas. I described the nine and the five. They were a proportion of a subset of 48. But it's not that there's that proportion that are a problem across, because we had narrowed it to ones that we had concerns about. And I'd say, similarly, I don't have an equivalent statistic on the number of concerns on the general one. I wouldn't use the word 'breach' because it's harder to be determinative, to determine that that is a breach. It's definitely a threat to independence, and it's of concern to us. We've described our findings as 'disappointing'. But because there's a general independence requirement, it's harder to reach that next stage. Ms JARRETT: Do you have a sense of how broad these threats are across the community? Ms O'Rourke: I think the reason we've called them out the way we have, and noted that they were in small firms as well as large firms, is that they are sufficiently broad to be of concern and for us to bring them to the auditors' attention, for this to be an area of focus for us. Coming back to your initial question about why, it's because this trust, confidence and reliability of the information that our economy trades on is just so important. That's why we've been thinking hard about independence. I think it might be a good opportunity to say that there's the question of independence in behaviour, but also, more specifically, there are questions about independence in actions—for example, on valuation. An area that we've focused on, and which Simone is an expert in, is private credit. When we see auditors going into funds—whether they be super funds, other managed investment schemes or otherwise—that question of appropriately testing the valuation of the assets that sit within those funds is incredibly important. It's sometimes very difficult—it's sometimes not easily accessible information—but for auditors to take that step of trying to independently value it rather than relying on the valuations of either the fund managers themselves or someone else who's a related party in that situation— CHAIR: Would it be somebody they used to work with? Ms O'Rourke: In that circumstance, no. Do you want to add in on the independence? Ms Constant : Yes. Ms O'Rourke: Are you interested in that valuations question, or do you want to come back to this report? Ms JARRETT: I'm happy to follow up on that in the— Ms O'Rourke: In a fortnight. Sure. No problem. Ms JARRETT: What I was really trying to understand was how widespread we think these concerns around compliance with independence are across the board. My next question then is: How do we reduce that? Are the laws good enough? Is it just a practice thing? Do we need to have more learnings? Do we have to have tougher penalties? If it is endemic and it is a big problem, what do we need to do about it? And maybe that is one, given the timing— CHAIR: Do you want to take that on notice? Ms O'Rourke: I think we are going to have that extended discussion in a fortnight, so perhaps it's an appropriate time to talk more about independence, as well as the other elements of discipline and other aspects. Ms Constant : For context, as you go into that discussion, I'd emphasise that point about the importance of this—the financial reporting and audit practices and assurance in and around valuations in this era of rising private markets. We always say— CHAIR: It's an even darker spot to have a look at. Ms Constant : We always say private markets done well are good for the economy. But, to have confidence in private markets, these practices are critical. Commissioner O'Rourke has opened that discussion, which you'll pick up in a fortnight, around the importance of, for example, when superannuation investments are made into private markets. CHAIR: Ms O'Rourke, can I ask you to take on notice: what actions arising from the serious concern that is manifestly obvious in the report has ASIC taken? Ms O'Rourke: Sure. CHAIR: Correspondence to the CEOs of the big four, engagement with the representative bodies and the certifying bodies for auditors and accountants et cetera—what's happened in that space would be helpful. I'll give the call now to Senator Scarr. Senator SCARR: I want to turn to the order made against RAMS Financial Group Pty Ltd. Can someone explain the conduct that RAMS engaged in that was subject to the penalty order? Mr Savundra : The matter was heard before Justice Shariff on liability and penalty on 21 October, and judgement was delivered on 24 October. The court ordered RAMS to pay a $20 million penalty after it admitted to widespread compliance failures in relation to arranging home loans. The court found that, between June 2019 and April 2023, RAMS breached its obligations as an Australian credit licensee and contravened the credit act by doing a few things: firstly, dealing with unlicensed referrers; secondly, failing to have in place adequate arrangements to ensure that customers were not disadvantaged by any conflicts of interest; thirdly, failing to supervise RAMS's representatives to ensure compliance with credit laws, which included failures to create and enforce adequate policies and procedures and failures to investigate misconduct; and, fourthly, failing to do all things necessary to ensure that the credit activities authorised by the licensees were engaged in in an efficient, honest and fair manner. The court held that RAMS failed to have in place effective processes and controls, following internal findings of possible misconduct, which included instances of franchisee staff submitting false payslips from non-existent employers and altering customer liabilities and expenses to ensure loan applications were approved. Senator SCARR: That issue of false payslips from non-existent employers being used as part of the loan approval process to secure loans for people—it is deeply disturbing that that sort of conduct would be occurring. I note that the CBA has recently reported—self-reported, so hats off to the CBA in that regard—approximately $1 billion in home loans obtained fraudulently, including doctored applications and even false documents created by artificial intelligence. That seems to be along the same lines, in some respect, as to what was occurring at RAMS. So what action is ASIC currently taking in relation to those issues in relation to CBA? Mr Savundra : I might hand to Commissioner O'Rourke to start. Ms O'Rourke: Thank you for drawing our attention to some of the most recent findings with respect to what appears to be possibly similar conduct. We too had taken notice and had information to us about the concerning areas that you make reference to for CBA, and we are at the point of making compliance inquiries with respect to those issues. We remain very keen, in circumstances where issues are emerging, to be connected to fellow regulators who may— CHAIR: AUSTRAC? Ms O'Rourke: Whether it be AUSTRAC, APRA, the police—whoever it might be that are relevant in circumstances where something significant that could have elements that fall under the frameworks that they're regulating. Being well joined up and working out if there should be a lead regulator or not are part of those discussions. Senator SCARR: So who's actively leading that investigation into what CBA has self-reported. Is it ASIC? Is it APRA? Is it AUSTRAC? Or is that still a work in progress? Ms O'Rourke: It's a work in progress. Senator SCARR: When are you expecting to have a resolution in that regard? Ms O'Rourke: I should say, when I responded to it as 'a work in progress', it's not like there's some sort of official process that starts and finishes or there's a declaration of someone. It's horses for courses as to whether inquiries continue in parallel or in sequence, depending on the circumstances. So it's not like there needs to be a conclusion at a particular point in time in relation to that. Senator SCARR: So do you have a cross-agency group that's working together looking at the CBA issues? Ms O'Rourke: There are existing cross-agency relationships with respect to all of those agencies that we are leveraging that already exist as they should. Regardless of the entity, information sharing is really important. To the extent that we've already got existing relationships, forums and means of communicating, those are available to us. Senator SCARR: Was any immediate action taken as a result of CBA's self-reporting of this $1 billion in home loans it believes were obtained fraudulently? Ms O'Rourke: I referred earlier to the fact that ASIC is making compliance inquiries. That's an action that ASIC is taking. Senator SCARR: Have there been reports from other major financial institutions with respect to similar concerns? Ms O'Rourke: I would need to take that on notice. CHAIR: Can I table Westpac and ANZ— Ms O'Rourke: I've seen their press reports. CHAIR: Correct. Ms O'Rourke: Your question is whether there's been— Senator SCARR: Well, Senator O'Neill stole my thunder! CHAIR: Sorry. Senator SCARR: That's alright. We'll have to liaise in caucus before we start these hearings next time! But there have been press reports in the Australian Financial Review— Ms O'Rourke: There have. Senator SCARR: in relation to Westpac and ANZ now reporting similar fraudulent-like practices. There was approximately $150 million of similar fraudulent practices which National Australia Bank forecast some time ago. So what's ASIC doing in relation to those reports, in particular in relation to Westpac and ANZ? Ms O'Rourke: I acknowledge the press reports, as that question also asked about whether there was the self-reporting. That's the part I'm happy to take on notice. And, similarly, unless I can be assisted, I'm not aware of that question of compliance inquiries, which is the response that I provided in relation to CBA. By the end of this hearing, I'll be able to confirm if those are underway. Senator SCARR: Can I encourage you to provide us an answer today in relation to whether or not— Ms O'Rourke: Westpac and ANZ— Senator SCARR: Westpac and ANZ are subject to active inquiry by ASIC in relation to these recent reports, which have generated quite a deal of interest. Have you seen the movie The Big Short? Ms O'Rourke: I have seen the movie The Big Short. Senator SCARR: Do you know the book? Ms O'Rourke: Have you seen the movie? Senator SCARR: I've even read the book. I did. There's a scene in the movie where they go to Florida to actually talk to mortgage brokers in terms of the sorts of loans which are being entered into collateralised debt obligations and then onsold to the market. This issue, with respect to fraudulent loan applications, isn't a new one, is it? Ms O'Rourke: No. In fact, I'm not sure if that's— Mr Longo : In the Australian context, it's new. I'm not aware of these issues being prominent. We've had lots of other issues with the banks, but the fraudulent loan applications—I'm not suggesting they don't happen at all, but I would like to think they'd be a pretty immaterial number. On these recent reports, I should say, frankly, I haven't got a lot to offer the committee. A lot of information about them suggests something quite different: that maybe this is an emerging issue with the banks at the moment. But, until now, I don't think it has been. Senator SCARR: One of the particular aspects of it, which may be different from what was happening in the lead-up to the global financial crisis, at least in the US context, is the concern that organised crime is involved and that it's not so much the financial wherewithal of the potential customer; it's that they're fraudulently creating documents to create the semblance of a commercial structure, which they can then use to actually meet their loan obligations but, in the process, wash money. Is ASIC in its inquiries actively considering that part of what appears to be the practices or motivation? Ms O'Rourke: I'm sure the team members undertaking those inquiries will be open to hearing what's different or what's new versus what other practices have occurred in the past. But, to the extent that that element might be there, that would be of more likely interest to AUSTRAC or the police, rather than the conduct issues that would be of particular focus for us. But we need to understand the wider factual circumstances in which we're seeing issues to make that sort of a judgement. So, yes, of interest, but in that contextual form— Senator SCARR: Can I ask you this direct question: is it actively being discussed by ASIC with AUSTRAC in this context? Ms O'Rourke: I mentioned earlier that we're using the existing arrangements that we have for discussion. I don't have notes from those particular ones. Again, if we can, through the course of this hearing, confirm that, I expect that that's for discussion, but I don't have that evidence. Senator SCARR: If you can confirm it, or otherwise, because it is a subject of quite a bit of public interest at the moment— Ms O'Rourke: I understand that, and I understand— Senator SCARR: I think it would provide some reassurance that our regulators are— Ms O'Rourke: Appropriately— Senator SCARR: on top of the issue and are taking appropriate conduct. Turning to the Shield Master Fund— CHAIR: Before you jump off—I'll give you some more time—can I follow up on the matter under discussion? I'll come back to you, Senator Scarr, in just a moment. Senator SCARR: Sure. CHAIR: The two articles that I'm sure were informing the senator's questions, which I've tabled, are from Max Mason, Joyce Moullakis, Angira Bharadwaj and Simon Evans. One of the interesting conversations that I've had—I don't know if my colleagues will back me up on this—was about how people know that money laundering is a really bad thing but they don't actually understand exactly what it is or how people do it. I think these articles are important because they actually put into the public space, in a document, what people are doing. John Moss from AUSTRAC is quoted here as saying that the banks assessing the market suggested 'criminals used mortgages obtained through doctored applications'—which we've been discussing—'to "disguise the origins of illicit funds, embedding them into high-value assets such as real estate"'. They get the money from, perhaps, drug dealing or prostitution rackets or modern-day slavery practices in our country, get enough money together, doctor up some applications, get a loan and start to put the money in through this. Now, they've been figuring this out because they've had more than the five per cent or the 20 per cent deposit. They're not behind in their loan payments, so there are no triggers in the system that would normally make indications. It says: By repaying loans with criminal proceeds, offenders give dirty money the appearance of legitimate income. That's just on the record for what money laundering is. This is a model that's currently operating in the Australian market. I want to go to the article published—I'm looking for a date but can't quite find it. It's the one that you've got in front of you with the headline 'Bank calls in cops over questionable home loans'. If you go to the page where the timeline is, the first thing I want to know is this. It concerns me that, from 15 February 2025, the SpeakUP program had triggered concern at CBA, but if you look through—we've got July, September, September, October—it's quite a while before the police get informed. So when did you find out? Who informed you? What is the line for, 'We found out this is happening; who are we supposed to tell, and how quickly do we do it?'—because an awful lot of money can be laundered in the space of a year, although we do have the second tranche of reforms, and now we've got real estate agents who didn't want to be a part of it but are going to have to declare their suspicions. But they're only going to know—I'll put to you—if their accountants think it's their responsibility. If auditors are going in, going, 'Hey, we're looking carefully for this; we've got a directive to watch out for any money laundering,' then that becomes a priority for them, for which they might not have been paid previously, in five of their seven years. That hasn't been a real focus for them. Now it is, because we know this is going on. I'll go to the bit at the bottom of the second column, where it says: One person with detailed knowledge of CBA's credit policies said another way criminals were targeting the bank was by buying shell companies that appeared to have been trading for two years and using fraudulent income documents to secure loans. "There is not an actual running business. They use dodgy accountants to show the income. Sometimes they have websites, sometimes they don't." This is the bit that concerns me about the intersection between the professional knowledge that accountants have, the observation of what accountants are doing by audits—some of which you regulate and some of which you don't—and the large entities that would be in a position, as the big four partnerships, to be observing these sorts of behaviours if they were called to particularly pay attention and alert you and other relevant bodies in a more timely way. So I offer you the opportunity to respond immediately, but I'm simply putting that concern on the record. Perhaps that could be part of your consideration going forward. What are the systems? What are the timelines? What are you saying to the accounting bodies? How are accountants who are enabled to do this able to do this? Ms O'Rourke: Thank you. We will definitely reflect on that ahead of the discussion that includes the professional accounting bodies in a fortnight. I'm sure they would have an interest in exploring this as well. I think we've talked, in prior discussions around the kind of regulatory perimeter that applies—whether it be auditors or accountants—about the fact that we have challenges associated with people providing financial services or support in a way that is not about their professional expertise. It's not that there is something special about being an accountant; people who can doctor up financial statements could be beyond that group as well. So we have challenges— CHAIR: Yes. We've been here. Ms O'Rourke: associated with that boundary issue as well. But then— CHAIR: The question is: what needs to change? People are able to use the term. They can say they're an accountant. They don't have to have any qualifications. Ms O'Rourke: That's right. CHAIR: So is this a problem? Does it concern you? It affects the market. It intersects— Ms O'Rourke: The effect's facilitating criminals— CHAIR: Correct. Ms O'Rourke: That's right, and I think that extension of the money-laundering requirements to a wider scope of people who have the obligation to report what they see—conveyancers, real estate agents, accountants and lawyers—is a very significant extension. In part, their facilitation of property and other really important commercial transactions where the risks about money-laundering that you've drawn out of using dirty money and then repaying a mortgage is exactly the basis on which, I understand, those extensions occurred—to try and improve the visibility of that kind of misconduct. CHAIR: I know that you're not a policymaking body. That is up to us. But you can describe the problems and you can, potentially, offer suggestions about where things