The royal commissioner, Kenneth Hayne, strongly criticised ASIC for striking deals with companies through enforceable undertakings or press releases rather than taking them to court, suggesting a new agency could be formed to launch prosecutions.
Labor financial services spokeswoman Clare O’Neil said Labor was open to this idea if the regulator did not show results.
“Commissioner Hayne has given us an alternative and we note that it’s there. He’s given us an additional option should things not change,” Ms O’Neil said.
Ms O’Neil said her expectation was that ASIC would “radically change” the way it was enforcing the law.
Labor estimates ASIC has been deprived of almost $200 million in funding over the six years since the Coalition was elected, saying this has been a factor in the enforcement problem.
“We can see the evidence that ASIC has become much more active in the last six months and we expect that to continue,” Ms O’Neil said.
“But when you cut $200 million from an organisation, things start to go wrong and cracks start to appear.
“The resourcing implications are real and that’s part of the story here.”
ASIC’s funding fell from $393.9 million in 2013 to $356.8 million in 2018 and the Labor estimate is a cumulative tally of the shortfall in funding each year compared to 2013.
Ms O’Neil did not pledge more money for ASIC but pointed to Labor’s record to claim it would properly fund the regulator.
ASIC funding averaged $386.6 million under Labor from 2008 to 2013 and fell to an average of $354.4 million under the Coalition from 2014 to 2018.
Commissioner Hayne rebuked ASIC for being too willing to make arrangements with companies to avoid the time and money involved in litigation.
“The starting point for consideration is, and must always be, that the law is to be obeyed and enforced,” he said.
“The rule of law requires no less. And, adequate deterrence of misconduct depends upon visible public denunciation and punishment.”
The report recommended ASIC take a new approach to enforcement, considering “as its starting point” whether a court should determine the consequences of a contravention.
The commissioner did not recommend the “civil enforcement agency” to take on the work of ASIC but suggested the idea for consideration depending on ASIC’s progress in reforming its enforcement.
The Labor stance is another sign it is eager to go further than the government in acting on the 76 recommendations in the final report, with a fight looming over compensation for victims as well.
Treasurer Josh Frydenberg has extended the scope of compensation scheme already in place and supervised by the Australian Financial Claims Authority but this caps claims at $500,000 for individuals.
Ms O’Neil said on Monday the cap was not enough to cover many mortgages in Sydney and Melbourne, going further on Wednesday by telling ABC Radio that this was one area where Labor could go further.
“Compensation for victims is one of the things [where] Hayne just recommended a very minimal model and I think that we can do something more there,” she said.
The government is also fielding questions over a spike in bank shares on Monday morning, ahead of the public release of the report.
The shares rose from 11am on Monday, when the government had the report but before the media entered a secure area in Parliament House to read the document under embargo.
Ms O’Neil wrote to Martin Parkinson, the secretary of the Department of Prime Minister and Cabinet, to ask for an investigation into whether any information was leaked by a ministerial office, a minister or a member of the public service.
David Crowe is Chief Political Correspondent of the Sydney Morning Herald and The Age.