THE Australian Securities and Investment Commission (ASIC) has set up a taskforce to investigate the failure of Banksia Securities and the possible need for tighter regulation of the unlisted debenture sector in which the company operated.
The taskforce is the second to be set up in two days as the ramifications of the Banksia disaster continue to spread.
The state government on Tuesday set up a working party to help people affected by the crash.
ASIC chairman Greg Medcraft said its taskforce would comprise business units from across the commission and would be led out of Melbourne by commissioner John Price.
It will make recommendations to the federal Treasury.
“The failure of Banksia, an unlisted debenture company that has operated a mortgage financing business across a large part of regional Victoria, will affect the lives of many everyday Australians,” Mr Medcraft said.
“ASIC wants to take a closer look as it is another area of retail-funded shadow banking.”
He said non-bank financial institutions such as Banksia were presently governed by regulations that required them to make full disclosure about the risks and other information regarding their activities and to a limited extent, about the conduct of debenture issuers.
“But we need to lift the regulatory intensity to make sure that investors are confident and informed,” Mr Medcraft said.
“The taskforce’s work may involve making recommendations to Treasury about law reform, given we have pushed the existing conduct and disclosure regime to its limit.
“We will also work closely with Banksia receivers and managers McGrathNicol to try and get the best result for Banksia investors and retail clients who Banksia provided credit to.
“Importantly, we’ll also continue to remind debenture trustees of their obligations as gatekeepers to protect investors and monitor debenture investments — particularly bad loans and liquidity problems.”
Speaking on ABC Online, Mr Medcraft said investors needed to be informed of the difference between a debenture and a deposit with a bank or other authorised deposit- taking institution.
“Investors really need to be very clear that these institutions are not covered by the deposit guarantee, they are not regulated by APRA (Australian Prudential Regulation Authority), that’s the most important thing,” he said.
“They may look like a bank and act like a bank, but they are not a bank and they are not regulated prudentially like a bank. Nor do they have the same protections as a bank.”
Mr Medcraft said a surprising number of investors did not appreciate that higher returns on financial products generally equated to higher risks of losing money.
In other developments, a Hamilton-based solicitor John Fletcher, is considering putting together a class action against Banksia if enough victims of the collapse agree to take part in the legal action.
Mr Fletcher also said some victims might have solicitors who had an association with Banksia and it was important they got independent legal advice.