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Estimates: Economics Legislation Committee (Australian Securities and Investments Commission)

Estimates & Committees
Lee Rhiannon 3 Jun 2015

Senator RHIANNON: Mr Medcraft, in your opening statement you spoke very extensively and strongly about the need to change the culture. In this context, can you update the committee on ASIC's work to strengthen whistleblower protection in the private sector?

Mr Medcraft : We can certainly do that.

Mr Day : You are asking about what are we doing to strengthen it in the private sector. These are things that flow on from the Senate inquiry into ASIC's performance, where there was an intensive focus in relation to our own handling about whistleblowers, but I think what was also a focus of that consideration was the handling by financial institutions of whistleblowers within their own organisations. In respect of that, what we are doing-and have done previously-is provide a number of information sheets and other guidance for businesses as to what they should think about for their own frameworks and own approaches for dealing with information from whistleblowers. We have also given them guidance. We reissued our own information sheet 52 last year, and we intend to probably update that again shortly in relation to the requirements in the Corporations Act that deal with handling whistleblower information.

We are also contributing to some work being done between a number of universities lead by Professor AJ Brown at Griffith University, who is seeking to do another larger research project into whistleblowing in private enterprise. That follows on from the work that Professor Brown and others did that was under the title of Whistling while they work. We are looking at a research based approach. We are looking at our own guides in that respect and then guidance as to the features of our legislation that relates to whistleblowers.

Mr Tanzer : From a surveillance perspective, I mentioned in the speech that I gave last Wednesday when I was expanding on what ASIC would do in this area of culture that we intend to focus on a couple of areas. The first was to incorporate culture into our risk based surveillance reviews, the second was then to go on and to use those findings to better understand how cultures drive conduct and the third was to communicate to industry and the firms where we have a problem with their culture and conduct-as the Chairman mentioned.

The particular areas that we are planning to target in surveillance are those where poor practices may increase the potential for poor conduct and therefore increase the risk to trust and confidence. One of the six areas that I specifically mentioned there was the approach of the entities with respect to whistleblowing because we see that the response of an entity to whistleblowing, internal or external, its approach to dealing with complaints, is a good indicator of whether the culture of the organisation is such that it uncovers and deals with problems or tends to hide them.

Senator RHIANNON: You spoke about risk based surveillance. Could you describe what that is.

Mr Tanzer : We undertake risk based surveillance across the whole of our regulated population and that ranges from auditors-

Senator RHIANNON: I meant, sorry, with regard to whistleblowers. I was not sure what you meant in that context.

Mr Tanzer : What I mean is that we have a program of risk based surveillance of entities. When we go to see entities we will be incorporating into that surveillance an examination of how they deal with whistleblowers, because we see that as an indicator of a potential issue from a cultural perspective.

Senator RHIANNON: What Mr Day set out was about the information sheets you are updating, and you have expanded on that. I was interested in how you are encouraging businesses to adopt whistleblower protection strategies At the moment how it is working sounds quite passive. Considering it has been identified at international levels how serious this is I thought it might have been more proactive.

Mr Tanzer : Senator, that was precisely why I made such a point in the speech. I made a point that not only are we seeing culture as central to this, because it bears on conduct, but whistleblowing or the way in which entities deal with whistleblowing is one of the six areas that we are identifying. The other ones are things like your reward and incentives policy, with respect to your employees; your recruitment and training policy; and how you deal with conflicts of interest. But out of the six areas whistleblowing was front and centre within that.

Mr Medcraft : It is basically that program I outlined earlier about dealing with culture and conduct. I have publicly said what Greg said, which is that we are going to be encouraging companies to reward people who come forward and whistleblow-and not just say it but actually reward them. Also, we want companies to have a culture that encourages whistleblowers to come forward. As I say, that culture could even incorporate rewarding them for coming forward. In terms of how we enforce the law, our approach is: detect, understand and respond. In part of detection, we consider whistleblowing as a very key source of intelligence gathering for us, and it should be for companies. If companies have got the right culture then they want to encourage whistleblowers to come forward and they want to protect and value them, frankly.

Senator RHIANNON: Have you determined what form that reward would take?

Mr Medcraft : They may offer them a bonus for offering up. It is also what I have said. I made a speech to the stock brokers last week, which I am very happy to give you a copy of. I was very strong on this issue. I said: 'Look, if the person next to you is not doing the right thing, you take responsibility to elevate it to management, because, at the end of the day, if things go wrong, that affects the reputation of your firm and you should be concerned about it. It is actually for all of you. Just being passive is, frankly, not the right culture. It is everyone's business.' I have been very passionate about this particular issue. It is part of this broader push. I am happy to provide you a copy of that speech.

Senator RHIANNON: If you could do so, that would be good. Is ASIC involved in the government responding to the OECD report, where they have identified the need to have better protection for private sector whistleblowers?

Mr Tanzer : I think it is being coordinated through the Attorney-General's Department, but I am not aware of whether we have been specifically approached.

Senator RHIANNON: You are not aware.

Mr Medcraft : We made some comments to the Financial System Inquiry, and I think we did suggest perhaps stronger protections for former employee whistleblowers. Is that correct?

Mr Day : It was a Senate inquiry.

Mr Medcraft : We did make recommendations that protections for former employees acting as whistleblowers should be strengthened, because one of the issues, as you know, Senator, is that often a person who has been an employee, who has blown on somebody, may never be able to get a job again.

Senator RHIANNON: Yes. It is enormous.

Mr Medcraft : It is obviously a very, very important issue. They should not be penalised for the rest of their life for having stepped forward to do the right thing.

Senator RHIANNON: Just to clarify: there is no formal involvement of ASIC with what the A-G is doing in responding to that report?

Mr Medcraft : No.

Senator RHIANNON: Just staying with the OECD anticorruption work: they detailed 16 allegations of Australians bribing foreign officials, and the AFP are investigating. There is speculation that some of these companies may be involved in illegal activities in Australia. Do you have a memorandum of understanding or some working arrangement with the AFP to share information on Australians or Australian companies involved in bribery activities overseas and/or in Australia?

Mr Medcraft : We have a memorandum of understanding with the AFP. We also have staff seconded into the fraud and anticorruption unit within the AFP, with other federal agencies. I will highlight on this issue for companies in Australia-and, again, I would be happy to distribute a copy of it-that the AFP, and with our name on it as well, has recently released an online tool kit for companies dealing with fraud and corruption. I really recommend it. It is an excellent document.

Senator RHIANNON: Thank you. Can you confirm that some of the 16 allegations of Australians bribing foreign officials are also being investigated for illegal activities within Australia?

Mr Medcraft : I cannot comment on investigations; but, certainly, as I said, we are part of the fraud and anticorruption unit that is sponsored by the AFP. Clearly, that unit is probably pretty busy.

Senator RHIANNON: Okay. It says a lot.


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