BHP buyback on the cards, analysts predict

BHP Billiton can continue investing in new projects as well as return money to shareholders, analysts believe.
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The diversified miner posted an underlying half-year profit of $US7.8 billion on Tuesday and said it was on track to reduce its net debt to $25 billion by June.

Analysts said BHP cutting gearing levels to below 30 per cent would trigger a shareholder buyback or investments in further growth.

”We think they can do both,” Deutsche Bank analyst Paul Young said.

”Management believe they can achieve an average internal rate of return of over 20 per cent for the major project options. We see further project approvals with the 2014 full year results”.

Mr Young suggested the Spence copper project in Chile or the Pilbara iron ore business were the most likely candidates for investment funding.

BHP will spend $US16 billion on projects this financial year. UBS analyst Glyn Lawcock said that figure, combined with a debt reduction, would give the company the capacity to complete a shareholder buyback and invest in growth.

”We believe that BHP’s target of maintaining capex at up to US$15 billion per annum keeps the balance sheet flexible enough to balance shareholder value between investments in growth projects and capital management,” Mr Lawcock said.

”We do not believe that BHP is sacrificing future growth for cash returns. It is more a case of not over spending such that projects suffer from lack of ability to manage from a resourcing perspective.”

Mr Lawcock added the Jansen potash project in Canada to the list of projects for possible investment funding.

He estimated that BHP could announce a shareholder buyback of $US5.3 billion at its full-year result.

”To be conservative, the buyback could be over two years enabling further debt reduction also.”

But Macquarie analysts said while BHP could launch buybacks of up to $US7 billion, it was more likely to favour growth investment, citing a rising share price and fierce internal competition for capital.

BHP’s share rose for the ninth consecutive day on Tuesday, its longest rally since mid 2009, to a high of $38.89. Shares were slightly lower at $38.88 in midday trade on Wednesday.

Macquarie said BHP was targeting annual capital expenditure of $US15-16 billion in 2015, double rival Rio Tinto’s 2015 spend of $8 billion.

”And yet BHP’s production is only 40 per cent higher in copper equivalent terms suggesting, this is about more than merely replacing current production, with the focus of future investments being iron ore, copper and petroleum alongside jansen,” Macquarie said in a note to investors.

But Citi analyst Heath Jansen said BHP had scope for a modest buyback. He said he did not expect returns to shareholders to accelerate dramatically until net debt has been been cut to $US20 billion, ”which will not occur until 2015 on our estimates”.

”In addition to capital management initiatives, we expect BHP’s dividend to increase 7 per cent in FY14,” Mr Jansen said.

”The payout ration including buybacks has averaged 50 per cent in the last 10 years, and our forecasts imply a dividend payout ratio of 43 per cent in FY14 and 47 per cent in FY15.

”We expect the total payout ratio after buybacks to be over 50 per cent in FY15.”

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Thai PM Yingluck Shinawatra to face anti-corruption commission next week

Bangkok: The immediate fate of Thailand’s beleaguered prime minister Yingluck Shinawatra will be decided on Thursday next week when judges of the country’s anti-corruption commission summon her to answer a charge of negligence over a controversial rice subsidy scheme.
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If the judges find her guilty she will be suspended from office and face impeachment proceedings in Thailand’s Senate, bringing an abrupt end to the two and half year-rule of Thailand’s first woman prime minister, and plunging Thailand deeper into political crisis.

As renewed violence erupted on Bangkok’s streets, Ms Yingluck lashed out at her political enemies, accusing them of obstructing the implementation of the rice scheme she insisted had benefitted farmers and underpinned the economy.

“I am saddened and must apologise to the farmers as anti-government groups are holding rice farmers hostage and blocking the government from effectively implementing the scheme,” she said in a televised address.

“I must reaffirm the rice pledging scheme is the right policy and there was no conspiracy to corrupt.”

Ms Yingluck’s government is winding down the scheme at the end of February after it had suffered losses totalling as much as $US8 billion because farmers were paid almost 50 per cent above global market rates for their rice.