might need to be reformed in some way to stop the leakage. Ms O'Rourke: I think we'd also encourage that question to be posed to the other parts of the regulatory system, like AUSTRAC. I would certainly defer to them on the best ways of thinking about the effectiveness of the framework, including as extended. CHAIR: Thank you very much. Senator Scarr, back to you. Senator SCARR: I'll move to Shield Master Fund and First Guardian Master Fund. Chair Longo, you made the comment about the massive effort that is being made by ASIC in relation to this, and I provide my compliments to everyone involved in the team. This is incredibly important work that's being undertaken. I'm going to ask some questions where I really want to assist in teasing out what is being done to protect the interests, to the extent that is possible, of the 12,000 investors who've been impacted, and also what those individuals need to do in order to protect their interests, which I think is incredibly important. I'll kick the questions off by noting that I understand that ASIC has previously estimated that approximately 12,000 investors were impacted by the collapse of Shield Master Fund and First Guardian Master Fund but that, at one stage, the number who'd actually lodged formal complaints with AFCA was only at about 2,000. I'd be appreciative of knowing what the current update is with respect to those numbers, and, as part of that answer, could you please outline the importance of those complaints being made. Mr Kirkland : I'll kick off, and then Mr Savundra may want to add something. The last number I have is, as at 10 February, AFCA had received a total of 2,162 complaints relating to Shield and First Guardian. We are doing what we can to encourage people who've lost money as a result of the collapse of those funds to make complaints. We have information on our website that we're updating at each stage in the proceedings to let people know what's happened, what action we've taken and how that may affect their rights. We provide information there about how to make a complaint. We've also met directly with some of the representatives of the key investor groups, which is important for us in understanding how people are responding to the information that we've published, what they understand about their rights and whether they're having any challenges dealing with AFCA, and we've adapted our approach based on the feedback that we've received. One of the recent things that we've done is provide funding to Super Consumers Australia, which is a not-for-profit advocacy body for superannuation consumers, to stand up a new website that's specifically intended to assist people to understand what their rights are and how to go about making a complaint, and to try and explain that in very plain terms. That's partly because we had feedback that people were being given advice from a range of different places, including some of the entities that are involved in these matters, and they didn't know whose advice to trust. So we thought it was important to provide an independent source of information alongside what we're doing. We've also sent 11 rounds of direct mail letters and email to different categories of investors. Senator SCARR: Can I just halt you there. So you've sent, is it, 10 rounds or 11 rounds? Mr Kirkland : Eleven rounds—they're not necessarily to everyone; some of them have been targeted to particular groups. Over the time we've been involved, we've sent 11 rounds of direct mail and email to investors. Senator SCARR: How much of that is—let's take this 12,000 figure. I note your update; the latest report you have is that 2,162—less than 20 per cent—have made complaints, which is still a disturbingly low figure. How many of the 12,000 have been captured by that correspondence, and to what extent does that correspondence practically tell people, in simple terms, what they should be doing? Mr Kirkland : In terms of exactly how many we've reached, I'd have to take that on notice and see what we're able to say. I can say that our most recent mailout was an information flyer which focused on that issue of making a complaint and directed people to that independent website. We sent out over 13,000 flyers to just over 10,500 Shield and First Guardian investors for whom ASIC has contact details. One of the key constraints here is whether we have contact details for the individuals. That was also one of the reasons for enabling a new website to be established, in the hope that, if it's designed to be specifically for this purpose of providing information to affected investors, some of them might find their way there through other routes if we can't contact them directly. Through doing searches online, it will hopefully come up in search results. They might see posts on social media. We're trying to do everything we can, as well as what we do through the mainstream media, in talking about these matters and encouraging people to make complaints if they think they've got a right. Senator SCARR: Which is one of the reasons I'm asking these questions. Why is it important that someone makes a complaint to AFCA? Mr Kirkland : That's a key way in which people who've lost money may get access to compensation. AFCA needs to deal with each of those complaints on their own merits and form an appropriate determination. If AFCA makes a determination against a firm that is still in existence, that firm is required to pay that determination. If the firm is unable to pay the determination or has gone into liquidation, the consumer may have a right to then lodge a claim with a compensation scheme of last resort. Senator SCARR: It could well be that some people don't even realise they've got exposure in this regard. They might not realise they have an investment in one of these funds. What's the method by which they can determine whether or not they do? Mr Kirkland : Our advice has been to, if in doubt, make a complaint. AFCA can then determine whether they've got a right or not. To give you a sense of whether we have some hope that our latest communication efforts will have an impact, I said we'd sent out flyers to just over 10,500 investors for whom we had contact details. Most of that was via email, and the email had a 97 per cent delivery rate—so that means we had confirmation that it got through to somebody—and an 80 per cent open rate; 80 per cent of those recipients actually opened the email. There have been approximately 5,000 clicks from the email through to the website that I've spoken about. It's another big step to make a complaint to AFCA, but we have some confidence that sending out messages in different ways is getting through. Super Consumers Australia is trying to then help to further bridge the gap to making a complaint by, soon, publishing templates that people can use to lodge a complaint with AFCA. We'll then be considering, alongside Super Consumers Australia, once we wait and see what happens to the complaint numbers, what else we can do to raise awareness of that ability to make a complaint and how to go about it. Senator SCARR: What's the internet site people should be going to? What's the actual URL? Mr Kirkland : It is called Take Your Super Back. The URL is takeyoursuperback.com. Senator SCARR: I remember the debates with respect to the compensation scheme of last resort. Treasury put out estimates with respect to the likely draws on the compensation scheme of last resort. I can remember a figure of $20 million a year being discussed. We're talking about thousands of people here in this context who have already made complaints to AFCA, and thousands more who may make complaints to AFCA. What estimates does ASIC have? Does ASIC have any estimates with respect to the potential draw on the compensation scheme of last resort arising from these collapses? Mr Kirkland : The role of estimating potential demands on the compensation scheme sits with the CSLR operator itself. There's a process in the legislation through which it makes an estimate each year—an initial estimate, then a final estimate. Then, as I think you acknowledged in those comments, there are some annual caps. One of the caps is a cap of $20 million per subsector per annum. If the operator considers it's going to go over that cap in a year, it can then lodge a further estimate, which can trigger the minister to consider a special levy. That's the context in which estimates would be made. Senator SCARR: Is the operator of the compensation scheme of last resort in active consultation with ASIC, with respect to estimating the potential draw? Mr Kirkland : The way I would describe it is that the operator comes to us at each stage preparing an estimate. They engage an actuary that does the work; it's quite a technical exercise. We provide information to them as part of regular communications, but they'll come to us with specific information requests. To the extent we can answer them, we do. They factor that into the actuarial model, which results in the estimate. What tends to happen with these complex matters is the estimates will become better over time, because initially they'll be starting with fairly raw numbers. At the early stages they may not have AFCA determinations. With Shield and First Guardian, AFCA is working through the process of making what it calls lead determinations, where it identifies matters that are determinations or individual complaints that are representative of a broader class, and will issue a lead determination to send a signal around what the pattern of determinations is likely to be. They're partway through the process of issuing those lead determinations for Shield and First Guardian. As the next estimates come out, I think we'll see more in the CSLR operator's estimates around the potential impact of Shield and First Guardian, because we'll have better data on which they can base those estimations. Senator SCARR: Presumably ASIC is providing cooperation to AFCA in relation to the preparation of those lead determinations. Mr Kirkland : Where we have information that we can provide, we do. At this stage with those matters, there are some matters where we've commenced proceedings. In a way, AFCA doesn't necessarily need to rely much on data that we can produce. In matters that might progress to the CSLR operator, it would be on the basis that there's been personal advice to an individual that's not been appropriate. AFCA would be looking at that advice based on the information they can get from the advice licensee and the adviser, and making a determination based on those very individual circumstances. They tend not to need to rely heavily on us for those individual determinations. Senator SCARR: If there needs to be a special levy imposed, what's ASIC's role, if any, in that regard? Mr Kirkland : Our role is to issue the invoices, to answer in a precise way. If there's a special levy required, it doesn't necessarily happen; it's up to the minister to determine whether there should be a special levy. That has occurred; there was an announcement about a special levy in December last year. It's a year-by-year process, so there may well be further special levies. In a technical sense, the advice on the special levy is provided by Treasury and then our role— Senator SCARR: It's like trying to determine whether or not ASIC is essentially the postbox, if I can put it that way, as opposed to being part of the process or having input as to the appropriateness of a special levy being imposed. Mr Kirkland : The process of whether there should be a special levy and advising the minister really sits with Treasury. Our role is to issue the invoices once the minister has determined that there should be a special levy. Senator SCARR: So ASIC doesn't provide any advice as a regulator, as an enforcement agency, with respect to whether or not it's appropriate that a whole section of the financial industry should have a levy imposed on them because of the misdoing of a few? Mr Kirkland : That is really a policy question for government for which Treasury would be the agency providing the advice. If we have data that we can provide that may be helpful, we'd be providing that to Treasury. But, really, most of that data would actually be fed through to the CSLR operator as part of that estimate process that I've described. CHAIR: Can I jump in on that. I have a couple of questions on Diversa. I know that APRA have a stated intention to increase the intensity of their supervisory oversight and still maintain proportionate regulation. How does that sit with ASIC's strong enforcement action and court based penalties regime? Are they comparative? Are they complementary? Do you discuss this, once again, as an ecosystem of response? Mr Savundra : We've got distinct roles. We're focused on conduct and contraventions of the law—in this case, by Diversa. As you know, we've commenced proceedings against Diversa, seeking compensation and alleging Diversa failed to conduct adequate due diligence before allowing its members to invest, failed to conduct adequate ongoing monitoring, failed to enforce a 50 per cent holding limit imposed for First Guardian and failed to have systems and processes in place to ensure that there was compliance with the holding limit. We would describe the work that APRA is doing as being complementary to ours. As a prudential regulator, they are looking to ensure that the operations of Diversa are prudent. We do consult and we have consulted in relation to the recent work that APRA has undertaken in relation to Diversa. Prior to commencing the action against Diversa, we engaged with APRA, and we will continue to engage with APRA in relation to the progress of our proceeding. CHAIR: I understand that ASIC and APRA have a twin peak MOU, memorandum of understanding. Is that correct? I'm not seeking to ask you to divulge communications, but could you give me a sense of when APRA raised concerns regarding Diversa through that MOU with you, noting that they first imposed licence conditions on Diversa in January 2023. Mr Savundra : It will take me a little while to find that. Would you like to move on, and I'll come back to that? CHAIR: Yes, absolutely. Back to you for a couple more questions, Senator Scarr, and then I'm going to rotate the call. Senator SCARR: I want to ask questions about the Lion Property Group. I understand from previous questions asked in estimates that ASIC had some investigations occurring in relation to the Lion Property Group, and the Victorian Supreme Court has now issued orders that the group be wound up. There were scathing comments made by Her Honour Justice Patricia Matthews with respect to the management of the Lion Property Group. I want to put to you some propositions and give you an opportunity to give us insights from ASIC's point of view. I understand that ASIC did receive a report of misconduct in April 2020, commenced a preliminary investigation in July 2020, began a formal investigation in September 2021, but concluded that investigation in June 2024 without—to my knowledge and you might be able to correct me—any action being taken. And yet, in 2025, the Victorian Supreme Court took the action to wind up the Lion Property Group, and, in doing so, they put aside the issue of insolvency and said, based on the conduct of those responsible for the management of the company, that was an appropriate order. Could you explain what the misconduct investigated by ASIC was in relation to, and whether or not there was any connection between that misconduct and the matters which led the Victorian Supreme Court to order the winding up of the company? Mr Savundra : I might just start with your chronology. Unfortunately, I don't have the exact dates in front of me, but, based off my recollection, I think the dates you provided are broadly correct, as in, we concluded, our investigation of the matter in June 2024. I'm somewhat limited in what I can say because—just bear with me. I'll just get the date. Senator SCARR: Whilst you're looking for the dates, one of the comments that Her Honour made was one of the reasons why the group should be wound up. It wasn't just to protect the assets and the position of the existing investors, but it was also to mitigate the risk of losses by new investors. That was actually an active consideration Her Honour had. Mr Savundra : I understand that. Why I think I need to be a little limited in what I say is, I think it was either in late September or early October, ASIC commenced a new investigation in light of— Senator SCARR: In 2020— Mr Savundra : 2025. We have a current investigation on foot. I'm just wanting to navigate carefully in a way that I don't prejudice the current investigation, despite the fact that we concluded the original investigation. Senator SCARR: If, at any stage, we need to go in-camera— CHAIR: We can do that. Senator SCARR: We can also do that. Mr Savundra : For sure. ASIC quite often waits to commence an investigation where there is an insolvency until the relevant liquidator's report. Once a company goes into liquidation, liquidators are appointed, they have a statutory obligation to investigate and report misconduct to us. In many respects, because they are or become the controllers of the company, they are very well placed, and, in some respects, better placed than ASIC, to get to the bottom of misconduct. They can sometimes see misconduct more easily than we can when we're engaging with the operators of the company to obtain information prior to it going into liquidation. We— Senator SCARR: Having said that, and you know this as well as anyone, ASIC has a toolkit of regulatory actions and enforcement actions it can take, which include, say, freezing orders or other actions to try and, at least, hold the position, hold the ground, for investors, if I can put it that way, to make sure their position isn't further deteriorated prior to liquidators being appointed. Mr Savundra : We do that and we do it often, but we are selective and we need to make choices. Without disclosing too much about the original investigation, we did do a thorough investigation looking at potential harm—and what I'm talking about is a legal harm. That money was being misappropriated, rather than what—the judicial finding that the court made was that they were operating a managed investment scheme and it was unregistered. Senator SCARR: The obvious question—and you can probably anticipate the obvious question—but if you're investigating an entity like this in relation to possible misappropriation, I would have thought that raises a red flag for governance issues across the board, including possible unregistered managed investment schemes and whatever else. Surely, as part of an investigation such as this, you would look at the entity in a broader context for other possible noncompliance? Mr Savundra : The answer to that is, no, we don't. We are selective in what we look for. The context in which this occurs is the Lion Property Group did not hold an Australian financial services licence. The court has found it was operating an unregistered managed investment scheme. In those circumstances, we are looking to see, in quite a narrow way, whether there is obvious misconduct that is occurring. Senator SCARR: I really want to tease this out. Surely