Australian Securities and Investments Commission (ASIC) chairman Tony D’Aloisio (pictured) has sought to defend the regulator from criticism directed at it by retail investors amid the fallout from the global financial crisis (GFC).
Addressing a meeting in Sydney, D’Aloisio claimed the ultimate risk for the success or failure of an investment was a matter for the market, with shareholders and underwriters and other investors carrying that risk as they managed it through such strategies as asset diversification and assessing risk-reward premiums.
“This system and approach was well understood by institutional investors, but [less so] by retail investors,” he said. “As a result, some retail investors have been disappointed at ASIC’s performance.”
However D’Aloisio claimed that at the heart of such disappointment was “an expectation gap in risk taking”.
“There is an expectation that ASIC should have prevented some of the corporate collapses that occurred during the GFC and, once the losses occurred, ASIC should have more quickly recovered money and punished wrongdoing,” he said.
D’Aloisio said the challenge for the regulator was to make clear just what it could and could not do.
“For example, you get with the benefit of hindsight calls that ASIC was aware that Storm Financial was in the market and we should have closed it down,” he said.
“This disregards just what powers ASIC has,” D’Aloisio said. “At the height of the stock market, investors with margin loans were in the ‘black’. How would they have reacted to ASIC (if we had the power, which we do not) seeking to close them down?”