The government has struggled to find enough money to pay farmers for their latest crops, bringing hundreds of them on to the streets to protest.

Depositors at the Government Savings Bank pulled more than $US1 billion from their accounts on Monday after the bank provided a loan to the agricultural cooperative operating the rice scheme.

Ms Yingluck’s supporters say the anti-corruption commission’s action is part of what they see as a judicial coup orchestrated by powerful figures in Bangkok.

Ms Yingluck, who chairs a body that oversees the scheme that has left Thailand with huge stockpiles of unsold rice, denies any wrongdoing.

Pro-government red shirts in Thailand’s north and north-east have said they will mobilise 500,000 people to fight if she is forced from office, including setting up an alternative capital in northern Chiang Mai.

Meanwhile, clashes appear likely to continue on Bangkok’s streets as anti-government protesters vow to step-up their campaign against Ms Yingluck’s government and refuse to negotiate with police over their weeks-long occupation of protest sites across Bangkok.

Labor minister Chalerm Yoobamrung has warned that protesters must leave the sites at key government buildings this week or police would move to reclaim them.

More than 15,000 police have been mobilised in Bangkok for the operation.

On Tuesday a policeman was among four people killed as police clashed with protesters near government buildings in Bangkok’s historic quarter.

In his latest firebrand speech protest leader Suthep Thaugsuban declared that Ms Yingluck should be forced from the country.

“It is time to run this she-devil out of our native land,” he said.

The upheaval is the latest episode in an eight-year conflict that in broad terms pits one elite group of Thais backed by Bangkok’s middle class with another group backed by exiled former prime minister Thaksin Shinawatra, who is Ms Yingluck’s brother.

The protesters have been rallying since November in a campaign to force the powerful Shinawatra family from politics and set-up an unelected body to run the country for up to two years.

The latest violence brought to 14 the number of people killed since the protests began after the government attempted to pass an amnesty bill that would have allowed Mr Thaksin to return from exile without having to serve jail time for corruption.

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G20: Joe Hockey to take NSW infrastructure model to the world

NSW Treasurer Mike Baird, left, and Federal treasurer Joe Hockey speak ahead of the G20 Finance Ministers Meeting and Infrastructure at the Transport Management Centre, Eveleigh. Photo: Tamara DeanTreasurer Joe Hockey will plug the “NSW model” of infrastructure development to the world’s most powerful economic officials when they gather in Sydney this weekend.
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Mr Hockey applauded the state’s strategy of privatising public assets and using the capital to help fund new transport projects ahead of the G20 Finance Ministers and Central Bank Governors meeting.

“I want to praise the NSW Government for its approach to recycling of government investment in existing assets into new assets,” he said. “The sale of ports, with the proceeds going into new road infrastructure, is a benchmark for the rest of Australia and arguably many countries around the world and I will be using that as a clear example to G20 finance ministers this weekend.”

Australia will use its presidency of the G20 in 2014 to foster stronger global growth and will push for infrastructure investment to be a key growth engine. On Saturday night, Mr Hockey will host an “investment and infrastructure working dinner” as part of the G20 program. The G20 meeting in Sydney will be a who’s who of global finance, including Janet Yellen, the first female chair of the US Federal Reserve, and International Monetary Fund chief Christine Lagarde along with finance ministers who preside over 85 per cent of the world economy.

“This is where the rubber hits the road in terms of the future of the world economy and I look forward to meeting with my fellow finance ministers and central bank governors over the next few days as we shape the destiny of the world economy,” Mr Hockey said.

The NSW Treasurer, Mike Baird, who joined Mr Hockey in his infrastructure pitch, said Australia was considered an “infrastructure capital of the world” by foreign industry players because of the number of existing assets that are likely to be privatised in future and the pipeline of new projects.

Since coming to office in 2011, the O’Farrell Government has privatised the Sydney desalination plant, Port Botany and Port Wollongong and will “recycle” the capital raised to fund new infrastructure projects. Last week Mr Baird announced the NSW Government will sell Macquarie Generation to AGL Energy for $1.72 billion. The long-term leases of the Port of Newcastle will be finalised before the state budget in June.

