Corporate regulator defends decision to not act earlier on Sterling collapse

By Neil Griffiths

November 16 2021
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The corporate regulator said it did not believe there was any “particular concern” to act on complaints regarding the Sterling Income Trust when it was first brought to its attention.

Corporate regulator defends decision to not act earlier on Sterling collapse

In a Senate inquiry on Tuesday (16 November), ASIC chair Joseph Longo conceded that the corporate regulator had received complaints about matters related to Sterling in late 2016; however, it did not become officially involved until a referral by the Western Australia Department of Mines, Industry Regulation and Safety in March 2017.

The Sterling First Group eventually collapsed in 2019, leaving more than 100 customers facing possible eviction and heavy financial losses.

In his opening statement on Tuesday, Mr Longo said, “We appreciate that those who have suffered losses have wished for us to move faster at times,” however, he was pressed on the matter by Senator Louise Pratt, who asked if ASIC could identify opportunities where it could have acted earlier.

“At that point in time, the documentation of the scheme met the statutory requirements for registration,” Mr Longo responded.

“It’s true we had two or three complaints or reports of misconduct in relation to Sterling [in] late 2016, early 2017… but those didn’t trigger any particular concern for us that required any further action.”

As well as the tenant investors, 465 others invested in the Sterling Income Trust alone.

Questioned about compensation, Mr Longo said that, according to the liquidators of the Sterling Income Trust and Group, “there is little chance of meaningful returns to creditors” and it’s possible no returns will be made at all.

Mr Longo’s comments come following fresh demands from the Association of Independently Owned Financial Professionals (AIOFP) and consumer groups, including CHOICE, for a key change to the government’s CSLR obligations bill – the inclusion of all managed investment schemes (MIS) and other bank products in the CSLR catchment zone.

On Monday (15 November), the AIOFP accused the federal government of defying Commissioner Kenneth Hayne’s recommendations by excluding investment managers from CSLR obligations.

AIOFP director Peter Johnston wrote in a letter to MPs: “Commissioner Hayne intentionally recommended a retrospective date for the commencement of CSLR to assist consumers who have lost life savings due to the incompetence of banks.

“The Commissioner also wanted all managed investment schemes and other bank products involved in the CSLR catchment zone to comprehensively protect consumer savings.

“Minister Hume, however, wants to defy Commissioner Haynes recommendations by precluding banks and their MIS products from CSLR catchment and not backdating its commencement – an astonishingly conflicted position to take against consumer best interests.”

The Sterling Income Trust inquiry will continue on Thursday (18 November).

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