if you're looking at possible misappropriation et cetera as part of your investigation you'll get a sense as to what the company is doing? There are all sorts of obvious indicators of managed investment schemes in terms of contributions from investors being invested in common purpose. Presumably you don't go in blinkered as to the narrow focus of the investigation and you're going to look at things, at least, from that perspective, which I would have thought was a somewhat obvious one. Mr Savundra : Again, without going into too much detail, what we did is a detailed tracing exercise. We wanted to see where the money was going. We do narrow our focus, particularly on investments which are outside of the regulated space. Senator SCARR: This is my last question on this. I'll discuss with the chair whether or not we should have an in camera hearing in relation to this as a bit of a case study at some stage. CHAIR: That might be the way to go. Senator SCARR: Given the findings of Her Honour, has ASIC engaged in an active debriefing process, looking back at what ASIC did from the time when it got the first reports of misconduct, and asked, 'Maybe we could have approached things a bit differently?' I won't ask you to answer that now. Take that on notice. I think you've heard the tenor of my questioning, and I think investors will have their own concerns. Mr Savundra : I think it goes to an issue of the level of expectation of those investors about the degree of protection ASIC will afford them. I'm certainly happy to have a conversation about that. It's fair to say that we invest more heavily in the protection of investors within a clearly regulated space. That doesn't mean we ignore people who invest outside of the regulated space, but it means that when it comes to the level of investigation we undertake we will, just from a resourcing perspective, have a narrower focus. Senator SCARR: But, at the same time, it raises a question in our minds, thinking about those investors who invested in into that entity, that enterprise, from the point in time when a red flag was raised with ASIC to the point in time— Mr Savundra : In relation to the current investigation, that is examining new information that's arisen through information that the liquidator has reported to us. Senator SCARR: The chair has something to offer. Mr Longo : Nothing useful or likely to be welcome. Senator SCARR: Fair enough. CHAIR: Thank you very much. We now have a block of questions from Ms Lawrence. Ms LAWRENCE: Chair Longo, I think in your address—I think as recently as yesterday—and certainly last year, at the National Press Club, you spoke on tokenised security and its potential to fundamentally change the capital markets. I would appreciate it if you could give a minute or two to how you think it would indeed do that. Before we go to any risk discussions, I'd love to hear about where you see the opportunities for Australians in moving on this path. Mr Longo : Tokenisation is a process where what are regarded as real-world assets, whether they're physical or intangible, are turned into digital tokens on a blockchain. It's a totally different way of thinking about how we trade. The technology bridges traditional finance with decentralised finance, enabling fractional ownership and increasing liquidity. This is a rapidly developing field. We're encouraging innovation in this area in Australia, as are other parts of Asia—particularly Hong Kong and Singapore—and the US. I think that the broad story here is whether we're doing enough to encourage innovation. ASIC's position is that we'll do everything we can to help startups to navigate our regulatory framework in a way that's safe. In yesterday's speech, that's what I was getting at with the sandbox. Of course, we're also working with RBA on Project Acacia. This is all in the speech. So it's really this whole idea of really encouraging everyone to think about what the economy or markets would like five or 10 years from now. Ms LAWRENCE: From those examples, such as Singapore—I think you referenced Switzerland, with the SIX Digital Exchange and their digital bonds issuance, which has already exceeded $3 billion—are you seeing productivity gains or faster settlement times? Is there more transparency with the permanent record? What are the things that incentivise you to— Mr Longo : As the speech says, there's a lot of experimentation going on, but certainly in Australia none of this is happening at scale. If we want it to happen at scale, we've got to encourage it and have trial and error. That's how innovation happens; people have a go. Sometimes it works; sometimes it doesn't. Sometimes it's regarded as commercially viable; sometimes it isn't. But I'm convinced from my own conversations I've had and from my foreign travel, talking to foreign regulators, asset managers and market participants, that this is the area we need to be thinking about and focusing on. Ms LAWRENCE: In your travels, are you seeing the focus just on tokenised assets, or are you looking at the distributed ledger infrastructure as well? Mr Longo : Well, tokenisation is on DLT. That's how it works. Ms LAWRENCE: It could potentially work alongside, I presume. After the CHESS failure, for example, would you— Mr Longo : It's a different technology. Distributed ledger technology is a different technology to what I understand the CHESS replacement's going to look like. That's the issue. It's being able to harness DLT at scale and achieve things like atomic settlements. At the moment in Australia, we have T+2—or actually, in practical terms, T+1½. In other words, settlement happens within two business days of the transaction. In some parts of the world, like the US, they've achieved T+1. A lot of work has been done in Australia as to the appetite for the investment required to go from T+2 to T+1. But my overall message is openness to innovation. There are no instant results, but that's what we're playing for. Ms LAWRENCE: So, where you describe the T+1, is that suggesting that the US— Mr Longo : The differences existing— Ms LAWRENCE: Is that suggesting that the US is still using some conventional clearing-house models? Mr Longo : No. It's suggesting that the—we're T+2 at the moment. The US does T+1. The ASX, which is the primary entity responsible for clearing and settlement, has spoken to market participants and consulted about whether the cost-benefit of investing and going from to T+2 to T+1—I think I may have suggested some confusion there. It's got nothing to do with tokenisation. But the promise of tokenisation is resilience, inefficiency, productivity and so-called atomic settlements—things can happen instantly—and I think Australian needs to be part of that. Ms LAWRENCE: I was certainly very buoyed by your enthusiasm for innovation. I think it is exciting and I liked the challenge you put down— Mr Longo : With respect, enthusiasm's the easy part! Ms LAWRENCE: I know! But— Mr Longo : It is just a lot of work has to be done. A lot of policymakers, government regulators and the private and public sector have to come together to make this happen, because the investment required is huge. Secondly, the competitive forces are huge as well. So there is no—this requires a whole-of-government effort, I think, but maybe Commissioner Constant can help me there. Ms Constant : I was just going to add to give depth to what the chair spoke about yesterday and your line of interesting questioning. Absolutely—you called out innovation just then. We continue to say we support responsible innovation and facilitating it, not just observing it. We are observing the same trends you're picking up on and that Chair Longo mentioned. There are increasing amounts of research and analysis to suggest tokenisation could be the disruptor in financial markets. It could be. The question is—this is where Chair Longo was going, I think, just then—the scalability of tokenisation versus traditional models. Chair Longo just mentioned US market and the move to T+1. That's traditional models—traditional models infrastructure—but it does apply that tension. The accelerating pace of change in development of tokenisation's application means that, with each year that passes, we need to be paying attention to not just the application of tokenisation, potentially—I'll talk a little bit about what we are doing now and what we will be doing—but also the expectation for approaching real-time settlement. I am not signalling that this is ASIC saying we expect real-time settlement or that that's the key priority right now, but, as tokenisation grows—and other disruption—T+2, each year, will be seeing more pressure to think about whether that is appropriate. A couple of things—you did allow us to anticipate a question. I just thought I'd put down some thoughts about what we are doing. We are conscious that there's a lot of research about this. There are tens of billions of dollars of potential here and an international focus. We're very conscious of what Chair Longo was noting—that the advisory group, participants and every markets panel that I convene will tell us right now to focus on CHESS. No. 1 right now, when it comes to clearing and settlement, is the stability and the implementation of CHESS. That said, it doesn't mean, as you can hear from our posture, that we're ignoring the opportunity and the potential of tokenisation and other technologies. We are technology agnostic. A few things we've done—we have licensed FCX last year, I think, for private companies and funds. This is small, but there's potential. This is disruption. It's one of the world's first tokenised markets with that atomic settlement. We absolutely are informing ourselves. That's why the chair was talking about this yesterday—participating in OECD roundtables in subgroups to understand where we're up to. We're convening the industry roundtable in May, which will touch on this application to financial markets infrastructure and more, and my colleagues can talk about some of them more. We've actually already commissioned some research for testing of legal and regulatory barriers—are there things we're doing that are imposing friction and not showing that we're open— Ms LAWRENCE: Is that being tested in Project Acacia? Ms Constant : I'll let Commissioner Kirkland talk about Acacia more generally for understanding what the frictions are. I just want to circle back to that, right now, we absolutely are aware that the every one of the market participants has said, 'Prioritise CHESS right now,' as we lean into April. This work is going on in the background. In May, if you think about the roundtable anticipating being through the first release and some adjacent work in Acacia coming through, we will be in a good position, when we're next with you, to talk more about this. I don't know, Commissioner Kirkland, if you want to say anything about Project Acacia? Mr Kirkland : Just at a high level. We can always come back with more detail. We are obviously supporting Project Acacia, led by the Reserve Bank and also with the Digital Finance Cooperative Research Centre. ASIC's role has been to be part of the discussions around design from the very beginning but in particular to grant regulatory relief for some of the participants to allow them to test certain applications of some of the technology we've been talking about. That project was a time limited project that is due to wrap up soon, and the RBA, I understand, will be issuing a report on what the outcomes have been, what the observations are and what some of the potential implications are. To the extent that some of those implications are relevant to how we approach our work, either individually or alongside the RBA, we will be thinking about those and having more to say, I think, over the course of the next year. Ms O'Rourke: A forum in which these issues are being really actively considered is the current statutory review of the enhanced regulatory sandbox, which ASIC administers. So there is a sandbox that is in relation to financial services relief. Particular aspects of relief are given so people can come in, and that had a statutory review that's underway at the moment. The reviewer, Ms Maha El Dimachki, is taking a very wide view about what sorts of sandboxes or regulatory arrangements more generally—rather than just, 'Does this one have exactly the right specs?'—really enable innovation, the testing, the coordination and the convening in ways that I think is really nice, wide thinking. We've really appreciated her lens and are looking forward to hearing her conclusions that sit alongside things like next steps after Acacia as well. So there's lots of different enthusiasm and opportunity and discussions that are getting granular. I just wanted to mention that. Ms LAWRENCE: I feel like I'm probably a little early with these questions. I feel like I need to wait perhaps for the report for more answers. Ms O'Rourke: There's plenty happening right now, but there'll be even more to say. Ms LAWRENCE: From your experience within the sandbox and the safeguards—perhaps you've had to test within it—but also looking to see how Singapore, Hong Kong, Switzerland and the US have managed things to date, my understanding is that tokenisation promotes decentralisation. But, of course, we're in the business of financial regulation to have clear, responsible entities. What's ASIC's perspective on how it's going to manage a decentralised model? Who's going to be accountable if something goes wrong, whether it be fraud or a mistake in a transaction? Where will the accountability sit? Mr Kirkland : To the extent that any entity is issuing a financial product, providing a financial service or providing a market, they will need to be appropriately licensed or authorised. We look at it through the lens of, 'Who are the entities operating in Australia that are performing one of those roles that we regulate?' and they'll still be subject to the same obligations, regardless of the technology that they're relying on to deliver those services. Ms O'Rourke: I think it's less in application to tokenisation specifically, but the wider question that you're asking has also played out in relation to payments. Technology has permitted a very significant kind of fragmentation of payments chains. What used to be done entirely within one entity is now, by virtue of technology, being able to have really specialised players that play a really important role but only a specific role. So the reforms that are currently being consulted on in relation to payments actually recognise that and are switching from an entity based framework to an activity based one. With that idea of being a payment service provider, it doesn't matter what else you do in your business, if you fall within that activity, you'll now need to get—sorry, if the law passes. Subject to that being a successful new regulatory framework, its premise is based on that idea of activity rather than just assuming a type of entity. Ms LAWRENCE: Do you see that we as a government will be required to introduce legislation so that tokens are regarded as a legally valid record? Is there something there that you think we'll be required to do in order to better facilitate that? Mr Kirkland : The government's approach has been to identify specific activities, I think, that aren't adequately captured by the current law. So, under the digital asset reforms that are currently making their way through parliament and the payments reforms that are at a slightly earlier stage, there are some new definitions that are being introduced which will require entities that provide those particular products or services to be appropriately licensed. I imagine that, if there's a need for further reform along the way, that may well be considered, but, because our current law is technologically neutral, there are many products and services—some of which are being provided at a smaller scale today, some of which could be potentially provided in the future—that involve blockchain technology and may involve tokenisation but can be adequately captured by existing financial service and product definitions. But, as I said, the reforms seek to then bring a few additional types of activities in that have been identified as needing to be regulated. Ms LAWRENCE: Without pre-empting the outcome of the report, given some loss of confidence with the ASX capacity around the CHESS program, would you be suggesting we start first in private markets, venture capital and digital bonds, rather than trying to do a big wholesale change? Ms Constant : I might be better placed to take that. As you say, we can come back to this when we've completed some of the current work, but, actually, that is the approach we're taking. Commissioner Kirkland would have talked to the area he's focused on, or Commissioner O'Rourke. It's the same in markets or in financial markets. That licensing that I mentioned is the approach that's been taken. Let's not call those pilots, because they're up and running businesses and initiatives and we're really encouraging of those. That's that enthusiasm. The challenge now is taking these smaller approaches and, within those guardrails, making them scalable. But that innovation is encouraging for keeping that challenge for competition. Ms LAWRENCE: My last question is around the capability of ASIC and what would need to change to ensure there was 24/7 monitoring potentially of a global market of trading in tokens? What would need to change within ASIC in terms of skills for monitoring? Ms Constant : There is nothing today that I would identify, certainly for my part. Indeed, this is the kind of capability we continue to invest in and adapt. It's a good question to take on notice for the broader discussion in May. We have these things. We've talked today about our enhanced and refreshed supervisory approach, for example, with respect to ASX, but that's also financial markets infrastructure generally, right alongside the RBA. We don't need to have all the capability; we work alongside RBA. But we'll continue to invest in and develop ours. That's something we're doing right now. We're always doing that, but it's actually a core focus at the moment. As I said, it's not just because we want to see these commitments delivered by ASX. It's not just because we want to see chess delivered safely. It's because we want to be able to use those powers that we have to facilitate competition through innovation and understanding the global pace we have and the accelerating pace of change and the tension that provides. Ms LAWRENCE: Thank you. I look forward to taking this further the next time. Ms O'Rourke: Just before we break, there were three questions in relation to the earlier discussion on loan fraud. One on what we do about accountants facilitating we agreed to take on notice, but the other two posed by Senator Scarr were about whether inquiries or issues in relation to loan fraud were being raised with banks—I can say yes—and there was also one on whether ASIC and AUSTRAC have joined up in relation to the issues discussed—yes. I said I'd come back to you on those during the day. CHAIR: Maybe some detail could be added on those two things on notice, if possible. Mr Savundra, did you want to close the loop