Mr Hockey would not be drawn on whether the state government should sell its electricity distribution network – the so called “poles and wires”. He said that was a decision for the NSW government.

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Asylum seekers’ personal details made public on website, Immigration Department concedes

Details of asylum seekers across Australia were revealed, Immigration concedes. Photo: Luis AscuiUPDATE: Asylum seekers could win refugee status over bungleMichael Gordon: Stop transfers until we have answersTony Wright: Australia put these people at riskDesperate calls for help as violence erupted on Manus
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The Department of Immigration has conceded that details of thousands of asylum seekers held in Australia were inadvertently made accessible online.

A report in Guardian Australia on Wednesday said that the personal details of a third of asylum seekers held in Australia – making up about 10,000 people – were released by Immigration in a serious breach of privacy.

The department was alerted to the breach and pulled the data down.

The information included all asylum seekers held in a mainland detention facilities, on Christmas Island and several thousand in community detention. Children were also included.

Despite the federal government’s insistence about the need for greater secrecy when it comes to immigration and border protection, the report said that a database containing the full names, nationalities, location, arrival date and boat arrival information was revealed on the department’s website.

On Wednesday, in response to questions about the breach, a spokeswoman from the Department of Immigration, said ”this information was never intended to be in the public domain”.

”The department acknowledges that the file was vulnerable to unauthorised access. The file has been removed and the department is investigating how this occurred to ensure that it does not happen again,” she said.

Fairfax Media has also contacted Immigration Minister Scott Morrison for comment.

Guardian Australia has not identified where the database was located online and said it told the department about the information before it reported the breach.

Refugee Council of Australia president Phil Glendenning said the release of asylum seekers’ information was “outrageous” and unprecedented.

“We are deeply disturbed by this,” he told Fairfax Media.

Mr Glendenning said the breach ran the risk of exposing people who were already vulnerable to “very serious danger”.

This not only included reprisals if asylum seekers were sent back to their country of origin, but their families – either in home countries, or transit countries in between.

The Refugee Council is also seeking particular assurances about the safety of people in community detention who may have had their location revealed.

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O’Farrell government breaks election promise by backing central coast coal mine

That was then: Premier Barry O’Farrell in 2011 with (from left) Chris Holstein (Member for Gosford), Darren Webber (Member for Wyong), Barry O’Farrell (Premier), Alan Hayes (Australian Coal Alliance), Chris Spence (Member for The Entrance) & Chris Hartcher (Member for Terrigal & Minister for Energy). Photo: Supplied”Unjust” mining laws slammed by former judgesMore NSW news
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The O’Farrell government has been criticised for breaking a key election promise by recommending approval of the Wallarah 2 coal mine on the central coast.

Before the 2011 state election, as opposition leader, Barry O’Farrell said a Coalition government would not approve the mine because of its impact on drinking water catchments.

However, the Department of Planning and Infrastructure has now recommended the project be approved, subject to strict conditions.

NSW Planning Minister Brad Hazzard said the Independent Commission Against Corruption hearings into mining approvals under the former Labor government had resulted in “seismic changes” in the way planning decisions were made.

“Three years of Eddie Obeid and mates at ICAC has underpinned a critical need for the integrity of an arms length independent decision-making process through the Planning and Assessment Commission,” Mr Hazzard said.

“The Green groups are playing dangerous political games if they are arguing in the face of ICAC recommendations supporting independent processes.”

Nature Conservation Council Chief Executive Officer Pepe Clarke said the department’s decision was a “bitter blow” to the people of the central coast and to Premier O’Farrell’s credibility.

“Mr O’Farrell gave a personal guarantee before the election that, under his government, mining would not be permitted to occur in drinking water catchments, no ifs, no buts,” Mr Clarke said.

“At the time, Mr O’Farrell and Central Coast MP Chris Hartcher were even photographed together wearing T-shirts emblazoned with the words ‘Water, Not Coal’.

