PacBrands airs five-year plan

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By , 10/06/2019 20:06

Pacific Brands boss John Pollaers has committed to only modest net sales and earnings growth after 2015 and for the struggling clothing and footwear manufacturer to hit its full potential another two years after that as part of a five-year turnaround strategy.
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Holding a briefing for analysts on the company’s underwear division, which owns brands such as Bonds, Berlei and which generates about a third of PacBrands’ annual sales, Mr Pollaers said he would explore overseas expansion opportunities that could one day see its underwear sold from London to Beijing. But that will take time.

”The imperative is to explore the potential for geographic expansion. People have to understand that it’s part of our five-year plan, but it’s likely to have an impact in the back end of that five-year plan,” Mr Pollaers said. ”From a brand potential some of them are ready now, but if you take the underwear business you have to consider the logistics of supporting it, the size of the range, the international labelling – so there is a job to be done on the background.”

Mr Pollaers said the company would likely, at best, stabilise its earnings and halt its downward profit trajectory over the next year or two, and then record modest sales and earnings growth.

The business would expand in the final two years of the five-year plan to post respectable growth.

Backing this up would be a pivot away from a reliance on the domestic market, which accounts for 95 per cent of sales, as well as its exposure to the wholesale market. Mr Pollaers plans to force through a structural change that will see a 50/50 split for sales across wholesale and retail, down from 65 per cent of sales which go through wholesale channels.

Mr Pollaers took over from former PacBrands boss Sue Morphet last September after the company unveiled its third loss in four years following more than $500 million in write-offs and restructuring charges. He took the reins promising a restructure of the group after a downturn in its key markets and the sting of a high dollar saw Pacific Brands post a full-year loss of $450.7 million for 2011-12.

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Lawsuit no more on Curtis’s mind

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By , 10/06/2019 20:06

Is there no limit to the magnanimity of Nick Curtis? On Tuesday the kindly rare-earth miner he chairs, Lynas, decided to drop defamation action against a Malaysian protest group.
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Curtis vowed to ”shut down” criticism of Lynas’ Malaysian rare-earth plant in May last year, when the company launched its lawsuit against members of the Save Malaysia Stop Lynas group.

The group alleges radioactive waste from the processing plant is a risk to people and the environment.

Lynas said that, since start-up in November, emissions have come in under the limit set in its environmental paperwork.

Slam-dunk evidence to win that defamation lawsuit, right? Er, no. ”Now that the facts are available … there is no value in continuing disputes with members of our local community,” Lynas chief executive Eric Noyrez told the ASX.

While Curtis was front and centre when the lawsuit began, he was absent from the announcement bringing it to an end. Perhaps he has lawsuits closer to home to keep an eye on, such as insider trading charges that – if found guilty – potentially could jail his son Oliver Curtis, who is married to celebrity PR woman Roxy Jacenko.Corporate crooks

Opposition immigration spokesman Scott Morrison has been out and about talking tough about deporting foreign crooks but CBD has discovered he has gone soft on corporate crime.

A new Liberal Party policy unveiled by Morrison this week aims to ”protect our streets and communities from foreign criminals”, but apparently boardrooms will remain as dangerous as ever.

Under the policy any Johnny Foreigner convicted of a crime that can attract more than a year in jail will lose their visa and be deported, even if a kind-hearted beak decides not to send them to the big house.

However, the policy does not apply to ”other miscellaneous offences”, a category defined by the Bureau of Statistics to include financial offences.

This would seem to mean that, though many of the 13-odd pages of offences listed in the Corporations Act theoretically carry a year or more’s jail, foreign business types would be able to break them without fear of deportation. CBD asked Morrison’s spokesman to clarify the situation but has yet to hear back.

Undies briefing

CBD wonders if, when Pacific Brands boss John Pollaers was a lieutenant in the Royal Australian Navy, he ever imagined he would one day give a lengthy strategic briefing to a room of analysts about undies.

But that’s exactly what took place on Tuesday when Pollaers, who once would sink seven or eight black coffees a day, briefed the market about his plans for PacBrands key Y-fronts, jockeys and knickers operation.