on the APRA-ASIC MOU? Mr Savundra : I've got a lot of information in front of me, but I've not been able to get the information to answer your query, which I think is about the APRA 2023 licence conditions. CHAIR: Yes, the timing. Mr Savundra : If I could take that on notice, I'd be grateful. CHAIR: Sure. I'll put the other one on notice for you. Could you compare the differences ASIC found in its investigations and actions with the Diversa APRA investigation and actions made? Again, a bit of a compare-and-contrast would help me understand what different parts the two regulators are working with to get the shape of that particular problem. Mr Savundra : For sure. CHAIR: Thank you very much. Proceedings suspended from 14:52 to 15:08 CHAIR: The committee will now resume. Ms Jarrett. Ms JARRETT: Final stretch, everybody—hang in there! My questions are going to scams. I raise this issue quite often when I'm with regulators, as it's a big issue in my electorate. I'm always having people come up and talk to me about this. Back in 2023-24, you did reviews of the banks in relation to prevention, detection and responses to scams. Have you collected any recent data that tells us the number or financial value of scams? Let's just keep it to the banks, first of all. Mr Kirkland : In general, the role of collecting data on scams sits with the National Anti-Scam Centre, which is part of the ACCC, and they break it down by type of scam. We can always go to some of that data. We've done two pieces of work that have looked at the banks' responses. The first one was the one you mentioned, which looked at the response of the four major banks to scams and at some of the outcomes for people who made complaints about scams. The second one was where we looked at the responses of a range of non-major banks and, as part of that, we also looked at the latest data in relation to the four major banks. So we've just done those two. Ms JARRETT: Are you seeing an increase? Do you have data from the ACCC that shows any changes at this point, or am I jumping the gun? Mr Kirkland : In terms of overall scam losses, the data for the first nine months of 2025 showed a 16 per cent increase, compared to the same period last year, and, consistent with the previous data, investment scams were the highest category of overall scams. In the last data that was released, there had been a bit of an uptick. Ms JARRETT: Is that uptick in numbers or in financial value? Mr Kirkland : That's in total financial value as reported by individuals to the ACCC. Ms JARRETT: So more people are losing money or the same number of people are losing more money as a result of scams at the moment. Let's look at that, then. Your report in 2023-24 showed that, of those who had succumbed to scams, less than five per cent, I think, or a very low percentage, had actually received compensation. The reimbursement was very low. My question is: is that improving or not? I think one of your reports said two to five per cent, and then there was one that said roughly 11 per cent. I don't care if it's two to five or 11; regardless, it's a very small number of people—mums, dads, grandmas, aunts and aunties—who are getting anything back after being scammed. Mr Kirkland : The initial report had found a rate of reimbursement relative to the number of people who'd complained. It had been four per cent in the 2021-22 financial year from the four major banks. When we did the further piece of work that included the non-major banks and updated the data on the four major banks, the reimbursement rate had increased to seven per cent in 2022-23 and had then fallen slightly, to six per cent, in 2023-24. So I guess it had improved over the initial period that we'd done that work, but it was still relatively low in reimbursement rates. In the meantime, of course, the Scams Prevention Framework legislation has been introduced, and that will be progressively put in place over the next few years. Ms JARRETT: That rolls out, I think—compliance for the banks has to start at 30 June this year, correct? Mr Kirkland : The government has announced its intention for there to be a mandatory code applying to the banking sector and commencing around the middle of this year, yes. Ms JARRETT: Is there a reason why—from your perspective, you're sitting up here and this is all happening here. Why is it that the reimbursement is so low? Mr Kirkland : That's not something we specifically looked at in our work. Ms JARRETT: Is it in your remit? Mr Kirkland : One of the reasons the Scams Prevention Framework has been introduced, I think, is that there are no specific obligations for banks in relation to scams in the law. We're sort of falling back on general law, and the banks are determining those in the absence of any really specific obligations about how they respond to scams. Obviously, the Scams Prevention Framework will change that. It also introduces or extends access to dispute resolution in relation to scams. It'll also bring other entities that are involved in scams into the dispute-resolution framework administered by AFCA; digital platforms, most notably, as well as telcos will have specific obligations. I think we'll see a range of changes that should, we would hope, see an increase in reimbursement rate where that's appropriate. The other thing I should mention is that one of the challenges for customers getting reimbursement at the moment, when they go to AFCA, has been that AFCA hasn't had the jurisdiction to determine complaints in relation to what's termed the receiving bank. If somebody has been scammed and they've been tricked into sending money to somebody else and it's gone to another bank, AFCA hasn't been able to look at what that other bank has done. We've recently approved changes to the AFCA rules which will start soon and will allow AFCA to look at what the receiving bank has done. That may also have an impact on rates of reimbursement. Ms JARRETT: You said there is no obligation in the laws. Is that a policy setting issue for us to be thinking about? Mr Kirkland : Well, I was referring to the situation before the introduction of the Scams Prevention Framework legislation. That was the basis on which we did that previous work. Banks and AFCA would have to deal with scam complaints just based on the general obligations of banks. But the Scams Prevention Framework will change that, because it's the government's intention to introduce a mandatory code to apply to banks which will have specific obligations. Ms JARRETT: Is that going to be overseen by ASIC? Mr Kirkland : It'll be a multiregulator model, but it's intended that ASIC will be the primary regulator of the mandatory code in relation to banks. Ms JARRETT: Repercussions for bad behaviour by the banks that results in fraud or negligent behaviour—pardon my ignorance, but is that being developed now, and are you having input into that, or is that already set? Mr Kirkland : My understanding is Treasury is working on developing that mandatory code. Any questions about that would best be directed to Treasury at an appropriate time. But around this whole framework, given our role and our previous work, we have had regular conversations with Treasury. Ms O'Rourke: To the extent there have been some issues where we've had to rely on general law, there are circumstances where we've decided to take action in relation to that. We have commenced proceedings against HSBC in relation to scams. So, as well as the surveillance work that was referred to earlier, that's underway. Ms JARRETT: Okay. I'm trying to put all the pieces together, but I do get that. I know the code of practice is coming in. In terms of repercussions, where does that get spelled out? Does that get spelled out in the Corporations Act, or does it get spelled out in the code of practice? Where will we see that? Mr Kirkland : There are some general principles based obligations that sit in the relevant act, and they will in general be overseen by the ACCC. But then the act creates a power for the minister to designate particular sectors and to establish a mandatory code in relation to those sectors. We will be the regulator for the mandatory code for banks. If we receive a report of misconduct about a bank having breached one of those specific obligations in the code, we can consider investigating that and can consider taking enforcement action once that's in place. Ms JARRETT: In terms of your everyday activities in relation to the banks, are you seeing them getting ready for the implementation of the code? Where are you seeing changes? Is it in their governance, their technology, their customer engagement? Can you give us a bit of an indication of what's changing? Ms O'Rourke: There is a current voluntary—I think it's called the scams accord. The ABA have worked on that, and it has been an effort on a voluntary basis to change internal practices and external engagement in relation to the issue. We are yet to see the code that will be developed, which is still in development, but it would be surprising if it didn't encompass some of the practices that are already included in those voluntary efforts that have already been commenced at a lot of the organisations. So I don't think the banks are waiting until then before they start. We understand there are definitely actions underway to uplift protections and responses, including because of the surveillance work and the actions that ASIC has been taking. I think the banks recognise how important it is for scams to be stopped and for them to respond appropriately. I'm not sure if there's a specific area you're interested in inquiring into, but we've seen a very high level of interest in scams and a high level of interest in the framework, the code and the steps that will be expected. There is also, as Mr Kirkland referred to, that question of dispute resolution, which is going to be a very important part of the new framework. Ms JARRETT: Where I'm coming from is how we talk to consumers who are really concerned about scams and say to them, 'The framework's coming in.' Is there a message to the banks? Are you giving a message to the banks that you've got a benchmark of improvement that you want to see in terms of the number bringing the two to five or 11 per cent up a bit higher? How are you thinking about measures of success? Ms O'Rourke: In circumstances where a new legislative framework has been created and a code that will sit underneath it is in active development, I understand it would be unusual for us to set something separate and to front-run that. Having said that, the reports that Mr Kirkland referred to were pretty clear about areas of concern, and actions that we take, including enforcement action, are a very clear signal as well. We haven't not set milestones, benchmarks or something separate, but we do recognise the importance of the codes because that's the sort of place in which it will appropriately set out what those expectations are. We hope that they're available really soon. Mr Kirkland : Our message to consumers now is that, if they're affected, they should still make a complaint to AFCA. Despite some of those limitations of the current framework I've spoken about, people are making complaints to AFCA now, and some of those people are getting outcomes. AFCA's powers will progressively increase over the next year or so, so we do encourage people to make a complaint if they've lost money as a result of a scam. CHAIR: I have a couple of questions about ASX. From this morning, we've already discussed the change to the capital charge and what we think that might do. In your view, are there any specific governance or cultural changes that the ASX should prioritise first to regain market confidence? Ms Constant : Specifically with regard to governance changes, absolutely there was a governance change that was identified. That was the independence of the clearing and settlement boards. Something that was identified in the inquiry's interim report was the importance of governance and driving the right culture and incentives. The ASX have already moved to make that change so that the clearing and settlement boards have only independent directors. And the second part of that question— CHAIR: There's that word again—those independent directors that we started with this morning. There are concerns about that. That's the purpose of my question, because I've been following closely and I'm aware of the recommendations and the change. You're observing it. Is all well with the cultural piece of change? That is what gives life to the governance reframing. Ms Constant : Yes, that's the second part of your question, which I think is a more complete question about the cultural change. Your question is whether there is something with the culture that needs to change? Is that correct? CHAIR: Yes. What degree of confidence do you have that's happening, and is sufficient being done to regain market confidence? Ms Constant : I'll start with the tail of the question there, which is market confidence, because that's where we've started with our work with the inquiry and, indeed, even with the commitments reset and the reset that's underway. Confidence is paramount. Our expectation of ASX—and I did reference the public remarks on 27 February not of our chair but of the chair of ASX, where he acknowledged and accepted the findings of the inquiry's interim report and acknowledge where they're starting from. Our expectation—and he used these words also—is that the ASX will move to an aspirational culture that focuses on their role as stewards of critical national markets infrastructure. If you work backwards from that, as an aspirational goal and an understanding of the purpose and place as a culture, then the other elements follow in terms of the degree, breadth, importance and style of reset and refresh that's required, and that goes throughout the organisation. CHAIR: So do you believe that is underway? How is how is the market talking about this? What are people saying in the market? Are they confident that the change is already implemented and bedded down? Is it a work in progress that's just begun? Are we seeing some fruit of this aspiration? Ms Constant : A simple answer is that it has indeed only just begun with this reset. The full report of the panel of inquiry isn't due until the end of this month, and we'll be considering and responding. That's the complete response and report. The interim report is only the beginning. As mentioned in response to Senator Scarr's questions this morning, having done so much work and understood the importance of the role and the need for that confidence, the inquiry panel came forward with the interim report, and we responded at the end of last year to move forward on some of the initiatives because it was time and it was possible. That is all about giving the market confidence that we've had a panel that's come and worked with us to understand the governance, risk management capability challenges and how they relate to that culture that needs that aspiration around critical national markets infrastructure. That's the beginning of this refresh and reset journey. CHAIR: So the first bit is acceptance that change needs to occur. Change has been accepted. Things are underway. What's the process of communicating what you observe as cultural change into the marketplace—or is it going to be by a series of whispers across the sector? Ms Constant : I think you've just put it perfectly. The first step is the acceptance of the need for cultural change and, indeed, the acceptance of the need to meet that aspiration and fulfil that role and the primacy of that in how ASX, from board down through the organisation, think about their role in place. The reason I referenced the public statements on 27 February, which were consistent with the public remarks at the time of signing the commitments letter, is that it is the first starting place, however, that ASX publicly recognised that that's where they are. In their own words, they were sometimes falling short. They accepted the findings of the panel and the need for the reset, and they've publicly talked about the need for the circuit breaker. That is the starting point. You've asked if we can give assurance that it is well underway and that change is happening? No. We can give assurance that we've seen the start of this part of the journey, and we've seen that in the commitments letter, which we've published. We've seen that in those public remarks. We see it in the engagement at the moment as we are engaging with them closely around delivery. We've just received the 'plan for a plan', which is how I describe how we work through and accelerate over the coming months. We see it in the engagement that supports that. But it is the beginning of that journey. As to market confidence, we can assure you of our commitment to market confidence, including the purpose of bringing forth the inquiry, the responses in December and the responses you'll see when we see the final report. We can't give you the assurance about confidence of the market in ASX. We can assure you that that's paramount for us. Indeed, that's what the panel have also expressed to us. That's why we're moving swiftly and making this a priority. That's why we're holding to them account against this very comprehensive package of commitments in the interim report. CHAIR: Change management is one of the most complex things to ever undertake. It's okay to put a system in place that deals with numbers, but humans are complicated. Somewhere in the gap between guilty and ashamed, having admitted mistakes, being powerless when you're shamed and unable to respond to that, is where change might begin. So I think we need to continue to regularly ask you questions about what you're observing. I don't know if you could tell me, in your compare and contrast that you're going to provide me, what would it look like? What could the committee interrogate to assure ourselves that confidence is returning to the proper functioning of the ASX in the broader market? They're on notice. If I could go to the 2016, 2020 outages, what steps has ASIC taken to ensure investors can still access auctions when one exchange experiences a failure? Because it's not the only exchange, is it? Ms Constant : You are going to the resilience of the market and the outage. We've probably talked before at this committee about the outage itself. The important element of your question, though, is that resilience and that concept of redundancy. Because of the bulk of the Australian equities listed market, for example, clearing through ASX, primarily our focus is on the work with that critical national markets infrastructure, the ASX, including this reset. CHAIR: Can I ask you to consider it in terms of the competition efforts and the alternative structures that exist in redundancy capacity. Can investors still access options in one exchange when the other one fails? Ms Constant : There's not the element of redundancy that would allow me to blanket answer yes to that question. However, that's not what we saw in the outage that we saw in December a year and a half ago. That wasn't the nature of the outage. But for that resilience and that redundancy capability, we cannot blanket say that all services