THE squelch moment at the annual Australian Securities & Investments Commission forum in Sydney came during question time with the regulator's entire top brass on the main stage. A representative of the consumer advocate Choice got up to ask which areas the regulator was looking to as priorities in the next five years, noting in passing that across the past decade consumers of a whole range of financial products regulated by ASIC had lost billions of dollars.
The observation punctured any self-congratulatory mood that you might expect to see towards the end of a gathering of international financial regulators and was a reminder of the hopeless regard they sometimes find as they battle corporate malfeasance and consumer gullibility.
The latest example is the collapse of LM Investment Management, a property financier that has vapourised $700 million of savings for thousands of investors. It follows in the footsteps of, most recently, Banksia Securities, which collapsed in October -- another operator in the shadow banking system that prompted some tough talk from ASIC.
The collapse, despite frequent references to ASIC compliance and licensing in its marketing materials, is an embarrassment to the regulator and heightens the debate about the effectiveness of the disclosure regime that underpins much of the Australian regulatory system.
Former Macquarie Bank chief executive Allan Moss, who was interviewing the ASIC brass on stage, put it to ASIC chairman Greg Medcraft and got a significant admission.
"One of the ideas that I have heard coming up again and again over the last couple of days is that disclosure doesn't always work," Moss said.
"Elizabeth Bryan (the chairman of oil refiner Caltex) put it quite elegantly, I think, last night when she said there is a big difference between data and insight.
"And disclosure really doesn't help much if the person who is on the receiving end of the data can't understand it."
Medcraft said that since becoming the top regulator two years ago one of the things he had realised was that "disclosure doesn't work, in many cases".
Nor did he give much hope to those wanting to see the cops mounting more heads on sticks as a consequence of corporate collapses and investors scams or, better yet, vetting scams and dodgy investment before they reached the public.
"We can't have cops on every street corner," Medcraft told the assembled throng.
ASIC's approach under Medcraft instead has been to project the commission's reach by putting the acid on what he calls the "gatekeepers" -- accountants, lawyers, financial advisers and the like -- to be accountable for their role in identifying dodgy companies and investment scams, and for consumers to be more careful and informed.
A former auditor, Medcraft has picked a fight with the auditing profession over the standards of its work.
He opened the conference with a warning to investment banks concocting complex financial products that they needed to "wise up" or risk a run-in with the courts and legislators.
Earlier this month he fired a similar warning to clean up their disclosure and compliance after reaching a settlement with Macquarie Group over practices at its private client business.
The jury is still out on the newish gatekeepers strategy, particularly in light of the Banksia and LMI collapses.
No one can deny the anguish of seeing retirees losing their savings. And if ASIC is found wanting in its supervision of such investments it should be held accountable.
But such losses also should serve as a reminder that investors can be their own best defence if they remain sceptical about claims made by investment promoters and don't put all of their investments in one basket.
