Senator WILLIAMS—When can we expect a report on Storm Financial? It was due last August. Hundreds
and even thousands of people are awaiting this report. It will affect their lives. When can we expect a report?

Mr D’Aloisio—I checked with the team before coming here this evening. The commission will be able to
look at the results of our investigation at the end of this month and we are hoping to be in a position to outline
the outcome of that in early March.
Senator WILLIAMS—Will you make that public in early March?
Mr D’Aloisio—That is what we are planning to do. At this stage, that is the advice I have received from the
team. As a commission, we have not received the final results of our investigations, but I am told the team is
targeting the end of February commission meeting.
Senator WILLIAMS—Does ASIC lack the resources to carry out these investigations? If you had people
working on it, could you do it quicker?
Mr D’Aloisio—No. The Storm matter is ASIC’s highest priority and has been for some time. I am well
aware and you would be too, we have seen on a number of occasions the impact that it has had on these
individuals. To give you an example, if you have 3,000 investors and they have been dealing in shares over a
lengthy period of time, we have to check all the transactions and we have to reconstruct those transactions, and
we have to be in a position that it is evidence of a nature that could be admitted in a court of law. I spoke
earlier about OneTel which is also a complex case. It is the nature of these cases.
Senator WILLIAMS—I believe it is complicated, but we are running out of time. I want to take you to
another issue. Accounting standards for ADIs treat all loan contracts, including unsecured loans, as tangible
assets. Is this not the case with, for example, debenture issuing companies?
Mr D’Aloisio—Debenture issuing companies are not ADIs.
Senator WILLIAMS—That is right. How do you define tangible assets when it comes to debenture issuing
companies?
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Mr D’Aloisio—I do not know.
Mr Dwyer—I can define tangible assets. In what context is the question?
Senator WILLIAMS—I have been informed that smaller companies that are not ADIs that are not covered
under APRA but under ASIC have had a tough time, especially when the government decided to underwrite
the investments in the banks, credit unions and building societies but not in those smaller companies. They
have had a horrid time because people withdrew their money to put into safe havens during the global
financial crisis. It appears they have been treated unfairly and that, for example, unlisted debenture companies
must display a warning that investors may be at risk of losing part or all of the principal and interest they have
invested. Is that true?
Mr D’Aloisio—I think that you may be referring to the guidelines that we give in relation to unlisted,
unrated debenture products. We found when a number of these debentures failed that they were typically
advertised as being ‘sleep easy at night, nine per cent interest, give us your money, put it in, no problem.’
There were no ratings—nothing associated with those—and what was not being focused on was the risk that
the principal, in terms of how it was going to be used by the group to build property or whatever, was not
going to come back. So we have insisted that, if you are going to raise money through debentures from retail
investors, you have to focus on the risk of that money, the principal, not being there. If you have invested the
principal in an ADI and you tell the investor that, you have discharged your duty in that and the investor
knows. But, if you have invested that in a speculative property investment somewhere else and you have lent
the money you have raised to that property development company, we want you to tell them that as well,
because that may affect whether or not they are comfortable with the risk on the repayment of the principal. So
we see quite a difference between putting your money on term deposit and putting it in a debenture that may
be on-lent—the company on-lends the money raised through that debenture—to speculative property or other
types of investors. We are focusing the retail investor by telling the retail investor to ask the hard questions
about where the principal is and the chances of getting it back. We are saying to the issuer of the debenture,
‘You have to disclose certain things on an “if not, why not” basis, and if you are not going to have a particular
sort of leverage or you are not going to invest in certain assets then you have to tell the investor why not.’
Senator WILLIAMS—Are you lodging a submission to the Senate inquiry into liquidators and
administrators?
Mr Dwyer—Yes, we are.
Senator WILLIAMS—You have not lodged it as yet?
Mr Dwyer—No, we have not.
Senator WILLIAMS—Will you tomorrow?
Mr Dwyer—We have spoken to the office and we have an extension until early March. We expect to lodge
our public submission in early March.
Senator WILLIAMS—Is there any particular reason you require that much time?
Mr Dwyer—We have taken the inquiry and ASIC’s role in the insolvency industry very seriously. I guess
you are aware that insolvencies have increased substantially in the last two years, and the resources that ASIC
has put into insolvencies during those last two years have been substantial. Clearly it has taken us a lot of time
to accumulate and analyse the statistics that we require from our complaints area so we can provide
appropriate information and outcomes for us to comment appropriately through our submissions. The reason
we want extra time is to ensure that the report is fulsome and that it does provide reasonable information for
the Senate to base its conclusions on.