“The position they adopted helped the Coalition win key marginal seats of the central coast. It is time Mr O’Farrell’s government delivered on his promise by creating binding legal protections for water catchments to ensure proposals like Wallarah 2 cannot be approved.”

Mr Clarke said that if it proceeds, the Wallarah 2 project will undermine several waterways and result in the extraction of up to 5 million tonnes of coal a year for 28 years. He said the former Labor government rejected the project in early 2011 because of uncertainty around subsidence, unacceptable impacts on surface water quality and uncertainty around ecological and heritage impacts.

“The mine would operate for less than 30 years, but the damage mine subsidence could do to local aquifers and streams would be permanent,” Mr Clarke said.

“This was a point that Mr O’Farrell clearly understood and was prepared to campaign on when in opposition. Now he is in power he has the opportunity and a moral responsibility to ensure this project does not proceed.”

Planning and Infrastructure Executive Director Chris Wilson said the department’s assessment of the project was supported by independent studies and had found there were no environmental or amenity reasons to stop the project going ahead, subject to strict conditions around the protection of water supplies.

“After careful consideration of all potential environmental, social and economic impacts the department is satisfied that the economic benefits of the mine can be realised without significant adverse impact,” he said.

“The department found the company has comprehensively addressed those factors which underpinned the refusal of a separate application in 2011.”

Mr Wilson said the project would be in line with the NSW Aquifer Interference Policy and have minimal impact on underground water tables and would not adversely affect the region’s water supply.

He said there would be no significant subsidence impacts on the region’s water infrastructure or major water courses.

He said any discharges from above-ground facilities would be limited under any environmental protection licence and could be adequately controlled.

Recommended consent conditions had been developed in consultation with the NSW Office of Water and a range of other state and federal agencies.

The conditions included performance measures requiring the mine to have negligible or minor impacts on all major streams, creeks and rivers and the development of an extensive ground- and surface-water monitoring network.

“The Wallarah 2 project would generate a significant number of employment opportunities in the local region, including 300 direct jobs and an estimated 500 flow-on jobs in related industries,” Mr Wilson said.

“It would also have direct economic benefits to the state, including an estimated $134 million in taxes and $207 million in mining royalties.”

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Why deny US-style Fair Use copyright laws to Australians?

Copyright reform needed: LaborWhy did we gain the restrictions of US copyright law but not the rights?After an 18-month review, the Australian Law Reform Commission (ALRC) has backed calls to bring Australia’s copyright laws into the modern age with “Fair Use” exemptions. The change would streamline our current hotch-potch copyright laws, which aren’t designed to cope with the rapid pace of technological change.  Australia’s current copyright laws need to be rewritten to account for every new technology, an approach which saw everyone breaking the law for almost thirty years until we gained the right to record free-to-air television in 2007. The ALRC’s “Copyright and the Digital Economy” report wants to replace this with proactive Fair Use laws which use four technologically-neutral “fairness factors” to determine whether an act of copying is within the law.Federal Attorney-General George Brandis agrees that copyright laws need an overhaul, describing them as “overly long, unnecessarily complex, often comically outdated and all too often, in its administration, pointlessly bureaucratic”. That sounds promising, until Brandis keeps talking and you realise he wants to focus all his attention on filtering the internet and chasing movie downloaders, rather than forging balanced copyright laws. Brandis has already signalled his reluctance to embrace Fair Use law due to the supposed uncertainty it would create for copyright holders. This of course conveniently ignores the fact that the United States – one of the world’s major content creators – has had similar Fair Use laws in place for decades.The ALRC report anticipated this kind of response from the likes of Brandis, and addressed it head on in the summary report:”The standard recommended by the ALRC is not novel or untested. Fair use builds on Australia’s fair dealing exceptions, it has been applied in US courts for decades, and it is built on common law copyright principles that date back to the 18th century.””If fair use is uncertain, this does not seem to have greatly inhibited the creation of films, music, books and other material in the world’s largest exporter of cultural goods, the United States.”Fair Use laws obviously aren’t creating too much uncertainty in the US, but our current laws are definitely creating uncertainty in Australia. The Optus TV Now and IceTV cases are two high profile examples where businesses were dragged through the courts even though they felt they were on the right side of the law – and so did the courts in some circumstances. Fair Use rules will create more certainty for copyright owners and businesses contemplating new services based on their content. What’s really frustrating is that Australians didn’t inherit Fair Use rights under the 2005 US Free Trade Agreement, in a text-book example of “do as we say, not as we do”. The agreement saw Australia adopt many of the restrictions of the US Digital Millennium Copyright Act, such as a ban on circumventing Digital Rights Management even if you’re exercising your rights under copyright law. Even if Australians are granted Fair Use exemptions for acts such as format-shifting our DVD libraries, these digital rights management (DRM) laws will stand in the way.If Fair Use does get up in Australia, it will be interesting to see if other services and copyright holders introduce token DRM protection just so they can neutralise Fair Use exemptions. Other agreements such as the secretive Trans Pacific Partnership also seem heavily weighted in favour of protecting copyright holders and at the expense of our rights under law.The ALRC clearly states that Fair Use does not include piracy, but some people are happy to muddy the water to ensure we get more copyright responsibilities without the corresponding rights. If Fair Use copyright laws are good enough for the US, why aren’t they good enough for Australia? Where do you think the balance lies? 
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Andrew ‘Twiggy’ Forrest pockets $103m as Fortescue joins dividend rush

