“So the insider trading laws just aren’t calculated or set up to deal with this situation.”
“It’s a bit of an abuse of position, a misuse of information as a director – knowing there might be a revaluation of illiquid assets and then taking a step in your own interests like self-dealing.”
ASIC announced last month it had investigated investment switching by executives at 23 funds, focusing on their conduct during the market volatility arising from the COVID-19 pandemic.
The behaviour in question relates to super fund executives transferring their money out of unlisted assets such as property and infrastructure at the onset of the COVID-19 pandemic, when valuations took a hit.
Since unlisted assets are revalued only periodically, a super fund executive could trade on secret information by moving their retirement savings out of an investment option with an allocation to unlisted assets before the fund revalued these investments lower.
The announcement from ASIC follows an investigation by Parliament’s economics committee last year, which found evidence of executives at AustralianSuper, NGS Super, Rest, First State, Hostplus and Intrust Super switching their investment options at the onset of the pandemic.
ASIC is working with the $3.4 trillion superannuation industry to improve its governance, conflict of interest policies and procedures to avoid opportunistic switching.
“They’re classic conflict management procedures and once they’re in place that should deal with this issue,” Mr Longo said.
Separately, Mr Longo also spoke to the Parliamentary Joint Committee on Corporations and Financial Services about disciplinary action taken against the Australian Securities Exchange over the week-long outage of its trading platform last year.
ASIC this week imposed licence conditions on the market operator, ASX.
The tighter regulation imposed by the new licence conditions is designed to ensure that the $250 million CHESS software replacement project will be subject to intense scrutiny over the next 18 months.
Professional services firm EY will play an important role in monitoring every aspect of the CHESS testing and implementation process, with regular updates to be provided to ASIC.
Under questioning from Liberal National Party senator Paul Scarr and Labor senator Deb O’Neill, Mr Longo committed to reconsider releasing more details from an unpublished report by IBM into the ASX’s outage.
“We will revisit whether we can publish more of the report than we have so far,” he said.
Mr Longo said there was “commercial and legal” issues for ASIC to consider in releasing the full report.
One of the challenges ASIC faced was that the report was commissioned by the ASX, even though it was instigated by ASIC, he said.
An ASX spokesman said it was not intended to be a public document.
“It was undertaken for ASX and our regulators to provide a full and frank examination of the outage.
“We have been transparent about the nature of the report and its findings and recommendations have been publicly released.”
“What’s important is our commitment to address all of the recommendations and commission an independent expert to review our actions to meet the recommendations.”