Part of his ”dacks day” presentation was an idea to take Aussie brands such as Bonds, owned by PacBrands, to the world. Its a kind of Fosterisation of the world, which is apt given Pollaers’ last job was chief executive of Foster’s.

It is unclear if ”wedgies” were part of some kind of secret initiation ceremony when Pollaers was in the Navy, or if he was ever the victim of the much-feared ”rear admiral” wedgie. Nonetheless, analysts reportedly were happy with Pollaers’ plans to lift underwear.Advice to trust

He’s under siege from politicians of all stripes over the Commonwealth Bank financial planning scandal, so where was ASIC deputy chairman Peter Kell on Tuesday?

Why, as far away from Canberra as possible, launching a website for 16-to-25-year-olds at Sydney’s University of Technology. According to Kell, the MoneySmart Rookie website will help young people make financial decisions by answering questions including: ”Who can they trust to give proper advice?”

That’s a question alleged victims of the CBA’s financial planners probably also would like answered.

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Holden warns of exit if pay cuts rejected

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By , 10/06/2019 20:06

Holden will ask employees at its Adelaide plant to accept a pay cut, in a bid to slash its labour costs – or risk the company’s manufacturing arm leaving Australia.
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”Australia is among the most expensive places to build cars anywhere on the planet,” Holden managing director Mike Devereux said on Tuesday in Melbourne, announcing the plan.

”Our geographic isolation, the cost of sourcing local components and our high labour rates mean we pay a significant premium to manufacture cars here compared to importing,” he said.

Mr Devereux said it cost $3750 more to build a Holden car in Australia than it did at the company’s other plants worldwide – with $2000 of this due to ”pure labour costs”.

”We are more expensive than Germany, the UK and Spain – let alone Asia,” he said.

The union representing workers at the plant signalled it would be willing to work with Holden – but also demanded that the Coalition lay out its plans for the nation’s car industry if it wins office in September.

Coalition industry spokeswoman Sophie Mirabella last week repeated the Coalition’s pledge to cut funding to auto makers in Australia by $500 million if elected.

Ms Mirabella could not be reached on Tuesday for comment.

Over the past 12 years, Holden has received $1.8 billion in government assistance.

Mr Devereux said any cuts to the wages and conditions of Holden employees would require a vote by the workforce, most likely in August.

He did not say how much employees might lose a week. The average salary for production staff in Adelaide is about $55,000. And a spokesman for the company could not say whether Mr Devereux would also take a pay cut as a result of the negotiations. Dave Smith, national secretary of the Australian Manufacturing Workers Union’s vehicles division, said the announcement ”smacks of the Coalition behind the scenes”.

Holden was going through ”pretty tough times”, Mr Smith said, because the high Australian dollar and the devaluation of the yen by the Japanese government, and Australia’s very low tariffs on imported vehicles had made locally made cars less competitive.

”We are standing naked in the front of the world, and everyone else has got their clothes on.”

The union would meet with the car company to discuss potential savings, Mr Smith said.

Prime Minister Julia Gillard and the Victorian and South Australian governments last March offered a $275 million lifeline to Holden, in return for the company agreeing to stay in the country until 2022.

Mr Smith said this ”co-investment” deal had not been given to Holden. ”If they can’t turn soil on their [proposed] body shop in Adelaide by the end of this year, they are out of the country.”

Mr Devereux said the company’s current wage levels were not sustainable if the car maker was to continue producing its Commodore and Cruze vehicles until at least 2022.

Mr Devereux also said that, over the 12 years that the company had received $1.8 billion in government assistance, Holden had injected $32.7 billion into the Australian economy. Holden last month posted a $153 million loss.

The pay-cut proposal follows Ford’s announcement that it would close its Broadmeadows and Geelong plants in 2016, after 88 years of local vehicle production.

Sales of Australian-built cars have been in free fall for more than a decade.

with Toby Hagon and David McCowen

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Elders digs in after sale plan shelved

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By , 10/06/2019 20:06

Elders chief executive Malcolm Jackman says the debt-laden company can trade itself out of trouble and denies the failure to sell its rural services business means the group is closer to falling into administration.
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The company announced on Tuesday it had rejected an offer for its rural services business because it fell short of its expectations.

”The bid delivered nothing to shareholders and hybrid holders and required banks to take a haircut, so it was clearly way off the mark,” Mr Jackman said.