Andrew Forrest at his iron ore mine at Cloudbreak. Photo: Quentin JonesFortescue Metals Group has joined in the dividend bonanza sweeping the Australian market, announcing a higher than expected half-year payout that will see close to $103 million flow to its biggest shareholder, billionaire rich-lister Andrew ‘Twiggy’ Forrest.
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The 10¢ per share dividend is equal to the dividend that came with full year profit announced by the company in 2013.

The dividend came as Fortescue reported a $US1.71 billion net profit for first half, which was slightly lower than the $US1.77 billion that a consensus of analysts were expecting.

But it was better than the $US1.67 billion that UBS was expecting.

The result is a stunning 259 per cent higher than the first half of 2013, and reflects the huge rise in production that is underway at the iron ore miner.

Fortescue has also benefited from higher than expected iron ore prices over the past six months.

Fortescue has kept its full year export guidance at 127 million tonnes, despite weather challenges over the past seven weeks.

Fortescue chief executive Nev Power warned last month that heavy rainfall was persisting through January and could interrupt production and shipments.

The wet weather has continued since then, and UBS analyst Glyn Lawcock noted this week that one year’s worth of average rainfall in the Pilbara had fallen in January alone.

That prompted Mr Lawcock to lower his export estimate to 125 million tonnes, but the company is so far holding its guidance at 127 million tonnes.

Fortescue was initially forecasting that exports would range between 127 million tonnes and 133 million tonnes in the 2014 financial year, but changed that in January to 127 million tonnes exactly.

Fortescue wants to gradually increase its dividends until it hits a consistent dividend payout ratio of between 30 and 40 per cent.

But the company will need to pay down more of its debt before it hits that level.

The dividend paid out by Fortescue was almost double the 5.3¢ dividend analysts had been expecting.

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‘Dairy wars’ not over as Bega Cheese positions for battle

Bega Cheese’s factory on the NSW south coast. Photo: Orlando ChiodoNSW-based Bega Cheese has hinted the dairy wars are not over, saying the company is well-positioned for further consolidation and the battle for milk supply as it reported an 18 per cent jump in first half profit to $18.7 million.
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The cheese company, which listed on the ASX in 2011, recently lost out to Canadian giant Saputo in the dramatic three-way takeover battle for Victorian dairy group Warrnambool Cheese & Butter.

But Bega said it has reaped $98.9 million, before tax and costs, for its 18.8 per cent stake in WCB and expects to report an after-tax profit of $44 million in its full-year accounts.

