The Australian Securities and Investments Commission (ASIC) has denied key elements of a freedom of information (FOI) request because it fears it might give away too much about its processes and methodology to high risk hedge fund managers who are still under scrutiny.
The regulator has told the Victims of Financial Fraud (VOFF) group that it cannot release documents pertaining to particular hedge funds because it contains details of ASIC’s methods and procedures in conducting monitoring and risk-based surveillance of hedge funds.
The VOFF, which is focused on gaining recompense for Self Managed Superannuation Fund investors hurt as a result of the Trio Astarra collapse, had asked ASIC for a document that lists hedge funds that ASIC considers to be of high risk between 11 December, 2008 and 19 September, 2009.
“Disclosure of this information would reveal the specific criteria that ASIC uses to assess indicators of potential fraud and higher risk in the hedge fund sector. It would therefore reveal what factors guide and influence the allocation of investigative resources by ASIC,” the letter said. “Disclosure of the criteria, along with ASIC’s notes and considerations, would prejudice the effectiveness of these methods and procedures by providing forewarning of the matters considered by ASIC in deciding whether to conduct further risk analysis and investigation.”
“If hedge fund managers were aware of the indicia that guide ASIC’s decision making they would tailor their activities in ways that specifically exclude these criteria with a view to avoiding detection,” the letter said.
“If persons are able to tailor their activities based on knowledge of the types of matters ASIC takes into account when assessing what types of conduct it will and won’t pursue, ASIC’s ability to enforce the law will be adversely affected. There is a very real risk of prejudice to the effectiveness of these procedures in that an examination of this material would allow a person to exploit any weaknesses in order to evade detection.”