Belinda Gibson, the deputy chairman of ASIC, has told Lawyers Weekly that the regulators will not be "driving around in vans up and down St Georges Terrace or listening in on everything," as ASIC signalled it will limit its proposed phone tapping powers to serious markets offences.
"I don't envisage that ASIC will be seeking to exercise those powers very much" Gibson said. "In the time I have worked in the supervision of the markets, in the last three years there has only been three or four instances where it might have been helpful.
"It doesn't come up very often, and to get a warrant from the magistrate you need some pretty good evidence."
In May, the Federal Government announced legislation that would allow ASIC to monitor phone calls in a bid to curb insider trading and market manipulation.
Gibson spoke to Lawyers Weekly after giving the keynote presentation yesterday afternoon (11 November) at the ACLA Conference.
Standing in for ASIC chairman Tony D'Aloisio, Gibson made the observation that over the last 20 years, ASIC has grown "from a nascent social network to a professional association of committed commercial lawyers with a clear and important role in our corporate sector and financial markets".
Gibson also acknowledged the skills of corporate lawyers early in her speech.
"The unique attribute of corporate lawyers is that you are generalists, you must know quite a lot about everything, and apply it in a commercial environment, usually in a very tight timeframe.
"This is an attribute a Commissioner at ASIC needs."
In a wide ranging speech that touched on ASIC's responsibilities as a market supervisor and the importance of surveillance, Gibson paid particular attention to the importance of continuous disclosure.
"Before joining ASIC I was an adviser to listed entities", Gibson said, as a nod to 20 years as a partner in the M&A group at Mallesons Stephen Jaques between 1987 and 2007.
"I know the question of when to disclose is very difficult. I know that disclosure can damage the underlying deal. Against this, the reputation for integrity of our market is critical to attracting capital. If investors believe that people 'in the know' can profit ahead of others, or can manipulate trading by parlaying information, the whole market is damaged."
Gibson made it clear that companies are immediately required to disclose sensitive information, unless carve out rules apply. Gibson said that if a deal has been leaked to the media, companies should act quickly to inform the market as "confidentiality is lost and exceptions to disclose do not apply".
She also warned that while the Australian Securities Exchange (ASX) still has the primary responsibility for supervising continuous disclosure, ASIC will also be taking a more active role. Gibson said that it already monitors media coverage and stocks of entities that have anticipated deals, and that it would telephone companies directly if there was evidence of abnormal trading or media coverage of mooted transactions.
Gibson was joined on the podium by Les Taylor, a former chief solicitor and general counsel with the Commonwealth Bank Group and barrister David Bennett, the Australian Solicitor-General from 1998 to 2008.
"I think we have some pretty good people at the top level of our regulators who are applying common sense," Taylor said. "Whilst it will cause a lot of pain and extra costs for you guys and your corporations, hopefully the increased regulation won't be too much, and there will be a lot of common sense involved."
Bennett added that when it comes to influencing the conduct of corporations, in-house counsel are in a position to have more influence than lawyers with law firms. "I have always thought that in many ways, a lawyer employed by a corporation, contrary to popular superstition, has more independence than an outside lawyer," Bennett said. "If you consider the classic situation where, in the course of discovery, you come across the 'smoking gun' document and you have the issue of whether you do the right or wrong thing with it. It is hard to imagine a corporate lawyer being sacked for insisting in disclosing a document. Can you imagine what would come out in the wrongful dismissal case?"
In speaking to Lawyers Weekly after her address, Gibson acknowledged that ASIC looks at the actions of other regulators, such as the Securities and Exchange Commission (SEC) in the USA, in forming its own policies.
"One of the things the SEC has is a Risk Committee, brought in after the financial crisis, and they are doing some really good work," she said. "We can't possibly emulate that [due to resources and expertise], but we can borrow and build from that."
Gibson also said that the ASIC guidelines on mortgage lender exit fees, released earlier this week, are very much aimed at protecting retail investors and sit in the unfair contract space.
Read the latest in-house news, views and opinions on our specialist in-house website
Read the latest in-house news, views and opinions
on our specialist in-house website