Episode 1 transcript

Transcript: ASIC VIEW, Episode 1 – Tim Mullaly, Financial Services Enforcement

Host:     Hello and welcome to the official ASIC podcast, where we'll be giving you an insight into the type of work we're doing, and the issues we confront every day at the corporate regulator. My name is Andrew Williams and my guest today is Tim Mullaly, Senior Executive Leader, Financial Services Enforcement at the Australian Securities and Investments Commission. Tim, thanks for joining me on this episode of the podcast.

Tim Mullaly: Thanks Andrew.

Host: Tell us a little bit about your position at ASIC and what that involves on a day-to-day basis.

TM: Well, Andrew, as you said, I'm the Senior Executive Leader for Financial Services Enforcement. So that's financial advisers, and the licensees that they work for. It includes credit providers and credit intermediaries. We look at matters concerning superannuation trustees, managed investment schemes, insurance, banking, foreign exchange licensees, so quite a large range of industries we cover. And we also look at people that operate in these industries but are not licensed, so the unlicensed entities as well.

Host: So pretty much anything that involves someone's money, you are enforcing that people aren't doing the wrong thing.

TM: We are, we are. That's what we're looking to do.

Host: So how does that work for you on a day-to-day – what does a regular day in your work life look like?

TM: Lots of administrative functions, so I need to squeeze those in, but I provide the overall strategy and direction for the investigations that are underway within my team – I do that of course in consultation with my senior managers and my senior executive that reports through to me, so it's certainly not something that just I look after, I have a really competent and excellent team around me. It can include making decisions about what matters we'll investigate and what matters we might not be able to investigate. We look at settling the scope of our investigations, so what's in and what isn't. We make decisions on the matters and how they might be run in terms of the investigations and also importantly in terms of the litigation. And we make decision perhaps around how we might settle matters – what the terms of a settlement will be. I'm also involved in decisions around the potential criminal charges that ASIC might want to bring in relation to particular breaches. So it's quite a wide range of decisions that need to be made on a day-to-day basis and an hour-by-hour basis in relation to it. You know, currently we have somewhere around 150 investigations underway at the moment, so, there's a lot of things that need to be considered, and as I say, it doesn't happen unless you've got a really good team around you and I do.

Host: How big is your team, how many staff are in the Financial Services Enforcement area?

Tim: Yeah, it can vary because with litigation, sometimes you need to get large numbers of, say, paralegals in to assist, so it ranges around about 80-120 at any point in time, and at the moment I think it's a bit closer to the 120 than the 80.

Host: And what's the primary goal for you and your team? Essentially, when you boil it down, what are you trying to achieve?

TM: Look, you know, at a high level what we're trying to achieve is really to support the priorities of ASIC. So that's to ensure that there's investor and financial consumer trust and confidence, and ensuring that there are fair, orderly and transparent markets. So that's the primary aim, and we do that by bringing investigations and litigation in respect of breaches of the laws that ASIC regulates, and ensuring where there are breaches, that there are enforcement outcomes that are targeted towards those breaches.

Host: Tell us about some of the ways that you've gone about achieving those aims. Obviously, there are a lot of cases that ASIC undertakes, there are a lot of different kinds of cases that you're dealing with – what are some of the methods that you're using to try and get results?

TM: Andrew, our investigation teams are made up of highly skilled staff that understand the industries that we regulate, and are really innovative in their approaches to the investigations, so they get the right information and they make the right decisions. We utilise a full range of our powers and remedies in our investigations, so that's compulsory powers to get information, documents, also examinations of people that might provide us with information, so we exercise all those powers, we do a lot of voluntary interviews with people, particularly with consumers that may have lost money to understand the circumstance around that; we operate hopefully in a really innovative and flexible way, but always we operate within the terms of the law.

Host: Mm. You have to be more innovative and flexible, don't you, because this is a rapidly changing world, technology has made, I guess, ASIC's job a lot more complex.

