The Australian Securities and Investments Commission (ASIC) has claimed it does not have the resources to pursue individual commercial lending arrangements, particularly those related to second tier finance and ‘lenders of last resort'.
ASIC made the statement in response to claims by the Four Corners program on the ABC that it had chosen not to investigate the actions of a number of lenders of last resort, including Ian Lazar who featured in the program.
On its website Four Corners stated that ASIC "has washed its hands of policing the business-to-business lending practices of Lazar and others who operate outside the major banking institutions".
ASIC stated it had acted against Lazar in 2004 and wound up a group associated with him — the Business Australia Capital Finance group (BACF) — which was soliciting funds from retail investors and was being operated in a manner that did not comply with the Corporations Act.
According to ASIC this action was part of its focus on matters relating to collective investments by retail investors that did not comply with relevant regulations, and its priority was to ensure retail investors were given appropriate protection in the financial services sector.
"When selecting matters for investigation, ASIC must ensure that it directs its finite resources appropriately to achieve this outcome, especially in cases involving systemic misconduct," ASIC stated.
The regulator stated it was aware of Lazar's activities, which were generally related to commercial transactions rather than investments offered more publicly, and was carefully assessing complaints it received about his behaviour.
ASIC also stated that commercial lending arrangements are not covered by consumer credit protection laws, disclosure regulations, licensing requirements or dispute resolution schemes.
"Commercial parties are generally assumed to be more capable of protecting their own interests, which is reflected in both the regulatory settings established by Parliament and the approach by the courts to individual matters," ASIC stated in its written response to Four Corners.
"ASIC has limited resources and we target our enforcement efforts towards matters that have a wider public impact, particularly where they involve retail investors. As a result ASIC generally does not intervene in private, commercial disputes for the benefit of one party.
"When appropriate, ASIC will refer these matters to another law enforcement agency. In particular, in cases where there are allegations of criminal activity it is more appropriately a matter for police."
ASIC stated that it had made repeated warnings about second tier finance and recommended that businesses should seek legal advice about other options rather than using ‘lenders of last resort'.
