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Watchdog alert: ‘Ralph Norris has spoken’ - NAREV was the Norris protege!!!!
The Australian 12:00am April 22, 2017
Ben Butler
October 26, 2011, should have been a day of triumph for the corporate regulator.
The Australian Securities & Investments Commission was about to announce the Commonwealth Bank was going to enter into an enforceable undertaking that was supposed to clean up its scandal-ridden financial planning arm.
No doubt ASIC hoped that the agreement would put an end to the saga of shoddy advice given to customers at CBA’s Commonwealth Financial Planning by planners such as its notorious former star, “Dodgy” Don Nguyen.
After days of painstaking drafting, ASIC was gearing up to send out a media release at 11am, documents released to The Weekend Australian under Freedom of Information laws show.
The press release had been approved from the top, with chairman Greg Medcraft emailing his approval — “OK with me” — to head of corporate affairs Kristen Hannah the night before.
But just before 9.30am the entire process came to a sudden stop after the intervention of one of the most powerful men in Australian business, CBA’s Ralph Norris.
It’s an episode that demonstrates the massive pressure banks brought to bear as they attempted to massage the public messages put out by ASIC in response to the sector’s seemingly never-ending series of scandals.
“Please halt the CFP media release,” Hannah told her team in an email.
“Ralph Norris has spoken.”
She forwarded an email from senior ASIC investigator Adrian Borchok.
“This email will be painful!” Borchok wrote. “CFP have just come back to me with a request from Ralph Norris himself.”
Norris, who was approaching the end of his time as CBA chief executive, wanted a sentence noting CFP’s “cooperative approach” replaced with a lengthier passage lauding the bank for voluntarily launching a review of its financial planning division. He didn’t get his way, although ASIC did agree to what Hannah described as “minor changes” made by CFP.
“Sorry about this, it’s obviously a huge deal for CFP,” she told her team. “They have sweated over EVERY word in the media release, believe me …”
For ASIC, this kind of pressure was only unusual because it directly involved Norris.
As The Australian has been reporting this week, over almost a decade, big banks and financial institutions — CBA, Westpac, NAB, Macquarie Group and AMP — used their corporate and legal muscle to influence the public statements ASIC put out about a dizzying array of misdeeds.
Almost in passing, the cache of FOI documents has also revealed the misgivings senior ASIC staff had about an EY review of financial planning woes at Macquarie (a “sham”, an investigator said) and frustrations about learning about breaches second-hand from sister agency, the Australian Prudential Regulation Authority, (NAB “forgot to tell us”, an officer complained).
In addition, the emails, meeting notes and draft press releases show ASIC often watered down its language without any apparent outside pressure and fretted it would be scooped by the likes of its frequent critic, Nationals senator John “Wacka” Williams.
Discussing rogue Westpac loan officer David St Pierre, who was jailed in February for running a Ponzi scheme, ASIC banking and insurance boss Michael Saadat told commissioner Peter Kell the bank was briefing Williams. “Given the good senator’s current practices we should expect it to be leaked very quickly,” Kell responded in a September 25, 2014 email.
ASIC officers then put together a draft press release — and accepted edits from Westpac.
Williams, however, never did leak the story.
The documents reinforce the impression of ASIC as a “timid, hesitant regulator, too ready and willing to accept uncritically the assurances of a large institution” delivered in a scathing June 2014 Senate economics committee report after an inquiry driven in large part by Williams.
It was only after prodding from the media and the Senate inquiry that ASIC returned to the financial planning cesspit for another, closer look, imposing fresh licence conditions on two CBA financial planning subsidiaries in May 2014 and winkling a commitment to do more work fixing its woes from one of the toughest operators in the business, Macquarie, in February 2015.
This week, Williams told The Australian he found ASIC’s behaviour “amazing”. “If they are consulting with the people they are supposed to regulate, then something is not right,” he said. “I don’t put a media release out about Bill Shorten and run it past Bill Shorten to see if it’s accurate.”
The documents — and ASIC insiders — paint a picture of a constant battle between ASIC and hugely resourced bank spin units pushing for changes to announcements that shouldn’t have been up for negotiation.
As the regulator drafted a press release about widespread and long-running problems with NAB’s Navigator platform in April 2014, senior manager Nick Coates tried to hold the line. “I think we need to be clear with them that they do not get to have input on release — except for verification of facts,” he wrote in an email to the ASIC media unit. “I wouldn’t want there to be an expectation that our release will be a negotiated outcome.”
But in the end, ASIC accepted all but one of five changes suggested by Andrea Debenham, the head of regulatory affairs at NAB’s wealth division — including one that put the bank’s actions at the centre of the press release by identifying it in the opening paragraph as having “identified a systems error”. Little wonder Debenham was “comfortable with where we landed”, as she told ASIC officers in an email.
But even without external pressure, a few rounds of back and forth between ASIC’s media unit and its lawyers tended to smooth away any prickly bits in the regulator’s statements — and rob them of much of their newsworthiness.
In one 2011 case, ASIC commissioner Peter Boxall squashed together press releases announcing the banning of CBA’s Nguyen, and a compensation scheme for bank customers. “This is a ‘good’ story,” a handwritten note accompanying the email states.
Boxall, who is now the chairman of the NSW Independent Pricing and Regulatory Tribunal, said he did not know who wrote the note. “It’s so long ago I can’t remember anything about it,” he told The Weekend Australian.
ASIC also scrubbed the release of findings Nguyen “hassled” a blind woman into signing a document she could not read and tipped an 87-year-old client into a high-risk investment.
The process tended to render press releases “so vanilla they became tasteless”, one ASIC insider told The Weekend Australian this week.
This week’s revelations came as efforts by the banks to stave off Labor’s ever-present threat of a royal commission reached new heights, with the industry pledging to eliminate commissions for selling products (although the pay reforms don’t reach as far as the executive suite).
As part of its attempts to show it has turned over a new leaf, the industry has appointed former Labor premier of Queensland Anna Bligh to head the Australian Bankers Association.
In a cheeky move this week, she castigated ASIC for allowing her ABA members to water down the regulator’s press releases.
ASIC also insists it has turned over a new leaf and no longer allows banks to water down press releases — although they may still get to check for factual errors.
But an unhappy Williams still has questions, especially for Kell. He’ll get his chance to ask them when ASIC fronts Senate estimates next month.