Shares in Elders plunged 2¢ (22 per cent) to 7¢ after it emerged from a trading halt. Mr Jackman said that while originally Elders was under pressure from its lenders to sell both its rural services arm and its car parts business Futuris by September, the banks now supported Elders investigating alternatives.

”Our financiers are supporting us,” he said. ”We have some work to do with them clearly in terms of working through how the next 12 to 18 months play out.

”It’s not that we’re in a distressed business, we’re in a business where everybody prefers we have less debt.”

Mr Jackman has been fighting to stave off receivership for the past five years, but a tough year of adverse weather and underperformance in Futuris has meant he has been forced into asset sales to pay off mounting debt.

”We’ve got a very detailed time frame in terms of what we need to do in the next few weeks,” he said.

”The banks are clear they want to do things quickly but we are under no pressure from the banks per se.”

The 174-year-old company slumped to a $303 million loss at its most recent half-year result in March and its shares have lost more than three-quarters of their value in the past six months.

But Mr Jackman said the rural services industry as a whole had suffered because of hot and dry weather, and was banking on a turnaround in performance.

Elders declined to provide any detail on the bid it rejected, but it is understood Ruralco’s bid was about $250 million, which would have forced financiers, including ANZ, Commonwealth Bank and NAB, to take a loss.

Elders said it had made progress with the sale of Futuris, which is expected to attract a price of about $75 million, despite the blow of major customer Ford ceasing production in Australia.

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AusSuper acquires Queensland fund

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By , 10/06/2019 20:06

The country’s largest superannuation fund, the not-for-profit AustralianSuper, has quickened the pace of consolidation in Australia’s $1.6 trillion retirement savings sector by agreeing to take control of a Queensland industry fund.
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AustralianSuper, which has 2.1 million members and $62 billion under management, has reached an in-principle agreement to merge with AUST(Q) Super, which services the construction, engineering, maintenance and allied industries.

The deal with AUST(Q) Super, which has more than 17,000 members and $204 million of funds under management, follows AustralianSuper mergers in recent years with the multibillion-dollar funds Westscheme and AGEST.

AustralianSuper chief executive Ian Silk last week tipped a spate of mergers as funds sought to take on the banks’ wealth arms.

”It’s pretty clear that the regulators and public policy is pushing in the direction of a smaller number of large funds rather than a large number of smaller funds,” Mr Silk said. ”The public policy rationale for that is economies of scale should be able to be produced in large funds, and those benefits should be available to members.”

Mr Silk said there would eventually be a ceiling to the size of the AustralianSuper fund, but the limit related to performance rather than member numbers or assets.

”If we are true to our label and true to our beliefs that we exist only for the benefit of members, then we should continue to grow so long as that growth adds value for members,” he said.

AUST(Q) Super chairman Bob Henricks said in a statement: “With growing competitive pressure and increasing demands on the super fund industry, we believe our members will be best served by the scale of a larger fund such as AustralianSuper [with] a strong Queensland presence.”

Alex Dunnin, director of research at super research group Rainmaker, said recently that corporate funds in particular were consolidating. There were 344 funds in Australia, excluding self-managed funds, down from 463 four years ago.

He said that the average return for big funds were the same as smaller funds, but ”if you look at the incidence of outperformance there is a definite scale effect”.

”A smartly run small to medium fund will always outplay a big goofy fund. A smartly run big fund, though, is unstoppable,” he said.

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RBA content to see the dollar fall

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By , 09/05/2019 15:35

The Reserve Bank appears to continue to talk down the Australian dollar to help stoke economic growth, while the latest board minutes released by the central bank suggests it is open to cutting the cash rate again.
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Although the dollar had ”depreciated noticeably” against other currencies since its May cash rate cut, it ”remained at a high level considering the decline in export prices that had taken place over the past year-and-a-half”, the bank said in its June board minutes published on Tuesday.

”It was possible that the exchange rate would depreciate further over time as the terms of trade declined, which would help to foster a rebalancing of growth in the economy.”

The Australian dollar lost a quarter of a cent following the release of the minutes, falling to about US95.17¢ during the morning session. It was trading at US95.09¢ late on Tuesday.