“The recent battle for control of WCB was a demonstration of both the value of dairy assets in Australia and Bega Cheese’s positioning as a key player in the ongoing rationalisation of the Australian dairy industry,” Bega said.

“Bega Cheese has a very strong balance sheet and is well-positioned to participate in the ongoing opportunities in the Australian dairy industry.”

The comment comes just days after the banker who led Saputo to victory in the $530 million battle for Warrnambool said he expects dairy deals to keep flowing.

“There’s a trend of bringing global companies like Saputo to the Australian market and helping them build out their position,”Rothschild managing director Sam Prentice said.

“Private equity firms are all looking at their portfolios and which of their investee companies are suitable for IPOs.”

Announcing its first-half profit, Bega said there are a number of organic growth opportunities it intends to pursue in further value-adding its whey and dairy nutritionals products.

“The group expects to consider a number of investment and corporate opportunities in the short to medium term.”

Adverse weather and competition for milk supply drove an 8 per cent drop in milk intake to 336 million litres, but group revenue rose 4 per cent to $510.6 million and earnings before interest and tax jumped 15 per cent to $30.2 million.

Near-record dairy commodity prices and the recent decline in the Australian dollar underpinned the growth in earnings.

Bega said the outlook for dairy commodities is positive primarily due to the insatiable demand from China for whole milk powders and whey powders.

The company said a key focus going forward will be on providing incentives to grow its existing milk pool and procure new supply, suggesting it is ready for a battle to win farmers from rivals like new entrant Saputo.

“A number of new entrants in milk supply procurement, strong competition amongst existing players and increased returns from international markets will continue to create a highly competitive market for milk,” Bega said.

Bega declared a full-franked interim dividend of 3.5¢, matching the dividend paid in the prior period.

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Property group Mirvac strikes agreement with US outfit

Diversified group Mirvac has forged a relationship with the US based financial services company TIAA-CREF to co-invest in premium-grade office development projects sourced by Mirvac for a three year period.
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Called the Australian Office Alliance (AOA), TIAA–CREF will have the first right to buy a 50 per cent stake in any prime-grade Australian office towers, but only in projects that are acquired by Mirvac from now on.

It will not include the new City Tattersalls project in Pitt Street, to be constructed by Mirvac.

Under the scheme, the US group will provide the funding, with Mirvac will retain development risk.

Mirvac’s business will also provide investment management services, property management services and development services in respect of the assets held through the Alliance.

The news comes on the eve of Mirvac’s interim result, with analysts forecasting a net profit after tax of $214.7 million and a distribution of 4.4¢.

That compares to the result for the December 31, 2012 half which was impacted by asset impairments of $273.2 million. Mirvac reported a profit of $194.2 million, down 4 per cent, for the six months to December 31, 2013.

After those impairments and other asset revaluations, the statutory profit was down 69 per cent to $55.2 million.

Analysts have said the relatively high exposures to NSW and medium density residential sectors place Mirvac in a strong position to meet increasing demand by pulling forward project commencements.

Mirvac’s chief executive, Susan Lloyd-Hurwitz, said, said she was pleased to have formed a strategic relationship to acquire core office properties with TIAA-CREF.

”The alliance with TIAA-CREF is in line with Mirvac’s strategy to sell-down up to 50 per cent of major assets and development projects to strategically aligned, long-term wholesale investment partners.”

The analysts at JP Morgan said Mirvac should comfortably meet its 11.7-12¢ earnings per security guidance (+7-10 per cent) and the stronger residential markets should allow it to push Harold Park, Sydney, settlements into the 2015 financial year.

”Mirvac will use third party capital to fund half its office development pipeline (699 Bourke Street and 664 Collins Street, Melbourne projects),” the analysts said.

Mirvac is also looking to sell 50 per cent of its 275 Kent Street, Westpac headquarters, worth about $410 million and a further $500 million of ”non-aligned” assets to help fund its office and retail projects and recent acquisitions.

