SUBJECTS: Corporate law reform, increased ASIC powers, continuous disclosure rules
CARSON SCOTT:
The Corporate Law Minister, Chris Bowen, unveiling a reform package last month. It's focusing on three areas, essentially: reversing a High Court decision that's put shareholders on an equal footing with creditors; amending our insolvency trading laws; and tweaking existing provisions. Now those developments follow a busy few months for the Minister since he took up the job, including contentious moves to expand the jurisdiction, resourcing, and powers of the corporate watchdog ASIC.
Shortly, an august panel of experts, setting out the path to reforming Australia's insolvency laws.
But before we go any further, I spoke with Chris Bowen from our Canberra studios. I started by asking about the burden for publicly listed companies when it comes to contentious disclosure rules during the course of informal workout periods. Concerns, essentially, that the rules could hinder their ability to conduct confidential discussions over ongoing support with financiers.
CHRIS BOWEN:
Continuous disclosure is very important. You would need to have a very, very good case to overturn or to modify any of our continuous disclosure laws or rules. Continuous disclosure is very important to the integrity of the market. And as I say, the proposals contained in the discussion paper in and of themselves are very substantial. They are proposals that other Governments haven't gone down the road of. We're willing to go down that road. The proposals in the discussion paper would make quite a dramatic difference, and I think we need to be mindful of the difference that those proposals could make.
SCOTT:
Some are saying also, Chris, that you need to be looking more closely at detailing what will qualify when it comes to advice from an experienced professional. Need that professional be external to a company, or can it be indeed someone appointed by that company, for instance as a Chief Restructuring Officer?
BOWEN:
Well, I take it that that comment goes to the business judgment rule about if you're acting in good faith and seeking advice. Of course that is one of the three options in the discussion paper, going down that road of a business judgment rule. And as I say, submissions are open, they're open until the second of March, and we would be seeking feedback on just what format, in a detailed form, the business judgment rule should take if it were to be extended to insolvencies.
SCOTT:
So at this point in time you're thoroughly open to all proposals? You don't actually have any detail in mind yourself until these have come through?
BOWEN:
Not in relation to that particular element of the business judgement rule, no. I think going down the road of a business judgement rule has a certain attraction, but there are detailed matters to be sorted out. That's why I took the decision to issue the discussion paper rather than make a policy decision at this stage in the cycle, to issue a discussion paper, have it open for a period of time, and to consult, and then to move reasonably quickly after that.
SCOTT:
Can I look at the priority that you're attaching to the reforms with ASIC, the regulator, beefing up its powers, specifically when it comes to phone tapping? What checks are going to be in place to ensure that ASIC indeed uses those powers appropriately?
BOWEN:
Oh, very significant, Carson. These are important powers, but it's also important that there are checks and balances. It's important to note that ASIC will not be using telephone taps itself. There won't be ASIC officials conducting telephone taps. The reforms we've announced are that insider trading and other related offences will be regarded as 'serious' under the Telecommunications Interception and Access Act, which will allow telephone tapping to occur. Now, ASIC will need to go to the Federal Police and show the Federal Police that they have cause for concern. And then a judicial officer, a judge, will need to issue a telephone tapping warrant. That judge will need to be convinced that the telephone tap is warranted.
SCOTT:
So it's not going to be a rubber stamp? The fact that the police have green lighted it, the judge won't then be minded to say "Okay, I've got two ticks in the box, I might as well put the third and final one"?
BOWEN:
Well judges in my experience don't like being treated as rubber stamps and don't act as rubber stamps. Judges will need to be shown that there are grounds for concern, that there are suspicions, grounds for suspicion, to warrant a telephone tap. I mean, somebody used the term to me, "How will you stop ASIC going on fishing expeditions?" Well a) I would say ASIC doesn't have the time and resources to go on fishing expeditions, but b) even if they were that minded, they would need to convince a judge, a federal judge, that that was the case. And in my experience, federal judges would not give that lightly.
SCOTT:
Does ASIC have the time and resources to be looking at rumourtrage, or is that simply a wild goose chase? If you look at the track record, last year 67 allegations of that and only one conviction.
BOWEN:
Well rumourtrage is of course, in my view, similar but separate to insider trading. And in relation to rumourtrage, ASIC has a process. They have a discussion paper, a proposals paper, out for discussion with industry. That's appropriate, they're getting feedback on that, and they're taking on board that feedback. And that's as it should be.
SCOTT:
You don't think the whole market is, effectively, one big rumourtrage?
BOWEN:
Well you can put that point of view, Carson, but ASIC does have concerns about the market integrity effects of rumourtrage. It's appropriate that they canvas ways of dealing with that. That's what they're doing.
SCOTT:
How would you like to be remembered, Chris Bowen?
BOWEN:
Well, generally, Carson?
SCOTT:
Yeah, generally.
BOWEN:
I'm only 37, I've got a bit of time left before I start writing eulogies. [laughs]
SCOTT:
Well, let's perhaps narrow it down then, to your current role, then.
BOWEN:
Well, Carson, I like to take the approach that when an issue is raised with me, when a concern is raised, then I deal with it. When I can be convinced that there is a case for reform, I embrace that reform, I follow it through. Sometimes that is not easy. Sometimes that is controversial.
But in the eight months or so that I've been Corporate Law Minister, there've been significant issues, significant reforms. Whether it be the overturning of Sons of Gwalia, whether it be these insider trading reforms, whether it be dealing with access to share registers, whether it be the transfer of market supervision from the ASX to ASIC. There've been a range of issues where I've seen a case for reform and have acted, knowing full well that that would upset some people, knowing full well that it would be controversial, but nevertheless more than happy to embrace the need for that reform.