RBS senior currency strategist Greg Gibbs said the RBA’s board members would have ”chosen their wording carefully in the hope that it might cause the currency to weaken”.

”Obviously it’s a very subtle attempt because the market doesn’t like overt pressure from central banks and normally rails against it … This is an example where they spoke in a way where they will welcome the currency’s fall but not rely on it.”

Citi economists Josh Williamson and Paul Brennan said the dollar was now more aligned with the terms of trade – a ratio that measures export prices to import prices.

Changes in the cyclical drivers of the currency, such as Asian currencies and risk sentiment, meant further falls in the terms of trade were more likely to be followed by weakness in the dollar, the economists said.

The Reserve Bank said while the US dollar was an ”important contributor” to the Australian currency’s recent depreciation, it also fell against most of its peers. It said this was a reflection of its May cut, falling commodity prices and concerns about China’s economy.

The board members noted that lower interest rates were having an effect on the economy, but that wage growth and business conditions remained subdued.

They said there was ”considerable uncertainty” about mining investment after it peaks and plateaus at a high level over the next year.

NAB currency strategist Ray Attrill said he expected the dollar to fall to US83¢ by the end of 2015. NAB also forecast the currency to fall to US93¢ by the end of this year and US87¢ by the end of next year.

However, Mr Attrill said, some of the recent falls could be reversed in the short term given the large amount of investors short on the dollar.

Financial markets were pricing in a 23 per cent chance of a July rate cut, according to Credit Suisse data. They were also pricing in at least one more cut by the end of the year.

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Time for plan B at Elders

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By , 09/05/2019 15:35

Elders is a bit like the rural services version of Billabong – an iconic brand with a business that strategically misstepped, bought the wrong assets, paid too much for them and is now lumbered with too much debt.
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Both have spent the past year (or more in Billabong’s case) looking for a buyer. And neither could find one. Elders looks like it will find a home for its automotive division, but the centrepiece, the rural services business, has been left on the shelf.

The most obvious buyer walked away from the auction room on Tuesday. Ruralco had been hanging around for a year. Its first offer lobbed around September and was rejected. The most recent offer was even less generous. Needless to say Ruralco was shown the door.

Ruralco has Australian Competition and Consumer Commission clearance. It also has a 12 per cent stake in Elders and could thus meddle with any other party that was looking to make a bid.

The Ruralco offer was only for the Elders’ rural services business and neither side is prepared to reveal the exact amount. But neither is disputing speculation that $250 million was close enough to the mark. Elders is also in negotiations with a couple of parties to sell the automotive business, which is expected to fetch about $70 million.

To have accepted the Ruralco offer, the banking syndicate would have had to take a haircut on its $340 million of loans. The value of the equity and the $150 million of hybrid securities would be zero.

Brokers have placed values on the Elders rural services business of $320 million to $385 million – which in depressed conditions in the agricultural market look pretty optimistic, and these are certainly not being reflected in the share price, which is perched at 7.1¢.

Having decided to spare Elders an undertaker, the banks will now have to come up with a plan B, the company simply cannot be left in its current overgeared structure. One of the reasons will be that to date Elders has managed to pay its interest bills – even in the lean years.

Given the seasonal nature of the agricultural industry, next year could see a positive turnaround in earnings, but it could also see a deterioration. It has been a tough year for everyone, with hot, dry weather and plummeting livestock prices pushing earnings lower.

Ruralco’s earnings fell in the first half of the financial year by 50 per cent, even before taking into account the loss on its stake in Elders.

The banks would not want to be rolling the dice too often. It is now up to Elders chief Malcolm Jackman to get some cost out of what is a high working capital business. He has been in rescue mode since he first put his feet under the desk four years ago. But this won’t address the more fundamental problem of repairing the balance sheet.

Only two immediate solutions spring to mind. The first is to get a major equity injection from a third party – an avenue being investigated – most likely an offshore party, probably Asian. The second is to undertake some debt for equity swap with lenders. But banks traditionally have been loath to do this other than as a last resort.

This story Administrator ready to work first appeared on Nanjing Night Net.