can be rerouted and provided. When we consider our role with promoting competition in clearing and settlement, I won't speak for the RBA, because RBA are the resolution authority when it comes to clearing and settlement, they are the lead resilience authority and they have the financial system standards responsibility. I'm sure I can say for them that when they fulfil that role also, the resilience and the need for redundancy and for cutover is something that is informing the way we think about competition and the way we think about the potential to license if there are alternative providers, because, of course, that is the best way to think about if there was an ultimate failover for a duration that requires that redundancy. CHAIR: So we do know that Cboe have a new CEO, things are changing there and they've changed their decisions about engaging in the Australian market. I hope that we'll still have the element of competition that has brought in. My questions go to acknowledging that—we're where we are at the moment. Is it correct that the ASX 200 benchmark currently excludes transactions executed on the Cboe Australia platform? Ms Constant : The so that's a very specific question. Are you going to interoperability? CHAIR: Yes. Ms Constant : Interoperability is a work in progress in the reset of CHESS and the implementation of CHESS and part of the benefit of release 1 and release 2 of CHESS is actually the enhanced interoperability standards. I think the premise of the question is about the role that Cboe provides in competition and in actually encouraging not just interoperability on ASX but participants to continue to format their systems to allow the Cboe access. That is something that is in focus for us at the moment. We would agree that the role and future of Cboe or alternative providers is really important in the resilience story. I didn't specifically draw that out in answer to your first question, because of the nature of your second question—that Cboe is in a sale process at the moment. I think ASIC's commitment to competition, whether it's or not Cboe—but let's talk about Cboe—should be clear from the licensing, for example, giving them a licence with respect to the listings last year and being supportive of that. Our engagements with many market participants, both when we have our regular individual engagements and through our markets panel on why are participants, if there are frictions or if there's some slowness in participants signing up and getting the platform— CHAIR: You're anticipating my next question, which really goes to: can a company listed on Cboe but not on the ASX be included in the S&P ASX 200? Ms Constant : It's probably not a question for me to answer. In each of your questions, are you getting to why participants are not formatting? CHAIR: We've talked about cultural practices at the ASX. There will be systems resistance to change. There can be cultural resistance to change, particularly when culture is, as Mr Longo described, driven by the shareholders' remittances over other concerns. What's going on with the listings and the exclusion of some listings? Can you help me understand that? Because, if you're going to have a competitor, most Australians would think that they're going to come on a reasonably even field, but this doesn't appear to me to be that. Ms Constant : There are three parts to competitiveness. One is us continuing to use the powers we've got to license competitors and to work with them and be open to innovation. Innovation may be a competitive provider. We've talked about Cboe, who faces in on, say, 10 to 20 per cent of transactions. It's ebbed and flowed. We could also talk about the competition that alternative technology may represent, and that was the nature of Ms Lawrence's questions before the break. So it may be that in three to five years time we have a more global international markets infrastructure space. That's perhaps beyond my imagining today, but you can see the pace of change accelerating. It may be that in some of these questions we jump a couple of steps in terms of competitive technology that actually breaks elements of dominance—I won't say 'monopoly', but let's say 'dominance'—of incumbent technology. That's the part that we play in this facilitating of competition directly. Where else do we participate? In ASX and its mindset in commitment to competition and critical national markets infrastructure, we have a role with respect to enforcing current standards and those expectations, including around interoperability, including in design of the new system, so, when CHESS comes in, Release 1 and Release 2, the changes to interoperability. The third question concerns engaging with market participants. Now, there we are very respectful that market participants are businesses. They have their own prioritisation. They have their own strategies to fulfil. That said, when we engage with them individually, for example, when we engage collectively in through the markets panel that I chair, we have been consistently asking some of the larger participants: what are the challenges that s may be stopping you from prioritising, from connecting, for example, with regard to ETF flow or other ways participating where they can access a Cboe business? Actually, we get no resistance in those discussions in terms of mindset and commitment to competition. I would say that the Australian financial markets participants are welcoming and looking to—you went to confidence—have confidence through supporting competition. We are respectful, though, that this involves IT configurations at a time when they are at the moment—if you were to think about this week—navigating a lot of volatility. We also have the CHESS Release 1 in the background, and they have their own priorities. I just must also note that these are the same platforms that in other ways we are focusing our expectations on them about what products they have on their platforms that are made available in choice versions, for example, to superannuants. We've been talking already today about the superannuation system and choice platforms. So there's a lot that they have to digest and do. But I think the nature of your question was culturally, in Australia, what is the commitment to competition in markets infrastructure? Is our view that all the different participants understand their role in that, including ourselves? I think you can answer positively in that regard. CHAIR: If I go to brokers and platforms currently being able to offer product, do you have a role in ensuring that brokers and platforms can offer investors the same products listed on the ASX on the Cboe platform? Ms Constant : We have a role in ensuring they're confident that we will support Cboe, for example, in their role, because there's an element of expense and risk and prioritisation for a participant to do that. CHAIR: These are the business decisions that you are referring to earlier. Ms Constant : Yes—the business decisions. CHAIR: What if I put it to you that I've actually heard that some are not business decisions. Some are old relationships, cultural practice and mates of mates of mates keeping things going the way they've always been as a form of resistance. Would that be a shock to you, Ms Constant? Ms Constant : That would be really disappointing, because it's not consistent with discussions that we've had directly as is appropriate in the normal course with the large entities we engage with. If there's something you'd like us to take on notice in that regard, of course we will. CHAIR: Even though it hasn't delivered—and I still don't understand why a company that's listed on Cboe but not on the ASX, or on the ASX but not Cboe, can't be involved with the S&P. If you want to help me understand the S&P index and its intersection with Cboe, as opposed to the ASX, that would be helpful for me. Ms Constant : There are some simple parts to that. I don't want to go beyond into technical knowledge, but the S&P index doesn't include trading from Cboe, which is what you're— CHAIR: Yes. Why not? Because it does in the US, doesn't it? Ms Constant : We are engaging with S&P about that right now. CHAIR: It seems it might be one of the structural barriers to your businesses that are resisting as well. Ms Constant : When I referenced engagements that we were having with participants, they include the S&P index element and not just the Australian platforms. That is something that, as I said, we can take on notice, including if that's part of your reference to what you see in terms of cultural resistance. CHAIR: Yes. We haven't sort of got to where we would hope in terms of Cboe, ASX and an open and flourishing competition. There are breaks, clearly. Ms Constant : We would agree that being included in the index will be an important part of the many steps in the journey to opening up competition. CHAIR: There's been some policy gains though, despite that stickiness there. How are you going to make sure that any potential purchaser of Cboe doesn't slip back? How do we keep the change going, and how do we have you engage in speeding that process up? Do you have a role to play? Mr Longo : That's a commercial matter. The first point is to achieve a sale. Then, among the questions that will arise as to what technology and what platform they'll use, we'll just have to wait and see how that plays out, but that'll be a commercial matter. We will do whatever we reasonably can to facilitate an orderly sale and one that promotes competition and gives the new owner time to do what it needs to do. Ms Constant : Then, ultimately, they will apply to us. Any entity or person, legal person, acquiring more than 20 per cent will, of course, ultimately need to apply to us—in terms of the licence to do so. As Chair Longo has said and as I think we've previously given evidence, we're staffed up, capable and focused on this and what those criteria are to be efficient and effective in supporting any successful sale. CHAIR: So your eyes will be over this when it advances. Ms Constant : Absolutely. It is absolutely in the national interest and ASIC's interest to see a smooth, orderly, successful transition to a buyer that has a commitment, an absolute commitment, to the role of Cboe in the Australian financial market's infrastructure. I've been conscious of acknowledging the different business considerations of participants and the various responsibilities they have. That said, we look to see alignment in that commitment to competition, because that's good for them. CHAIR: Ultimately. Ms Constant : Ultimately. CHAIR: In the long term and perhaps in the short term. Ms Constant : That's what will drive the medium-to-long term CHAIR: Correct. Thank you very much. Senator Scarr. Senator SCARR: I've been reading your annual report with interest. I like a good annual report, and I compliment everyone involved in preparing the annual report. I think it's a very, very useful document, and it helped me to get up to speed pretty quickly with where you're up to. There are a few things that struck me, which I might just ask some questions about. You prepared a very helpful appendix 11, 'Five-year summary of key stakeholder data'. I note that it's quite extraordinary in many ways. In 2020-21, we had 2.9 million registered companies in Australia, and that's now grown over the course of just five years to 3.6 million, which is quite a phenomenal number and a 24 per cent increase. At the same time, the number of registered company auditors has decreased from 3,553 to 3,073. So there's been a 24 per cent increase in the number of companies registered but a 14 per cent decrease in the number of auditors. Wearing my previous cap, during my nine months in my previous career before I rejoined the committee, I know that the issue with respect to shortages in the auditing and accounting profession has been raised consistently. So I'm wondering—have you got any observations with respect to the criticality of that issue of making sure Australia has enough registered company auditors and indeed enough registered liquidators? I note there that the figure of 649 in 2020-21 has only increased by nine over the last five years. That is an issue this committee previously looked at in terms of our inquiry into insolvency laws and what was happening in relation to insolvency, and it was raised then in relation to the number of registered liquidators. Ms O'Rourke: Thank you very much for making it to page 245 of our annual report! Senator SCARR: And in March 2026! Ms O'Rourke: Thank you for drawing attention to the stats and what they speak to about the health of some of the really important parts of our economic system, including auditors and liquidators. We've spoken a little bit today about some of the issues, but their numbers matter as well—just how many there are and the health of them as a population. The companies number includes private and public companies, and it's only in relation to—but I think it's a fair proxy. We haven't broken the growth out, but I suspect there would be a similar proportion of companies that need to have their financial statements lodged with us, the audited financials. But to your specific question about the number of auditors, we are conscious of the numbers either stabilising or dropping. Actually, I guess they're dropping in circumstances where the number of companies and those that need their services are increasing. The other point to make is that we're relying on auditors as well for the substantial new responsibilities in relation to sustainability reports. At this point, that's just that group 1. It's not that large by number of companies, but they're large companies, so they're going to have quite complex reports to provide assurance in relation to. When we meet informally with the professional accounting bodies and some of the firms, that question of attraction and retention of people who are working in this space is an issue they raise. I don't have any particular insights into either the drivers or the solutions to it, but I can certainly assure you that we're aware of the issue. We agree that it's an important trend to be watching. In relation to the liquidators, which is a smaller change, we're working closely with ARITA to help understand if there are blockages to people becoming qualified as registered liquidators. For example, we've been thinking through the licensing process that we help administer, the registration process, and the number of hours that need to be served. That's a statutory— Senator SCARR: That was a specific issue that was raised with us during our insolvency inquiry— Ms O'Rourke: The number of hours? Senator SCARR: in terms of the number of hours, and, in particular, the impact that might have on women. Ms O'Rourke: Yes. That's the question of accruing the statutory number of hours within the period of time. I take from your question that's an area of concern I am pleased to report that, to the extent committees have been considering that issue, there has been, in the committee decision to take registration, a willingness to consider alternative ways of satisfying the equivalent level of expertise that are different from the strict number of hours to accommodate exactly the sorts of issues that your concern identifies. We have seen decisions and have indeed taken steps to make sure the profession is aware of them so that others, too, can feel confident in applying a set of circumstances that demonstrate differently but nonetheless demonstrate their expertise and their suitable qualification to be a registered liquidator. Senator SCARR: The grants programs are programs where ASIC actually pays or commits to pay money to liquidators so they can take important proceedings. These can relate to director banning reports, as I understand it, and asset recovery actions. These are really important steps for liquidators to take in terms of, to use the chair's term, 'corporate hygiene', to hold people accountable and to protect the market and protect the public against those who shouldn't be directors. Ms O'Rourke: That process is what we call our Assetless Administration Fund. Senator SCARR: How do you work out the money that's dedicated to that program? There needs to be a cost-benefit analysis done, I presume. As the chair noted, ASIC's had this huge success in terms of civil penalties. It does beg the question as to whether or not there's a capacity to provide additional funds to liquidators to make sure people are held to account and that, in particular, directors who shouldn't be directors are banned so that they can't be involved in new companies that are incorporated and be involved in the failure of those corporations leading to debts on unpaid bills through mum and dad and small businesses et cetera. Ms O'Rourke: I'll start and then pass to Mr Savundra for anything additional. To the extent this is successful in achieving civil penalty outcomes—that's not something that then gets put into the same or any asset; it's a question of, I think you can— Senator SCARR: Yes, I know—chasing the consolidated revenue. But I would have thought it's by whoever makes the decision in terms of ASIC funding it. To me, it begs the question, 'Okay, well, if you can actually achieve better outcomes with additional money going into the system, maybe that's for the common good, right?' Ms O'Rourke: That's right. Senator SCARR: That's not your decision. I understand that. Ms O'Rourke: That's right. But I think the question of the administration is your second question. What's the total that we use? With the Assetless Administration Fund, I'm not sure we've got a total amount that has been allocated. Senator SCARR: Could you take that on notice? Ms O'Rourke: Yes. Senator SCARR: In note 7, you deal with your contingent assets and liabilities. There's a reference to 'quantifiable contingencies'. Ms O'Rourke: That was note 7. Are we in the appendix— Senator SCARR: This is on page 179 of the report. Do you have any updates with respect to the result? There's a reference to a particular matter where ASIC had costs awarded against it. It says: ASIC has estimated that this matter represents a payable of $2.690 million (2024: $1.800 million) … Do you have any updates with respect to any of those matters, presumably legal fees or— Mr Savundra : Their adverse cost orders? Senator SCARR: Yes. Mr Savundra : I'm happy to provide details if— Senator SCARR: Do you want to take that on notice? Mr Savundra : Yes. Senator SCARR: I was curious how one went from $1.8 million. Is that $1.8 million figure the aggregate figure? Mr Savundra : It would be the aggregate. Senator SCARR: That's an aggregate figure. That explains that. On page 93, there's a very useful comparative table with respect to outcomes in terms of enforcement and compliance. I should say that they're all very positive when you compare them year on year. There's one that stood out to me, and I suspect there's an impact from large matters. The average total time to complete an investigation and reach a court decision in months, in 2023-24, it was 56; in 2024-25, it was 70. Is there any reason for the material increase in time? And we're talking about months, so this is 56 months to 70 months. Mr Savundra : I think that measures to the