Senator WILLIAMS—Thank you. I want to move to some liquidators: Stuart Ariff who has been scrubbed
out for life—I believe he is an accountant; Geoff McDonald, out for two years—I believe he is a barrister; and
Dean McVeigh, out for 18 months. When these people are suspended or scrubbed out for life as liquidators,
can they still practise in their other profession? For example, could Stuart Ariff practise as an accountant?
Mr Dwyer—Yes, he could, but that would depend on his qualifications and what his foundation body—
Senator WILLIAMS—I would assume, as he was a registered liquidator, he would be an accountant.
Mr D’Aloisio—And the nature of the disqualification, if it has involved issues of honesty and so on.
Senator WILLIAMS—Sure. I have heard a lot of things about Stuart Ariff, none of them very good.
Justice Bergin—
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Senator Sherry—And you are about to use privilege to put them on the public record.
Senator WILLIAMS—No, this comes from court cases, Minister. If you listen, I will explain it to you.
This is from an article in the Australian about the 83 allegations of misconduct proved against him:
The case was completed in one day, with a listing of examples of gross misconduct.
… … …
CarLovers’ main creditor, the Malaysian-based Berjaya Group reckons Ariff ripped out $13m in disbursements and fees
over four years …
Ariff admitted to charging CarLovers for family holidays, hairdressing appointments, big restaurant bills and other
outlandish expenses.
For instance, there was a $208,300 consultancy bill involving Ariff’s father for services that had no relationship to the
administration of CarLovers …
… … …
He accepted ASIC’s allegation that he was paid $170,213 from a creditor of Sid Fogg for the GST—
but never paid the tax office. The article goes on:
He also admitted to wrongdoing concerning Bulla Tip, including the “fictitious” creation of a charge to secure a payment
of $400,000 to State Securities, a company fronted by Mr Karas.
… … …
He then paid Mr Karas’s State Securities $400,000 when he knew State Securities had not paid that amount to the Bulla
companies.
… … …
The case that really got the court going was HR Cook Investments, which was liquidated in June 2006 after the principal
died, leaving the money to members of the family, including minors.
Ariff was appointed liquidator of HR Cook and used hundreds of thousands of dollars of its money for legal fees that had
nothing to do with that company.
… … …
… ASIC to continue what it said it would do in court and pursue further investigations against Ariff.
When did you start investigating Stuart Ariff?
Mr Dwyer—Our initial complaints came in late 2005 and early 2006. There were a number of complaints
at that time, which were investigated by ASIC. No further action was taken at that time.
Senator WILLIAMS—You had some complaints in 2006 and no further action was taken at that time?
Mr Dwyer—On those complaints, yes.
Senator WILLIAMS—CarLovers spokesman Ian Fong said it was a shame ASIC did not act earlier. He
said:
It’s a shame ASIC didn’t act when we made our first complaint back in 2005. The damage that Mr Ariff and his group
caused would have been much less.
Adele Ferguson said in her column:
The Berjaya Group, frustrated with ASIC, came to The Australian in 2007 and told their story. Within days many more
victims of Ariff contacted the newspaper, and ASIC started action.
Is there any truth in that, because of the public display of Ariff’s actions brought out in Australia by Adele
Ferguson? Is that what made you act?
Mr Dwyer—I cannot comment on that.
Mr D’Aloisio—We will look at that. I do not think that is the position but we will look at it and give you a
response.
Mr Dwyer—We pick up intelligence from everywhere in relation to complaints. Certainly if there were
allegations in the press as well as complaints then that would be something we would certainly consider,
Senator.
Senator WILLIAMS—Mr Dwyer, since I have instigated this inquiry, I have been inundated with calls
from people. The first question I say to them is: you have problems; have you reported this to ASIC? It is like
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a scratched record: ‘I have done that and received nothing.’ That is a common thing of not once or twice, but
probably 30 or 40 times people have said to me: ‘I have reported to ASIC. I get an automatic response on the
computer and there is never any action taken.’ That report to me is so common that I am of the opinion that
you are either underresourced, or you do not look at the little issues or whatever. What is the situation?
Mr D’Aloisio—I think, as Michael was saying in our submission to the inquiry, we will go through these
complaints and the complaints records in some detail with that committee. It is one thing to say, ‘I have given
some information to ASIC,’ and it is quite another to conclude from that that ASIC then has a case that it can
take action on and, indeed, that it can find the evidence to take action on. I think you do have to look at the
complaint, what it was and its nature. We will, as Michael said in what we put to the committee, go through
the complaints that we have received and see how we have handled them. We did this, you may recall, with the
PJC in relation to Storm.