Investors back model to fund roads

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By , 09/05/2019 15:35

Institutional investors have given the thumbs up to the NSW government’s new model to fund large road projects but warned of a ”time bomb” if construction costs and traffic forecasts are not adequately assessed.
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Former superannuation minister Nick Sherry also cautioned that super funds that opted to put money into infrastructure had to deliver returns that justified the investment, and stay divorced from political whims.

”Having been a politician, I know plenty of … colleagues who’ve got their favourite road projects and bridge projects, generally to nowhere, carrying very little traffic, who would love you to invest in their political backyard infrastructure project,” Mr Sherry said at a lunch in Melbourne on Tuesday.

After the failure of toll roads built under a private-public partnership model, the NSW government has been forced to adopt a new funding strategy for the $10 billion to $13 billion WestConnex road project in Sydney.

As outlined in the state budget on Tuesday, the government plans to fund the first stage of the 33-kilometre motorway as an equity investment rather than a capital grant. It then wants to fund the next stage by raising money from the private sector against the tolls on the roadway.

This model is expected to be closely studied by the Victorian government, which is committed to the yet-to-be funded $6 billion to $8 billion east-west link.

The NSW government emphasises that raising private capital once traffic volumes are known can significantly reduce the risk of forecasting usage by motorists. Toll roads such as Brisbane’s Airport Link and Sydney’s Lane Cove Tunnel failed because the traffic forecasts were radically overestimated.

White Funds Management managing director Angus Gluskie said retail and wholesale investors could be willing buyers of toll roads such as the WestConnex once traffic volumes were known, and the project had been ”de-risked” under the NSW government’s plan.

”Right at the moment we have infrastructure projects that have to be done, and we have an unwilling and gun-shy private sector – this gets around that road block,” he said.

”It is exactly the right thing the government should be doing. It really just means the government holds the risk on their books for a couple of years and then just passes it on.”

But he warned that future governments could be saddled with large liabilities if their predecessors underestimated the risk of construction and overstated the likely traffic volumes.

”If it is done irresponsibly, you can be creating a bit of a time bomb for future governments,” he said.

”It will be important for the government to make sure, as they cost it and construct it, that they still believe it makes longer-term financial sense. They have to make sure the forecasts make it stack up.”

Danielle Press, chief executive officer of the $6 billion Equipsuper, said infrastructure investments by super funds required the right return, the right risk structure and the right liquidity structure.

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Lenders slow to pass on rate cuts

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By , 09/05/2019 15:35

Big banks have passed on official interest rate rises to their customers in less than half the time it takes them to deliver rate cuts, new figures show.
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Since the global financial crisis struck in 2008, banks have taken an average of 10 days to pass on cuts in the cash rate to their home loan customers, according to research published by Credit Suisse.

In contrast, lenders took about four days when raising rates.

The figures, obtained from broker 1300HomeLoan, show that all the big four banks – Commonwealth Bank, Westpac, ANZ and National Australia Bank – engaged in the practice over the past five years.

Commonwealth Bank was quickest to pass on rate increases, with an average gap of 3.7 days between when the Reserve Bank raised rates and when the change took effect for customers.

Westpac-owned St George was the biggest laggard in lowering rates for customers, taking 15.5 days.

Credit Suisse analyst Jarrod Martin said the practice was of some help to bank profits, but it did not have a substantial impact. ”When there are 365 days in the year it’s not going to be significant in the scheme of things,” Mr Martin said.

The Australian Bankers’ Association chief executive, Steven Munchenberg, said the analysis only looked at one side of the banks’ balance sheets.

”Banks typically announce changes to deposit rates around the same time as changes to lending rates, so any delay in changing lending rates also means savers are not seeing their rates changed immediately,” Mr Munchenberg said.

”This also has a bearing on the implications of timing for banks’ interest margins. While the Reserve Bank’s cash rate is a significant influence on market rates, other influences come into play when banks set market interest rates, for example, banks’ funding costs and competition from other financial service providers in the marketplace – just to name a couple.”

Bank profits in the first half of this year have grown strongly despite weak demand for credit from households and business. Total earnings in the industry are tipped to hit $27 billion this year.

The practice of holding back on rate cuts has been estimated to make an extra $2 million a day for the Commonwealth Bank and Westpac, the nation’s two biggest mortgage lenders.