conclusion of the court matter. Obviously, that is not all within ASIC's control. Senator SCARR: It's not all; I understand that. Mr Savundra : And a lot of variables go into it. Senator SCARR: I understand that. Do you want to take that on notice, if you've got any observations with respect to any particular reason it increased by 14 months year on year? It may well be that there are a number of decisions that are still outstanding or reserved and you're waiting for those. Mr Savundra : I'm happy to. Senator SCARR: I note that civil litigation completed successfully as a percentage improved at 82 per cent. It was still pretty high. In 2023-24, it went up to 95 per cent. That stood out. Do you have any comments on that? Mr Savundra : You don't want it to be too high. Equally, you don't want it to be too low—hopefully, just right. Senator SCARR: What's the sweet spot? Mr Savundra : I think 75. Senator SCARR: But it's a serious question. We can't be too risk averse, can we? Mr Savundra : No, you can't. The critical thing is that we run cases that ought to be run in the public interest, and we're not going to win them all. Senator SCARR: How do you assess a decision like Star, then, where you've been successful in part and unsuccessful in part? How does that get assessed, for those purposes? Mr Savundra : I'm not entirely sure. It may well be by a defendant. But, again, even by a defendant, we can be partially— Senator SCARR: That wouldn't necessarily do you justice, I'll just say, but I'll leave that for you. The number of users visiting ASIC's Moneysmart website is 11.7 million. It's quite extraordinary. I've visited the site myself. Are they independent users, or does that figure include a single user potentially visiting, say, 10 times? Mr Savundra : That would be unique users, based on the analytic software provided by Google that identifies unique users. It is, I think, under that, theoretically possible that, if somebody is, say, logged in under a different identity on Google, they might perhaps be counted twice. But, in general, the definition of that metric is 'unique users'. It's a reasonable indication. It should be close to the number of actual individual Australians visiting. Senator SCARR: That's been hugely successful. Mr Savundra : It has, and we continue to invest in trying to grow it because we think it's got such an important role to play. Senator SCARR: Very good. On page 164, note 4, there are 'Supervisory cost recovery levies receivable—taxation' and 'Supervisory cost recovery levies receivable—non-taxation'. How do you draw the line between taxation and non-taxation? Mr Gregson : We use the tax office guidelines. They're quite explicit about how you make that differentiation. It's quite a technical exercise, but we use that— Senator SCARR: Does that go to the cost recovery question? Mr Gregson : Well, it's involved in that process; that's right. Senator SCARR: So $73 million of the total supervisory cost recovery levies receivables are considered tax. Is that correct? Is that how I read that? Mr Gregson : That's correct, using those guidelines. Senator SCARR: In general terms, that means they're over and above what it costs to provide the service, if I can put it that way. Mr Gregson : It comes down to the methodology in terms of calculating it and whether it relates to the service or product in question or to a flatter fee. They're the basic concepts used. Senator SCARR: Did you have something, Ms O'Rourke? No? You don't want to enter into that discussion? Okay. This is my last area, and this is an issue we've talked about before in this place. We considered it during our insolvency review, and that is the obligation on liquidation et cetera to make reports to ASIC. You get thousands and thousands of these reports from a whole range of licensees—Australian financial services licensees, liquidators et cetera—and then we have to consider what action ASIC takes, having received that tsunami of reports. What was the term His Honour used from Gulliver's Travels? CHAIR: Brobdingnagian? Twice in one day! Senator SCARR: I note, from page 219 of the report, you received—I thought you'd fallen asleep. Unidentified speaker: No, sorry! CHAIR: He's young! Senator SCARR: I wouldn't blame you! You received reports from Australian credit licensees about so-called breach reports, reportable situations and reports from auditors. It says you received 24,895 reportable situation form lodgements from licensees, with 212 licensees reporting about another licensee. In the table below, table 25— Unidentified speaker: Can you please just refresh— Senator SCARR: Sorry, this is 218 and 219. Unidentified speaker: Yes, I'm with you. Senator SCARR: I'm just trying to connect the 24,895 figure with the number in the tables. Total breach reports finalised is 2,849. Is that a subset of the 24,895 total received? Or is that something different? Ms O'Rourke: What was your numerator? Senator SCARR: In the text, it refers to 24,895— Ms O'Rourke: Reportable situation forms, yes. Senator SCARR: And then it says you assessed 224 AFS and ACL licensing notifications. How do we bring that back to the 24,895? What do you do with 24,895 reports? How are you sifting through them and choosing which ones to progress and which ones not to progress? Ms O'Rourke: It's a really important question and one we're thinking hard about. We get the reportable situations where companies—it's like what we used to call breach reports, and, alongside that, we get reports of misconduct from others. Some of the reportable situations of that 24,000 number are the ones which are about someone else—if they've seen, from another licensee, an issue. We also have IDR and EDR data, and so how to best bring the insights we can across those is something that we're continuing to evolve. We've got more longstanding processes associated with our reports of misconduct because we've been receiving those for a lot longer. With our reportable situations, with such a high number of those, we have got different analytical tools and ways of sorting them. We've also been thinking about sharing composite data about that information by sector and otherwise. I think the specific answer to your question is I think that it is a subset of that number, but, if there's something about that subset or something more about the analytics that we apply to reportable situations that we can help you with, I'd be pleased to. Senator SCARR: Could take that on notice? I'm just interested to know how you physically process, because then we look at, say, the auditor breach reports that are referred to in the table, reportable situations by type and outcome—auditor breach reports are 2,456, and that's a subset of the total breach reports finalised. So you finalised 2,456, and only four per cent were referred for action by ASIC. Does that mean that there was no breach in the 96 per cent that were analysed and assessed with no further action, or does it mean that you only had the capacity to deal with a percentage? Ms O'Rourke: I suspect the answer is that it's such a high proportion of them. You've called out the auditor breach reports. Senator SCARR: Correct. Ms O'Rourke: I will need to take it on notice, to understand exactly what that category covers, given it's a subset of reportable situations. I will do that. The second question is: how do we get to four? Why is that number low? Is it because we're not looking at some of the 96, or is it that we have looked at all 96 and— Senator SCARR: Yes. Ms O'Rourke: I understand your question. Senator SCARR: To the extent there's a breakdown—you might not have pursued because there was no breach; that's one reason you might not pursue. An answer might be that it was minor and no further action was warranted. I am more concerned about the context, that there was something but that you didn't have the resources to pursue it. I'm happy for you to take that on notice. Ms O'Rourke: You'll appreciate, when the numbers are getting to 24,000, that we are thinking to need about triaging and about the right way of appropriately providing those resources. Senator SCARR: I understand. Going to the next table just on this same point, table 26, which is the statutory reports from registered liquidators— Ms O'Rourke: We've made changes in response to the feedback. Senator SCARR: Okay. Ms O'Rourke: This report was prepared for 2024-25. Over the course of the 2025 calendar year we undertook work in engaging with registered liquidators about the provision of both those initial statutory reports. Most importantly, we ended up changing the supplementary statutory reports. Both are statutory, as their titles show; they're things the Corporations Act requires. But we had heard loudly and clearly, as I'm sure you did as well, the frustrations associated with lack of clarity about why a supplementary was requested and also about that immediacy. In most circumstances when it was provided there was a thanks-but-no-thanks response, an immediate kind of automated response: 'We're not going to take that any further; thank you.' We did do a consultation process and, from 11 April 2025, actually stopped issuing those automatic responses based on the initial statutory reports for the supplementary ones. And we've replaced that with a different model of receiving. We still very much welcome those supplementary reports, the second reports, but it's based on the professional judgement of the liquidators. There's email available, and we're trying to make ourselves much more available by phone as well so that when people see something that they're worried about they can be in touch proactively with us, rather than it being an automated and frustrating process. We have received positive feedback about those changes. In relation to those initial statutory reports, we have issued a guide because the way that some of the form was set up through the portal was very frustrating. People didn't know what information was going to be sought later in the process. They didn't know how the fields were related. Again, that guide has alleviated some of the concerns that were expressed to us. We've also taken out some of the questions from the form. So they are some of the steps that we've taken to try and improve how we work effectively with registered liquidators. As you pointed out in your opening question, they're providing really valuable information to us about corporate hygiene—I think that's the term you used—so we did want to improve how we were getting that information, because it is important. Senator SCARR: So the feedback at the moment is very positive. Ms O'Rourke: Going back to your question about the figures— Senator SCARR: Have you got any preliminary figures you could give us, in terms of the percentage of matters requiring supplementary reports? Ms O'Rourke: In terms of requiring, in terms of an automation, that number is now zero because we have turned off that automation. Senator SCARR: It's because you've terminated that. Ms O'Rourke: Yes. Then it's a question of how many are being provided to us. I can say it's a much lower number than these, but I will find out what the number is. I suspect it's really become much more focused on areas of big concern in a particular insolvency or on those Assetless Administration Fund actions by those liquidators. But I'm happy to give you some more information about that. We're doing some other things that we'll share with you as well, trying to continue to improve those channels of communication. Senator SCARR: Thank you. CHAIR: I'll call Ms Lawrence now. Ms LAWRENCE: In my block, I want to cover a few different areas. My apologies. Because it's the end of the day, you must be quite fatigued. In the context—and I don't have this fact-checked, but I have it on good authority from the secretariat that, since 2001, the Corporations Act has doubled in length, now spanning over 4,000 pages, 800,000 words, and, apparently, longer than Leo Tolstoy's War and Peace. What recommendations or suggestions does ASIC have to the committee in terms of reforming the act? Mr Longo : I don't think there's enough time between now and the end of my term to answer that! The short answer is that there have been multiple inquiries and reports that have tried to tackle that issue, and, as I've said publicly many times, we're not good at law reform. We're very good at, with good intentions, creating new laws. They're always well intentioned. Ms LAWRENCE: I'm framing it with this because my next questions are to the new laws and powers that you're seeking. Mr Longo : There's no doubt we have a complexity problem in Australia. It's a wicked problem; there's a lot of blame to go around for where we are now. The Australian Law Reform Commission, after three years of labour, produced three interim reports, imaginatively called A, B and C. Then they came out with a final report with recommendations, which was, I think, a couple of years ago now. As far as I know, there's been no official government response to those recommendations. That report focused on chapter 7 of the Corporations Act, which focuses on financial services and is widely believed to be, essentially, broken. It's very complex and impenetrable. From my perspective, there are lots of ideas about what could be done to simplify and amend the legislation, but it does require, if I may say with great respect to the parliament, parliamentary will to tackle that. In the meantime, The approach ASIC has taken and what I've said publicly and privately is that simplification starts at home. Over the last 18 months, ASIC has been doing, I think, some really excellent work trying to make the interaction with ASIC more seamless and a better experience for people. I haven't got the stats at my fingertips, but literally thousands of Australians, either directly or indirectly, interact with us. I think Senator Scarr talked about those 3.6 million companies. We get lots of enquiries and issues dealing with the administration of the company registry, among other things. We tried to review the way we do regulatory guidance. One of the things the Australian Law Reform Commission pointed out, which is, regrettably, true, is that a lot of our statutory instruments are hard to find on our website, they're— Ms LAWRENCE: What do you see? Do you see tools like AI being able to help simplify the work? Mr Longo : A lot of people mention that to me. There is definitely a role for AI, but I think there's a lot we can do without AI. I'll ask Commissioner O'Rourke to talk about this because she's done a lot of work on the committee that ASIC set up on this very issue. I think there is a role for AI, but there is a lot of work that can be done productively without AI. That also requires a big investment. You've got to spend some money to simplify things. Kate, did you want to add anything? Ms O'Rourke: I have two extra points in relation to the AI question specifically about it being a tool to overcome complexity or some of the challenges of it. I think one of the things that people talk about is the quality of the data from which the AI is drawing its conclusions. We've been live to that and have thought that's been part of the impetus for what we've done—a big cleanup of our website. The web content included a lot of superseded pages as well as current pages, so we got rid of 9,000 webpages—just the superseded parts of it—so that when people are using AI, what they find from an ASIC website is current information, not superseded, incomplete or old information. So I think that wider point around using AI, wherever you are, does come back to the quality of data in the foundations of it. That's one point to make on AI. The second is—our chair referred to some of the work that we've been doing in different categories, and one was on regulatory guidance. We did some work in that space. It probably sounds self-evident, but we were made very much aware that there are very distinct audiences for ASIC's content. We've got people who want the unbelievably detailed, specific, technical guidance on those provisions in the depths of chapter 7. But we also have people who want a snapshot or a sense of an issue, whether it be corporate leaders, parliamentarians or people who want to understand the 'why': the policies, the outline—'outline' is the wrong word—the short, concise understanding of an issue. Or there's also a category of audience—say, small business—who are much more about: 'What do I do? I just want to do what I have to do; tell me what I need to do and help me do it,' which is a different category. So our understanding of how people are starting to think about using AI in relation to our content, or any regulatory content, is a bit audience dependent. Someone who's wanting something really specific because they're giving legal advice on it is less likely to go there. But if a small-business person is trying to work out renewing their annual review for their company or something like that, those tools might be more effectively used in that situation. It will vary. I think our wider efforts in relation to simplification, whether it's the stuff that we're either doing at home or contributing to the wider debates about law reform—which is where you started; which Treasury takes the lead on—are done with AI awareness; that there are going to be tools, and ways of looking at things or synthesising things or communicating things that are changing, so we need to be alive to those. Ms LAWRENCE: I imagine that, where there might be duplications, for example, you could get AI to identify where those are and then agree as to whether it can be consolidated or simplified. Ms O'Rourke: That's right. Ms LAWRENCE: In contrast, I guess, your submission notes that Australia's managed investment scheme regime is relatively open and liberal by international standards, and that Treasury is currently consulting on enhancing the oversight and the governance of the MIS. Can you give a bit of the historical policy context or intent that led to Australia having a relatively liberal approach to the regulation of the MIS. Mr Kirkland : I think that's probably a question for successive past governments, in a sense. Our observation about the regime—the chair's been quite clear about this on a number of occasions in public as well—is that it is, in some aspects, quite a light-touch regime. Registering a managed investment scheme that's available to retail investors in Australia is relatively simple. In fact, ASIC is required to register a scheme if the entity submitting for registration satisfies a few fairly basic requirements, such as having a constitution and having a compliance plan. In contrast to other jurisdictions, there are no real restrictions on what types of assets managed investment schemes can invest in; other jurisdictions have limitations to try to reduce the risk to retail investors. Once schemes are established, they can change their constitution and change their investment strategy without any requirement to notify us. As a regulator, we don't have the power to require them to give us data on a recurring basis. So there are a few of the key elements of the scheme that we see as being— CHAIR: It's a great summary, Mr Kirkland! Mr Kirkland : We spend a lot of time thinking and talking