Senator WILLIAMS—That is fine. There was a case in Adelaide that I have been very involved in and
thank goodness Mr Justice Owen from your organisation came to Adelaide with me. I asked the man there if
he reported it to ASIC and he said he did years ago and could not get a response. Luckily, thanks to Justice
Owen, the files are now taken and I believe ASIC is looking at this situation, and they certainly should be. He
is just a typical person who said that he had been to ASIC and just got the cold shoulder.
This is a common complaint I get, and I come back to the situation: no matter how small or how big the
issue, I question if you are resourced enough. Are you lacking staff? Why are so many people saying, ‘Waste
of time going to ASIC.’ This is what I get on a regular basis: why is it? Are you not resource enough? Are you
not staffed well enough? What is the reason?
Mr D’Aliosio—Your propositions there are too general in the sense that, in terms of the inquiry we have
said we will go through those complaints and see if, indeed, there is a resource issue. I do not think there is; I
think we are handling the complaints and taking them through, and simply because people are dissatisfied with
the result of our inquiry does not mean that there was wrongdoing, or that ASIC has been slack. But we have
said that we will, in the submission to the inquiry, put that information there for you and for us to debate
further.
Senator WILLIAMS—Okay. Liquidators are registered with you—is that correct?
Mr D’Aliosio—It is my understanding.
Senator WILLIAMS—About 562 in Australia, I believe. Is there an annual return or examination that a
person has to go through when they are a liquidator to ASIC?
Mr Dwyer—There are approximately 700 registered liquidators, of which about 550 are practising. We
register liquidators, we do not licence them. When they are registered, they complete the necessary
documentation. They do not, like bankruptcy trustees, go through any interview process.
Senator WILLIAMS—They don’t?
Mr Dwyer—No, they do not.
Senator WILLIAMS—So they do not fill in a report to you each year saying, ‘We have kept our nose
clean, we have done everything right’?
Mr Dwyer—Each year they lodge an annual return.
Senator WILLIAMS—Okay, they just fill that in themselves?
Mr Dwyer—Yes, they do.
Senator WILLIAMS—Do you ever question them on their—how can I put it—ethical standards and
behaviour et cetera?
Mr Dwyer—No, we do not. It is really not within—
Senator WILLIAMS—It is left up to them?
Mr Dwyer—I do not think it is left up to them; it obviously comes through the system in terms of
complaints.
Senator WILLIAMS—I want to take you to personal indemnity insurance. Do all liquidators have to have
that?
Mr Dwyer—Yes, they do.
Senator WILLIAMS—Okay. If they do not renew it, or cancel it, are you informed?
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Mr Dwyer—I would have to take that one on notice.
Senator WILLIAMS—So, it is law that they have to have PI insurance? Is that correct?
Mr Dwyer—Yes.
Senator WILLIAMS—That insurance—does it cover things like fraud?
Mr Dwyer—Yes.
Senator WILLIAMS—It does?
Mr Dwyer—Yes.
Senator WILLIAMS—Good-oh. I noticed Ariff’s PI insurance had not been renewed. Was ASIC aware of
that early in the days?
Mr Dwyer—ASIC is aware of that, yes.
Senator WILLIAMS—Before the end of the court case? Was it only after the court case of Ariff that you
discovered that?
Mr Dwyer—I could not comment on that.
Senator WILLIAMS—If they do not renew their PI insurance, is it up to them to notify ASIC?
Mr Dwyer—It would be declared on their annual return, I think.
Senator WILLIAMS—The annual return might be done when?
Mr Dwyer—If it expired before the annual return they would not have to declare it until the annual return
was due.
Senator WILLIAMS—Do you think they should?
Mr Dwyer—I think that is probably worth looking at, yes.
Senator WILLIAMS—I think it is too. We are running out of time; no doubt we will meet again in the
near future.
Senator Sherry—You have not joined the corps and financial services committee?
Senator WILLIAMS—No, I have just joined this committee.
Senator Sherry—You can have seven goes a year, from what I understand!
Senator WILLIAMS—Can you?
Senator Sherry—It used to be six.
Senator WILLIAMS—That will do me at this stage, thank you, Chair.
CHAIR—Thank you Mr D’Aliosio, ASIC and Minister. Thank you also to the secretariat, Hansard and
broadcasting. The committee is now adjourned.
Committee adjourned at 10.59 pm