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Corporate penalties need to ‘create fear’, says watchdog ASIC

ASIC chair Greg Medcraft has defended the performance of the agency. Photo: Jim RiceThe Australian Securities and Investments Commission has defended its record as the country’s main corporate watchdog, saying Australia doesn’t have big enough penalties to deter corporate misconduct.
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ASIC chairman Greg Medcraft told a Senate estimates hearing this morning that the regulator was upholding its mandate and called for tougher government policy to help it conduct its job better. ASIC is facing staunch criticism for its role in investigating a number of cases.

The Senate inquiry into its performance follows a number of articles in Fairfax Media that revealed serious misconduct and a cover-up by Commonwealth Bank’s financial planning arm and the failure of ASIC to act promptly.

”It is frustrating – both for us and the public – when the penalty available to respond to misconduct is much less than the profit someone made in the process,” Mr Medcraft said. ”If this is so, then rational players in the market will routinely take that risk.”

”If the thinking of law-breakers is a tussle between fear versus greed, then we need penalties that amplify the fear and smother the greed.”

”We need penalties that create a fear that overcomes any desire to take risks and break the law.”

Dealing with whistleblowers

Mr Medcraft also said ASIC was attempting improve its dealings with whistleblowers that approach the regulator with information.

This includes establishing specific whistleblower staff and bolstering training around whistleblower protections and handling of whistleblower complaints.

He said the watchdog had a strong record on enforcement and was proactive in identifying market problems. He said Australia needed stricter penalties to improve its enforcement record.

”ASIC recognises a number of submissions were from people who have incurred significant monetary loss and suffered serious financial hardship.

”We appreciate the difficult circumstances these people face and the trauma that it can bring – and we thank them for their contribution to the inquiry.

”Individual losses are distressing. However, the settings established by Parliament for our financial system are such that no financial regulator can prevent all losses from occurring.

ASIC’s performance on the issue of whistleblowers is also coming under scrutiny by the Senate economics committee inquiry. The inquiry was launched in the wake of series of BusinessDay articles that exposed allegations of forgery, fraud and a cover-up by former CBA financial planners including Don Nguyen and Ricky Gillespie.

Hundreds of clients are believed to have lost hundreds of millions of dollars as a result of the misconduct. Commonwealth Bank has so far paid out $50 million in compensation.

ASIC has previously acknowledged that its dealings with a group of whistleblowers who contacted the regulator with concerns about CBA’s financial planning operation in October 2008 were “not adequate”.

BusinessDay has revealed that ASIC took 16 months to act on the information provided by the whistleblowers.

‘Front page test’

Following ASIC investigation into the actions of two David Jones directors, Mr Medcraft also called on companies to look beyond the law and at the “front-page test” when allowing their directors to trade shares,

“[Companies] do need to go beyond the law and you need to be careful about perception,” he said.

“Any company needs to make sure that the market has confidence in it.”

The inquiry began with the chairman of the Senate Standing Committees on Economics, Mark Bishop, questioning Mr Medcraft and his commissioners about ASIC’s investigation into the purchase of shares by two David Jones directors just days before Myer approached its rival about a $3 billion scrip merger.

Senators Mark Bishop and John Williams questioned the commissioners over the timing of the share purchases by the directors, which were made three days before a better-than-expected quarterly sales update.

But the ASIC commissioners, including Mr Medcraft, said they did not deem the information held by the directors to have been material, meaning that it could have affected the share price. They said the material, on its own, was not deemed material by ASIC, especially given that the like-for-like sales were 0.3 per cent lower than in the previous corresponding period.

Expert advice

ASIC revealed that Harold Schapiro, an experienced stockbroker, was the market expert they had engaged to assist them with the investigation into David Jones and allegations of insider trading and the improper use of confidential information.

Mr Medcraft said that while ASIC had issued a “no further action letter”, it was not a tick of approval and the corporate regulator held the right to open the case again.

He added that Myer’s offer of a nil premium scrip merger was “just a try-on … frankly”.

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