The finding was contained in a detailed report on mortgage trends.

With Glenda Kwek

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ASIC has far too much on its plate

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By , 09/05/2019 15:35

Since Greg Medcraft took the chair in May, 2011 the Australian Securities & Investments Commission has become more open about how it spends its limited budget on surveillance and enforcement.
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However, what it is telling us may be an argument for change given recent revelations about CBA’s financial planning scandal.

After steadily expanding its areas of responsibility ASIC has arguably become too big to operate as efficiently as it could, and as it also makes clear in information sheets it has issued since Medcraft took over, it cuts its enforcement cloth to fit its budget. Dollars in hand are an important part of the cost-benefit equation that decides whether cases will be pursued, and if evidence exists, prosecuted or settled by way of an enforced undertaking that takes litigation financial risk off the table.

The risk is that money will be saved at the expense of taking the correct action, and on the strength of what my colleagues Adele Ferguson and Chris Vedelago have revealed in recent weeks about the misbehaviour of CBA advisers, ASIC let CBA off far too lightly by extracting only an enforceable undertaking in October 2011. It could have opted for tougher action that sent a message to the advisory industry that improper or illegal behaviour that enriches advisers at the expense of clients will attract significant penalties.

It was also slow to react, or at least from outside appears to have been. Almost a year-and-a-half passed between ASIC’s first contact with a CBA whistleblower and the final elevation of the matter to a serious investigation in March 2010.

There are several contributing factors. First, while ASIC is an earnest and well-intentioned organisation, it has also become a regulatory dumping ground. It began life simply, as the overseer of corporate and securities law. Now, it is also overseeing areas including insurance, superannuation, credit markets, margin lending and business names, and is directly supervising the sharemarkets, having inherited that role from a conflicted ASX.

It’s hard to think of much else that could be thrown at it, although Fairfax’s crack investigators Nick McKenzie and Richard Baker may have found something with their report this week that in 2011 the Australian Federal Police passed on to ASIC a reference it had received from US anti-corruption investigators about allegations that people working for BHP Billiton made improper payments to officials in China, Cambodia and Western Australia.

ASIC has no jurisdiction to investigate bribery, but could look at possible associated corporate offences. If it did, it took no further action. AFP halted its inquiry in September last year, but reopened it in February this year.

Under Medcraft ASIC reports more frequently and fully on its enforcement activities and sets out how it is performing against various benchmarks.

In its most recent report covering the 2011-12 June financial year it says, for example, that it conducted more than 700 high-intensity ”surveillances” during the year, and identified more than 20,000 market trading anomalies. It completed 179 enforcement actions with a success rate of 92 per cent, including 27 convictions and 22 enforceable undertakings, and fielded 12,516 reports of misconduct in the markets and industries it polices, finalising 72 per cent within 28 days, above its 70 per cent target.

It says it aims to satisfactorily answer all telephone queries on the spot, and in 2011-12 did so with 87 per cent of them, down from 91 per cent in 2010-11. It answered 91 per cent of its ”snail mail” inquiries initially within 14 days and in full within 28 days. Responses to email inquiries within two days fell from 96 per cent in 2010-11 to 73 per cent, but that probably reflected the fact that it took over business names registration from the states during 2011-12.

It’s noteworthy, however, that the regulator qualifies its 72 per cent success rate on responding quickly to reports of misconduct with the comment that reports that take longer than 28 days to resolve ”are generally complex ones or ones requiring considerable additional work”. Those are, of course, the ones that matter most.

It is also noteworthy that enforceable undertakings and, for that matter, banning orders for directors, stand with equal weight alongside wins in court in ASIC’s 92 per cent enforcement success rate statistic. Actions of different calibre are lumped together.

That leads to a question, about whether the 92 per cent success rate is actually too high. If ASIC pushed for more litigation and less enforceable undertakings, the success rate would be lower, but ASIC would arguably be signalling its determination to stamp out misbehaviour more clearly.

Underneath it all, of course, Medcraft is running a complicated business, and running it to a budget. His task would be easier if ASIC had less on its plate: a new government might consider that. It would also have easier enforcement choices if there was more money to spend: a new government won’t consider that.

[email protected]南京夜网.au

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