ASIC warned Westpac that Senator John Williams could leak their information. Credit:Andrew Meares ASIC documents released in response to a freedom of information request made by News Limited two years ago show that it was commonplace until 2015 for ASIC to send draft press releases to the banks for feedback before issuing them to the media and the public. In some cases ASIC acted like an extension of the banks' PR team. By doing this it left itself open to being bullied into submission. Email correspondence between various ASIC staff reveals that sometimes the sugar-coating was self imposed, with some ASIC staff wanting to go in hard, while others pulled rank and went in soft. 'Dialling down' In one press release dated May 2014 that relates to ASIC imposing new licence conditions on two of CBA's financial planning arms, an original draft press release called it for what it was: the business had "misled" ASIC over its compensation scheme and the methodology used to compensate clients.

But the word "misled" was dropped by an ASIC executive. Australia's top corporate cop, ASIC chairman Greg Medcraft. Credit:Jessica Hromas The ASIC media staffer, who no longer works at the regulator, wrote back: "We are not stating openly that CBA misled us? Are we dialling down that rhetoric?" He goes on to say: "We have removed the reference about the results of the review being monitored by ASIC and will be made public? Do we want to consider that such a reference would provide some (even if on a minuscule scale) sort of comfort/reassurance to customers/media/observers who when they read this or hear about it third-hand will (already being disillusioned by how this matter has been handled) roll their eyes and refuse to believe there are no other surprises lurking about? Also consider the issue of transparency (then and now) being at the heart of this whole CFPL matter." Former Senator Mark Bishop. Credit:Alex Ellinghausen

The version that was released doesn't mention "misled" and, after weeks of editing, plays down the significance of the licence conditions. What is most interesting is the attitude of one of CBA's spin doctors on receiving the draft release: "I think the language needs to align. A bit about semantics but we do need to be clear so will make some suggested adjustments." We are not stating openly that CBA misled us? Are we diallng down that rhetoric? Former ASIC PR Asked about the arrangement a CBA spokesman said: "We value our relationship with regulators and we engage with them every day on a range of topics. ASIC plays a crucial role in ensuring Australia has a strong and stable financial system, and fact-checking statements prior to announcements is an important part of a regulatory process." It is all too cosy.

Neutral tone "Systemic fraud", "systemic theft", doctoring of customer files and "lying to clients", were some of the words used by Senator Mark Bishop, who chaired the Senate inquiry into ASIC and the CBA, and recommended a royal commission into the bank's financial planning arm. In contrast, ASIC's press releases favour a "neutral tone" about its concerns, as one email relating to a NAB release reveals. Words such as "superficial" were airbrushed from a Macquarie draft press release despite an independent experts report being considered a "sham" by a senior officer at ASIC. In one press release ASIC deliberately left out the compensation figure despite knowing what it was. Correspondence between ASIC and Westpac relating to a dodgy Westpac home loan manager, David St Pierre, who has since been sentenced to jail, was rejigged with the ASIC PR saying to her colleague the restructure was to "placate" Westpac. Emails show Westpac and ASIC discussing the timing of the media release and Westpac giving ASIC the heads-up it was briefing Senator Williams.

Again, not a good look. Nor was ASIC deputy chairman Peter Kell's curious remarks: "Given the good Senator's current practices we should expect it to be leaked very quickly. I assume Westpac understand this?" What is particularly disturbing is ASIC continued to send out draft press releases to the banks after chairman Greg Medcraft told a parliamentary inquiry into the performance of ASIC that the regulator had been "too trusting" of the banks, particularly CBA in its dealings with it over a financial planning arm. That same Senate inquiry had found ASIC was too timid and trusting and that this was "inherently dangerous to ASIC's legitimacy as a regulator". ASIC promised to lift its game. Despite this, the policy to show draft releases and allow them to be edited continued. Culture exposed It speaks volumes about the culture. It can only serve to embarrass Prime Minister Malcolm Turnbull who described ASIC as the tough cop on the beat when defending his decision not to have a royal commission into financial services despite public support.

ASIC says it changed its policy on media releases in February 2015. That's all well and good, but the brutal reality is that policy only changed after Fairfax Media embarrassed it with an article, "ASIC allowed NAB to check and alter media releases", in February 2015. The article was picked up in a Senate hearing by Senator Williams, with a commitment from ASIC that it wouldn't do it anymore. The information was supplied to Fairfax by a NAB whistleblower who released documents that showed ASIC agreeing to alter a draft media release about a significant, six-year-long system error in NAB Wealth's Navigator platform, which affected tens of thousands of customers. These documents shine a light on the impact of getting the heads-up on press releases. One internal NAB document says that "feedback provided was incorporated into the final release", contributing to a "well executed" strategy that resulted in "minimal" media coverage and public reaction. It was a win for NAB. A February 2014 document obtained by Fairfax refers to ASIC's acceptance of NAB's plan to appoint PricewaterhouseCoopers to independently review the Navigator problem. "This approach avoided a formal enforceable undertaking." A second February document states: "This is a less severe regulatory outcome than was originally anticipated."

Instead of calling it for what it was, the media release, issued on May 2, 2014, described it as "a systems error that resulted in some customers having incorrect investment income allocated to their account". In the media release, ASIC acknowledged the "co-operative approach taken by NAB Wealth in this matter". Macquarie sham Another set of correspondence relating to Macquarie and its financial planning scandal describes an Ernst & Young independent experts report as a "sham". The ASIC officer Adrian Borchok, who has since left ASIC, who labelled it a sham requests the word superficial be included in the draft press release. However, Louise Macaulay, who is still at ASIC, wrote: "In para 5 do we really want to say 'superficial', as MEL [Macquarie Equities Limited] did engage EY to do a review of their compliance system." Borchok fired back: "I think the use of 'superficial' is appropriate because it reflects the situation. Further, the EY review was a sham therefore they are getting off easy with 'superficial'."

Correspondence such as this never came to light in the Senate inquiry into ASIC. Nor was it raised as an issue in a productivity commission report into ASIC and its capabilities. Loading A royal commission would compel complete correspondence as well as the various independent expert reports, along with a lot more. Is it regulatory capture? Naivety? Why ASIC adopted such a policy in the first place is hard to understand. Whatever the reason, it strikes at the heart of the culture inside the regulator. It is why when Mr Medcraft finishes his term as chairman later this year it is imperative his replacement comes from outside and isn't part of the club.