about this, Chair. But that's because it is an issue of concern to us, and it's closely linked to the Shield and First Guardian matters that we talked about earlier today. There are a range of areas where we think there are regulatory gaps, but one key theme within that is the regulation of managed investment schemes. That's why we're very supportive of the consultation that's underway at the moment in terms of strengthening governance and oversight, and that includes proposals that would give us the ability to gather some more data. Ms Constant : I want to add it's also closely linked with our work on private markets. In our public and private markets work, we've also identified a similar need—there's a lot of adjacency, and indeed overlap—for enhanced managed funds data reporting through adjacent law reform; in that regard, anything that's additional to what Commissioner Kirkland's mentioned. We're working on a pilot with a sector of the funds management space in Australia to make sure we're really conscious of the commitment from government to not gather data that we don't need and aren't going to use. That's why we're taking the pilot approach. We're looking forward to testing the feasibility of that in the next financial year in terms of enhanced data gathering through that pilot approach. CHAIR: I think I recall a conversation around this matter in Canberra. You were there, Senator Scarr. We were concerned about this Liberal managed investment scheme, and I think it was made very clear on that occasion that there wasn't even a requirement for any indication of liquidity and certainly no assessment of the offering. I think you quipped that, in the US, it would never get up. There was a comment there. There's a very different model of accountability for a product to be established, which is quite a different way of thinking about the products that we put in, so I think this is a very interesting space in terms of where the protections lie. We're dealing with— Senator SCARR: Chair, one of the issues that was raised was also—Chair Longo, I remember this from the Sterling inquiry we had—that promoters will say that it's a registered managed investment scheme and consumers will see that and think it's totemic of a safe investment because ASIC has gone in and signed off on everything. As Commissioner Kirkland advised, that's simply not the case. Mr Kirkland : We certainly see examples of promoters actively promoting the fact that a scheme is registered with ASIC, which creates an impression that we think is out of step with the nature of the regime. Senator SCARR: Correct. Ms LAWRENCE: In the context of the powers you have available—in particular, section 601FF and section 912E—where's the shortcoming in the availability of the powers under the act presently in terms of the additional powers you're seeking for MISs? Mr Kirkland : To step through some of the issues that I mentioned earlier, the fact that schemes can change their constitution and change their investment mix means that we don't have any ability to understand where there might be a sudden shift in risk to investors. If a scheme has shifted towards high-risk property investment, which is where we commonly see problems, we won't necessarily be alert to that. Ms LAWRENCE: So it's about the change. At the moment, you can check whether they're complying with the scheme's constitution, but it's the fact that they can change it, presumably without that notification of the fact that it's moving investors' funds into higher risk investments. Mr Kirkland : That's right. They can change their constitution. They can change their investment mix without us being in any way alerted to that. We can't require them to give us data on a regular basis. Another example in terms of data is that we can't see if there's been a sudden flow of funds into a particular managed investment scheme, which might indicate there's actually a chain of lead generators and financial advisers channelling people into there and could be another indicator of risk. We just don't get that data at the moment, nor can we require it on a recurring basis. That's a key gap in the regime at the moment. Mr Longo : I think it's really important to keep reminding ourselves that we have no supervisory or monitoring role over a managed investment scheme. We don't even see the product disclosure statement. A lot of money gets invested in this sector—and, in fairness, a lot of it is fine. We only hear about the ones that become very problematic. Unfortunately, when that happens, a lot of people tend to be affected, but it's very important that people understand we have no ongoing monitoring or supervisory role of managed investment schemes. We don't get any data. We don't get the product disclosure statements. The other aspect of this—which hasn't come up yet, but I feel bound to raise it—is the number of people deemed to be wholesale investors has grown enormously. That is a problem we have chosen to have. While the retail wholesale investor test remains almost 25 years out of date, we will continue to have these losses. They will happen again and again, and ASIC will be expected again and again to pick up the pieces. In my respectful judgement, it's just not a reasonable expectation of the regulator, and it's not how the system was designed to work. CHAIR: Can I do an ad for the day of inquiry that Senator Scarr and I did with regard to wholesale investors. I think there were some timely points made about changes to our economy, a need for funds that are going into innovation, intersection with private markets, public markets, sophisticated, not sophisticated, wholesale and retail. This space is very, very rich for serious policy consideration. I think that report stands as a descriptor of the challenges without really signalling a clear path forward. It needs more investment of energy. Mr Longo : We are a risk-taking nation, but the system— CHAIR: It's served us well. It's the greatest country in the world. Mr Longo : But with risk comes occasional loss. And—I think I need to be very frank with the committee about this—there's a financial literacy issue in Australia. CHAIR: Agreed. Mr Longo : We want to encourage risk taking, but, with great respect to a lot of people who invest money in a whole range of things, people don't really understand risk—some of those matters were mentioned today—and they've lost their money. The critical question is: how do we think about that from a policy perspective? If we're trying to encourage risk taking, then we have to accept that people will have losses. That's not something that the government, or the taxpayer, can always be there to pick up the pieces. I personally think the Moneysmart website has done some excellent work. I keep getting positive feedback about it from a range of people. It really is something we want to continue to invest in, and I think it is actually doing a lot of good work, particularly explaining to people how superannuation works. CHAIR: This is where I'll do a plug for the Terrigal pub. Every time you mention Moneysmart, I remind people that I heard two men at the bar settled their debate about a financial product— Mr Longo : By going to Moneysmart. CHAIR: by going to Moneysmart while they were standing at the bar at the Terrigal pub—a great place to have a drink and a financial discussion with your mate! Mr Longo : I think this whole question of financial literacy is an issue for all of us, and we'll do the best we can to— Ms LAWRENCE: Do you think the cooling off periods will support— Mr Longo : Are you talking about super switching? Ms LAWRENCE: Correct—super switching. Mr Longo : There's been some discussion about super switching for some time now, which I think I might have started. I will ask Commissioner Kirkland to give us the latest on that, because I know he's been doing a lot of work with Treasury on it. Mr Kirkland : It is something that the government's said it intends to consult on in the coming months as part of another package. I understand there'll be consultation on several different packages of reforms. We've talked about the managed investment schemes one. I think there's another one coming in relation to a range of potential changes, or options for changes, in relation to superannuation switching. We think it is worth at least considering inserting some more friction in that switching process, because what we see, particularly through our investigations on Shield and First Guardian, is that after what's often a really long and persuasive series of phone conversations with a lead generator, and potentially a financial adviser, there is then pressure on somebody to sign a statement of advice for them to switch their super, and then that switch at the moment has to happen very quickly. It's worth considering whether we can slow down that process and create some more opportunities to get independent information and advice to people in that interim period, because, as I say in all the media interviews I do on this, switching your super is one of the biggest financial transactions you could ever make, besides perhaps buying a house, and people need to see it with that level of significance. Ms LAWRENCE: Do you think it would have had an impact in the Shield and First Guardian situation? Mr Kirkland : Our view is that no single reform is likely to be effective in stopping that sort of harm happening in the future, but we think there are a range of regulatory gaps. A carefully crafted set of reforms won't—nothing will—completely prevent these sorts of things happening to some people in the future, but we think we can significantly reduce the risk and the scale at which we might see those sorts of problems in the future. We've talked about MIS regulation. We've talked about super switching. Another key one is lead generation, which is where a lot of this harm starts; the telemarketing and advertising firms essentially find the victims in the first place. CHAIR: And don't forget the survey on social media. That was really the one that got a lot of people, who had no idea that they were giving permission as they just filled in a little bit of an interesting survey. Mr Kirkland : Indeed. Ms LAWRENCE: I have two more questions. Again, following the Shield and First Guardian matters, will ASIC publish guidance to platform operators on how they present investment products and costs to retail investors? Mr Longo : We're not proposing any changes to our guidance at this stage. Mr Kirkland : Not at this stage. Ms Constant : Actually, we're not proposing any changes, because that isn't really at the heart of ASIC's role within the issue. Ms LAWRENCE: Just earlier, Commissioner O'Rourke was talking about providing information and guidance and so forth. Would this be an area where you might consider it? Ms Constant : We have very detailed guidance which goes to, for example, the disclosure of fees—how fees should be disclosed when it comes to superannuation. Regulatory Guide 97, for example, gets a lot of discussion and debate and a lot of focus. I should say, though, we will be refreshing Regulatory Guide 97 in the coming financial year. It's a very comprehensive and time-consuming process, and we'll be putting that time in. We'll take into account changes, learnings and, of course, stakeholder consultation and feedback. When it comes to investment governance—which is where your question was going—very respectfully, APRA is the lead agency when it comes to investment governance. That said, one of the final points I'd make is that we have done work and will continue to do work in and around, for example, observations by super trustees of adviser behaviour where they can see members, customers, being advised into different options. Through screening flags, for example, they might see that there is a lot of money being paid to a particular adviser—or, suddenly, there's a lot. Trustees should be sampling statements of advice to make sure the advice is there. We've published work in terms of that two years ago. We're refreshing it. We've also published work in the past, and are refreshing it, around choices on platforms. It's this slight adjacency, which goes to the fact ASIC has always said—as APRA would—that decisions should not be made, and information given to members to make choices, simply on fees and costs. It needs to be performance based. Is the product doing what it said it would do? That includes asking, if a trustee is offering it on the platform and putting it forward, if they are assessing it's performing and returning. That goes to the trustee's responsibilities to members. I just wanted to complete the answer, although APRA has the lead on investment governance. Ms LAWRENCE: Sure, I appreciate that. That's excellent. In closing, and in the context of your earlier remarks, Commissioner Kirkland, about the various tools being described here, I'll go back to where we started around culture this morning. I want to go back about a decade, when your former chair, Greg Medcraft, spoke of the poor oversight at that time around bank culture, which encouraged financial planners to act in self-interest—which, obviously, resulted in the loss of millions of dollars to clients. At the time, he said: …ASIC thinks culture is a major risk to investor trust and confidence … and to fair, orderly and transparent operations of our markets. With that in mind, I was reflecting—thanks to Google—on an old article where he had pointed to laws that allow companies to be charged with being an accessory to a crime if the company's culture encouraged or tolerated breaches of law. Under section 12.2 of the Commonwealth Criminal Code, as Mr Medcraft described it: …a company can be held responsible as an accessory for breach of certain Commonwealth laws by its employees if the company's culture encouraged or tolerated the breach. So, in the context of everything we've talked about today—from the outcome of Star casino through to where we've got these different platforms who are knowingly taking money through these cold-calling activities—what can we do around culture to really shift the dial? Mr Longo : Part 2.5 of the Commonwealth Criminal Code has been very disappointing. There hasn't been a single—not a single—successful prosecution of a corporate entity under part 2.5 of the Commonwealth Criminal Code, which took effect from 2001. I mentioned the Australian Law Reform Commission report earlier. The one before that was on corporate criminal responsibility, and a lot of that report was devoted to part 2.5 of the Criminal Code. That code, which is the law in Australia, is a Commonwealth criminal code. It hasn't been replicated in any state criminal code. I think the Northern Territory has adopted the federal Criminal Code. It attempts to define corporate culture as a mechanism for criminalising corporate conduct, but there's never been a successful prosecution under it. I think the premise is correct, though. Culture is obviously enormously important to the success of any institution, including corporations, but regrettably the Commonwealth Criminal Code simply hasn't worked in that respect. CHAIR: Perhaps you could take on notice what it might need to look like if it were to be effective. Mr Longo : I don't need to take that question on notice, with great respect. I would simply refer the committee to the Australian Law Reform Commission report on this topic. I can't do better! CHAIR: They certainly invested a bit of energy in putting it together. Mr Longo : They did, over 18 months. CHAIR: Ms Jarrett? Ms JARRETT: I have a number of questions, but I'm going to leave until the next hearing, because they're not urgent urgent. It is International Women's Day on Sunday, so I thought I should ask a question in relation to gender. There are a couple of issues that have come up in my electorate. This really is a question about the culture and conduct of ASIC as opposed to laws, regulations and policies at the moment, because the chair reminded me of the financial abuse report. There were a large number of recommendations for potential policy changes out of that. That's obviously a work in progress. Looking at your culture and how you prepare your frontline teams and your backline teams in relation to managing some of these issues, do you feel that your people really understand and manage those situations well? I'll give you an example. I had somebody talk to me. She was a creditor for her partners business. It became an insolvency case, and she felt like she had to continue to explain things. Maybe instead of having alerts in the insolvency space, it might be better to have regulatory guidance issued and things like that. My question is a broad one around your approach to victims of domestic violence and how you're tracking that with your own internal data. Ms O'Rourke: I think there are a number of different elements to your question, so I might see if our CEO wants to talk about that internal cultural piece, which is of great significance to us, but to the extent that that extends to the second part of your question around coerce directorships or dealing with violence in the regulatory or enforcement work that we do, Mr Kirkland and I may be able to supplement that. Did you want to start? Mr Gregson : I'm pleased to start. Issues of equity and inclusion are core cultural aspects at ASIC. They're certainly matters that existed before my arrival at ASIC 12 months ago, but they're ones that I've certainly taken as core components of my responsibility as the CEO. That's not just in relation to gender, equity and inclusion but in relation to all cohorts and areas. We do a number of things to encourage and support that, including our support for International Women's Day. We held an event yesterday that Commissioner Constant supported, and we actually spoke about and had speakers talking about the concepts and the issues associated with domestic violence and economic coercion. We have a number of strategies and policies that seek to provide and support those issues of inclusion and equity, including in relation to gender. We have just published our latest pay-gap report, and we very much participate in the WGEA framework. We've just made commitments, as we're required to under the WGEA framework, including setting targets for the continued erosion of the pay gap, making sure we're doing analysis and reporting on that and looking to provide equal representation or more balanced representation across all our cohorts. It's something that we take very seriously and is very much part of my KPIs. Ms Constant : As the commissioner who sponsors women at ASIC and having facilitated the event yesterday and also, late last year, an event around White Ribbon Day that focused on domestic violence and actually violence in all its forms and coercion in all its forms—I know you're looking for data and indicators. The event last year, where we profiled the work in and around financial abuse and also domestic violence, included training for our own people to be on the front lines and to have awareness. But it's also about the importance of all of us as colleagues. In a way, with our colleagues, we're also on the front lines, because you never know what's going on with your own colleagues. The event we ran