TM: It's made it a lot more complex, it means there's a lot more information available to us, in the, for want of a better term, the good old days, when it was all paper-based, there was never quite the amount of information that there is these days. So, these days you're looking at e-mail servers that contain hundreds of thousands of documents that you need to search through. So, our staff do need to be flexible, they do need to be innovative in their investigations, we need to have a lot of support from our IT people so that we can sift through all this information and make sure that we're targeting, really carefully, the important stuff, so that we can make the right decisions

Host: How much work is involved in getting a case from start to finish? I know that, like you say, they're becoming ever more complex – how much work is involved in getting something, not even to the finish line, but just to the case where sometimes it's going to court?

TM: Andrew, investigations are almost always complex – there's some that aren't, but some are a lot more complex than others. So where there's a major collapse of an entity, such as there was with, say, Opus Prime a few years ago, there was a wide range of matters that we needed to investigate in relation to that. We needed to look at compensation of clients, we had to investigate the ANZ bank and that resulted in an Enforceable Undertaking with them, we investigated the directors and that resulted in two of the directors pleading guilty, and a third director being charged with offenses but being found not guilty after a trial, and that trial was some five years or so after the investigation commenced. There was a range of market-related issues involved in that particular collapse and out of those we identified some insider trading by another person, and those criminal charges are still going through the courts as we speak. The amount of documents involved in that was substantial, you know, as I said earlier, there's just so much volume of information that you need to go through – a lot of very complex legal issues arise in relation to it – a lot of novel issues arise that haven't necessarily been dealt with before. The investigation team has to work through all of that in a very co-ordinated way, but under quite a deal of time pressure, particularly in relation to compensation type issues, where the investors want to get their money back, or get some money back as quickly as possible.

So that particular investigation possibly at times had a team of 70 on itself, so very large, very complex matters. There are other, smaller matters, where we might be looking to ban someone from an industry, and it might be a one or two person job, and they might be done and dusted within six weeks. So those matters might not be as complex, but they're still important.

Host: Absolutely. How do you decide - and you're probably only going to be able to speak to this to an extent, and it's a question without notice -  but how do you decide what cases to take and what not to take? Do you have driving principles that kind of guide you there?

TM: We do have issues that guide us around whether or not we might take something on. We always look at what evidence is available, and what evidence we think might be available. For example, if a matter we came across indicated that all the evidence was offshore, so another overseas jurisdiction, you know, that might be one factor that would be against us taking it on. It's not to say that we wouldn't, but it would be a factor pointing away from that. We look at the market impact of the conduct – is it something that's having quite a big impact on the market – though there can be some matters that might not have such an impact, and again, those might be matters where, all things being equal, we don't take on. We look to see if there's any other regulatory body, or enforcement body, that's more suited to take the action, so, it might be that it's better that one of our co-regulators like the ACCC or APRA take the matter on. We look to see whether it's within our current strategic priorities and business planning projects, and if it is, we're more likely to take it on. So there's a range of factors. We also look at whether we're going to get an outcome that is good bang for the buck, so we look at how much it might cost us to undertake the investigation, and whether we might get an outcome that's commensurate with that cost.

Host: Absolutely. We were talking about some of the challenges in the way that the world is changing, technology is changing what you do – what are some of the other big issues that are confronting you and your team at the moment?

TM: Well, look, innovation and disruptive technologies are really quite big in the financial services area. So things like robo-advice, peer-to-peer lending, crowdsourced equity funding – those things are new, they're having a lot of traction in the market at the moment – ASIC is, not just enforcement within ASIC, but ASIC overall is looking at the ways that we should and can regulate, and these are some fairly tricky issues – ASIC wants to be able to enable innovation, but it also needs to make sure that it's done with consumer protection in mind.

Host: What's the most – on a more positive note – what's the most satisfying moment you've had during your tenure at ASIC?

TM: Look, I think whenever you win a case, that's satisfying, and particularly those complex cases. What I always say is ASIC's made up of fantastically smart, intelligent lawyers and investigators and accountants and analysts, and when they all pull together to bring a case to court and you get the outcome that you expect, that's immensely satisfying.

Host: Tim, pleasure speaking with you, thanks so much for your time on this episode of the podcast.

TM: Thanks Andrew.

Host: We'll hope to bring you many more stories from and about ASIC staff in the weeks to come. Thanks for listening.