late last year, for example, had almost a thousand people joining in, and we were hearing from experts in empowerment about how to identify that and also what responses can look like. It was the same yesterday. Yesterday, actually, our guest speaker spoke about financial coercion and economic control. So there's training within the training programs for the different divisions in their roles. There's also actually an organisation-wide commitment not just to diversity, awareness and support for our own people but to what this means and how to identify it. One important follow-on from that, for example, is the statistic, which you may well be aware of, that, if you ask women whether they've been subjected to financial coercion and economic control, at the moment, I think, around 14 per cent will identify. If you then show them what it actually is, the number who identify as being victims of such about doubles. There are different numbers, but it about doubles because it's not even well understood what that is. So one of the reasons to run discussions like yesterday, where we had an expert, the CEO of the institute who is expert in this, is to educate our people in how to identify this and what this is. I'll let others talk about the external elements. Ms JARRETT: That's actually really good to hear, because it's not something that just comes naturally to people. Ms Constant : That's part of the problem. We're really committed to that. In the next 12 months, as part of Women in ASIC and just generally our commitment to culture and us understanding our customer service and frontline roles and responsibilities and in understanding the work that's been done, for example, through this committee on financial abuse and our role there, this is something we're quite committed to continuing with. The take-up and the Q&A that followed from yesterday are testament to the fact that people don't understand and they want to understand it. Of course, we have a core role. I have one final thing before I hand to others. We could talk quite proudly about the work we've done. For example, we've talked about Moneysmart a bit today. We're all a bit proud of Moneysmart. We have a 'quick exit' button there. When people are in these circumstances, first they've got to understand that they're right and that this is not appropriate. They're under an element of coercion, control and potential abuse. Then what do you do? So, when we talk about front line, we're not just talking about people on phones or receiving inquiries; we're also talking about those 11 million unique visitors to that site. Ms JARRETT: How many? Ms Constant : We spoke earlier about it. There were over 11 million unique visitors to Moneysmart. So it's a really important tool, and that's a way of interfacing as well. Maybe others want to add. Mr Kirkland : I have nothing to add on the training point. Ms JARRETT: It's really just your internal culture et cetera. The external and everything is a whole bigger discussion. Thank you. CHAIR: Can I indicate that there will be quite a number of questions on notice. The secretariat has been doing an excellent job in preparing a pack for us. I just want to close with one short session on—this won't surprise you—auditor independence. Senator SCARR: Can I ask one follow-up question quickly just to close it out? CHAIR: Please go ahead. Senator SCARR: Commissioner O'Rourke, you mentioned ASIC liaising with AUSTRAC in relation to the CBA matter of fraudulent loan applications. Is APRA part of that group and to what extent? What falls within ASIC's domain and what falls within APRA's domain? Ms O'Rourke: I think, when we were discussing that issue earlier, you asked whether there were special groups or existing relationships. I did want to come back and confirm that. My initial response was to confirm that we do have open lines of communication between people at AUSTRAC and people at ASIC and, similarly, of course, with APRA as well. That's more in response to the second question. Then just before the break—I wasn't sure earlier—you asked if this issue in relation to bank fraud has been the subject of those channels of communication, and I was able to confirm it has been. I'm sorry; to the extent I got that confirmation, I didn't hear whether the APRA folk were in those meetings as well or not, so I'll have to take that second part on notice. I'm sorry. Senator SCARR: That's fine. Was your comment with respect to AUSTRAC with respect to all of CBA, Westpac and ANZ or just in relation to CBA? Ms O'Rourke: I had understood, when we had that discussion—it was a little bit earlier—we were just talking about CBA, so that was the follow-up that I— Senator SCARR: If you could, take that on notice as well. Ms O'Rourke: Yes. CHAIR: Wonderful. Thank you very much. We had some discussion about auditor independence, conflicts of interest and conflict management a little earlier. I'd like to go to the ANAO audit of ASIC's regulation of registered company auditors. The four recommendations to ASIC, as I understand, are quite significant and accord with concerns that have been raised a number of times by this committee over the years—developing measures to report on the performance of regulatory outcomes for registered company auditors; ASIC to report publicly on the timelines of processing registered company auditor resignations and removal applications; review and improve ASIC surveillance activities related to registered company auditors, including reviewing the allocation of resources between individual audit file surveillances and thematic surveillances; monitor and report on whether registered company auditors undertake the remedial action they commit to in response to ASIC audit and surveillance; and implement procedures to use ASIC's audit deficiency powers. Now, I'm led to believe that there's some progress in the implementation of those recommendations, so there are some questions I have arising from that. As a result of ASIC's inquiries during the 2024-25 surveillance period, what are your key areas of concern regarding financial reporting? Ms O'Rourke: The key areas of concern in relation to financial reporting from that period of time were described in some length in report 819, which is our report ASIC's oversight of financial reporting and audit 2024–25, which was published in October 2025. Was your question particularly on financial reporting rather than audit? CHAIR: Yes. Ms O'Rourke: No problem. In section 1 of that report, which starts on page 9, it sets out the financial reporting surveillance that we undertook. We reviewed 254 company financial reports and conducted surveillances—additional inquiries—in relation to 22 of those. Of the five main areas of concern, the first was the operating and financial review. As you'll know, in a financial report, that's where there's an opportunity to discuss what the figures really mean. We were particularly concerned about the absence of information about material business risks in operating and financial reviews. That was the area of concern that was most prevalent. The second area is impairment and asset values that we had some concerns about. The third was non-IFRS profit information. IFRS has quite specific rules about what can be presented as profit, and when people use other presentations of profit it can be confusing. That occurred in a couple of the cases that we saw. Revenue recognition was another and then debt classification. They were the main areas of concern on financial reporting in 2024-25. CHAIR: With poor reporting, there is very likely material impact. Is that possible? Ms O'Rourke: If you think, for example, about the absence of material business risk information, it's hard to know whether or not it will have impact in reality or not— CHAIR: But it should certainly be reported. Ms O'Rourke: The omission of information is really important; that's why we've called it out. But will that mean the actual business risks being faced are bigger or smaller or will manifest or not? It's a little bit hypothetical. We think it's so important that those operating and financial review sections of financial reports are complete. We do enforcement priorities as well as strategic priorities. For 2026, a new enforcement priority is in relation to financial reporting misconduct. We've already got one in relation to auditor misconduct, but the new one in relation to financial reporting misconduct particularly calls out the failure to file financial reports at all. So that's before you even get to 'how good is your OFR?' You haven't done a report. Sorry, that's a development in 2026, and you were asking about 2024-25. Sorry to mix my years. CHAIR: No, that's okay because you've covered off a couple of questions there, but there might be a little bit more interrogation. On the recommendations that the ANAO made and that I just spoke to, what were your thoughts when you got that feedback from them? Ms O'Rourke: With reviews like these, it is an opportunity to showcase both the work that we've done and the work that we're doing. As you know, we've been talking about a lot. We've evolved our work on auditors over the last three years quite distinctly. It's about being able to describe what we've changed and why we've done so but also to ask what we could do better. It's an opportunity to continue to improve the work that we do. As you can see from the report, we've accepted all the recommendations. We think they're valuable, and we're working to implement them. Some of them are a little bit more straightforward. For the third one around public publishing the timeliness of processing RCA resignations and removals, we already had a target, so publishing it is quite straightforward. That one is a question of when we do it and where we do it, but it's not a more difficult one. Then, for some of the others, we're thinking about doing them carefully, but we're absolutely committed to them. For the performance metric, the first one that you referred to, it's more about reporting on the performance of auditors rather than a PGPA Act performance metric, which I'm sure you understand is quite a different thing. CHAIR: Yes. Ms O'Rourke: We do an annual report. I've just been reading from No. 819 for 2024-25. It's about how we best incorporate in there these measures about performance in a way that's going to be sustainable and measurable over time and really help change behaviours. All of them are underway, but that one is a little bit more complicated than the first one that I mentioned. Unless there are others that you particularly wanted to drill into— CHAIR: No, that's good. Ms O'Rourke: We're thinking about all of them and implementing all of them. CHAIR: That's great. Ms JARRETT: Given your travels, talking to other regulators, are others doing that—looking at the performance of auditors? Ms O'Rourke: Do you mean in other countries? Ms JARRETT: Yes, in other countries. Ms O'Rourke: We have quite different structures. In other jurisdictions they have standalone auditor regulators, and so that provides a different scenario than somewhere like us. If you look at our industry funding model, we've got 51 or 54 classes of entities that we regulate. It's not like we can have 54 performance measures that apply, so what do we do especially there? I understand your question is: what do other people do? We're part of international federations, like the IOSCO. Ms JARRETT: I understand. Ms O'Rourke: I think in relation to regulators it's a little bit different, because they're not generally securities regulators. But I take your point that it's valuable to look at how other people have done that, and I'm very confident the team is doing that. Ms JARRETT: Good. CHAIR: We started with Star; I want to finish with Star. Ms Constant : Chair, before you finish, I wanted to confirm something earlier. We have communicated to Cboe our support for their auction based routeing proposal, which I think you were referring to. I just had to check whether we had confirmed that. CHAIR:  Thank you very much. In an article in Accountants Daily, who might have some knowledge about the pressure that accountants and auditors are under, they talked about the Star casino issues with regard to hostility to internal audits. I don't know if you recall this article, but it's quite revealing in a way that most people wouldn't ever sort of see what happens to an accountant when they're in there trying to do this. I do remember some questions along this line with regard to EY and CPS 230, maybe, a long time ago. There was pressure put on them to edit and edit until the purchaser got the product that they wanted from the internal auditor. I was concerned then, and this really brings to bear some of my concerns now. Ms O'Rourke: What's the date of the article? CHAIR: It's 15 September 2022. It's by Philip King in Accountants Daily. He said the findings in this particular incident 'shine a light on the widespread problem of management hostility to unfavourable reports by internal auditors'. He goes on to say: "The main issue we would like to raise is that these problems are by no means unique to this particular organisation," the chief executive of IIA, Peter Jones, said. "Similar failings were recognised by the Hayne Royal Commission …" That reference back there is to the cultural practices that are applied by boards if they get to see original documents, but certainly by management, perhaps prior to the information getting to the board. The article says: "In any organisation, the first line of assurance is line management; the second compliance and risk; and the third and final is internal audit," Mr Jones said. …   …   … He said: "According to the report, the in-house internal audit team engaged KPMG to carry out an independent review of the Anti-Money Laundering and Counter-Terrorism Financing program … This is in line with our best practice recommendations …" The article then says: However, the failures came in senior management's reaction. He said: "Specifically (according to the Bell Report): The report was not given to the Audit Committee until the day before their meeting in late May 2018. The message from the CEO was that there were a number of problems and inaccuracies within the report. According to the article, the audit committee didn't have time to go through it properly. The article goes on, quoting Mr Jones: KPMG was pressured by senior management to change a number of findings within the report. The internal audit team (and other management) was given a clear message "that bad news was unwelcome". The report was erroneously treated as legally privileged and was subsequently held back from the regulators (AUSTRAC) for around two years. It does go back to those initial problems that we're talking about. How aware are you of those working in internal audit being subject to this kind of pressure, which is material? If they don't do as they're told, they potentially lose their client, and there's a financial cost to them and a reputational hit to them as not being a tough enough player to play the game that is internal audit, as a consultancy, basically, to sign off on a clean bill of health. Where's the pressure in the system? What's your role in making sure this cultural practice can't exist? Ms O'Rourke: The short answer is we don't have a role in relation to internal audit in the sense that that's not something that's completed by a registered company auditor or something that's signed. Internal audit practices really vary across different— CHAIR: Can I say, though, that the partners who are doing this are in partnership with the registered company auditors that you are looking after, and they're jointly responsible inside the partnership for this. So, clearly, they must know that this is going on and it's part of a business model that's operating. Ms O'Rourke: Yes, in this particular circumstance you can see that there is KPMG, one of the large firms, that's been hired to do internal audit work. In other places, internal audit work is done by employed staff of an organisation. In other places, it's a combination of both, depending on the different circumstances. So there is quite a high level of variety, I understand, about how internal audit is resourced and, I'd say, probably a variety in terms of the risks that you've called out. Mr Kirkland : We do deal with the Institute of Internal Auditors Australia, which is effectively a professional body, and we see them as an important stakeholder and regularly speak at their conferences. I spoke at their conference, I think, last year. My sense is that the people that work in that area take great pride in their work and understand the value that it can provide. We have absolutely reinforced that. We think that they can play a key role in seeing things, perhaps before we see them or before they're reported to us. Indeed, they can play a key role in bringing those things to light through things like speak-up programs or whistleblower protection. So we've really tried to reinforce that role through our engagement with the profession. CHAIR: Can I restate that they are partners in a business model with the people who are registered with you, so I don't know how they can continue to be separated out from one another. The businesses that they're operating in—in which they have a partnership role and are jointly and severally liable—are implicated by the challenges that exist for the internal auditors with whom they share profit annually. I just want to point that out. To have this evidence that Mr Bekier—who we commenced with this morning—sat down, turning pages of the report, essentially berating us for the entire time of that meeting, is something I think most Australians would be pretty shocked by. I have a very proper sense that an internal audit team would go in, get the documentation, provide the report and walk away. Star shows that that was absolutely not what was happening. Sadly, too many other whistleblowers are telling me what we've just described there, and what manifests itself in the judgement of Justice Bell yesterday, is all too common. Your registered auditors are in companies that are impacted by this, and they have some responsibility for the internal audit that then ultimately impacts the whole audit sector. So I want to get something thoughtful from you on the record later, perhaps on notice, about how you consider that intersectionality and where we can press on that for better outcomes for the cultural reform that's necessary. Ms O'Rourke: Okay. CHAIR: An easy one at the end, hey? Thank you so much for the endurance throughout the day. It's a long, long day. We did have to cancel the December hearing, so I really appreciate that we've covered an awful lot of ground today. We'll see you again soon, in May. I thank my colleagues who have been here today to undertake this questioning on behalf of the Australian people. That concludes today's hearing. Thank you to all the witnesses who appeared and to Hansard and Broadcasting for their assistance. Thank you to the secretariat for all your work in supporting the committee, as usual, and again today. I advise witnesses that responses to any questions taken on notice should be provided to the secretariat by 2 April 2026. Committee adjourned at 17 : 0 0