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SUBJECTS: Corporate law reform, increased ASIC powers, continuous disclosure rules

CARSON SCOTT:

The Corporate Law Minister, Chris Bowen, unveiling a reform package last month. It's focusing on
three areas, essentially: reversing a High Court decision that's put shareholders on an equal
footing with creditors; amending our insolvency trading laws; and tweaking existing provisions. Now
those developments follow a busy few months for the Minister since he took up the job, including
contentious moves to expand the jurisdiction, resourcing, and powers of the corporate watchdog
ASIC.

Shortly, an august panel of experts, setting out the path to reforming Australia's insolvency laws.

But before we go any further, I spoke with Chris Bowen from our Canberra studios. I started by
asking about the burden for publicly listed companies when it comes to contentious disclosure rules
during the course of informal workout periods. Concerns, essentially, that the rules could hinder
their ability to conduct confidential discussions over ongoing support with financiers.

CHRIS BOWEN:

Continuous disclosure is very important. You would need to have a very, very good case to overturn
or to modify any of our continuous disclosure laws or rules. Continuous disclosure is very
important to the integrity of the market. And as I say, the proposals contained in the discussion
paper in and of themselves are very substantial. They are proposals that other Governments haven't
gone down the road of. We're willing to go down that road. The proposals in the discussion paper
would make quite a dramatic difference, and I think we need to be mindful of the difference that
those proposals could make.

SCOTT:

Some are saying also, Chris, that you need to be looking more closely at detailing what will
qualify when it comes to advice from an experienced professional. Need that professional be
external to a company, or can it be indeed someone appointed by that company, for instance as a
Chief Restructuring Officer?

BOWEN:

Well, I take it that that comment goes to the business judgment rule about if you're acting in good
faith and seeking advice. Of course that is one of the three options in the discussion paper, going
down that road of a business judgment rule. And as I say, submissions are open, they're open until
the second of March, and we would be seeking feedback on just what format, in a detailed form, the
business judgment rule should take if it were to be extended to insolvencies.

SCOTT:

So at this point in time you're thoroughly open to all proposals? You don't actually have any
detail in mind yourself until these have come through?

BOWEN:

Not in relation to that particular element of the business judgement rule, no. I think going down
the road of a business judgement rule has a certain attraction, but there are detailed matters to
be sorted out. That's why I took the decision to issue the discussion paper rather than make a
policy decision at this stage in the cycle, to issue a discussion paper, have it open for a period
of time, and to consult, and then to move reasonably quickly after that.

SCOTT:

Can I look at the priority that you're attaching to the reforms with ASIC, the regulator, beefing
up its powers, specifically when it comes to phone tapping? What checks are going to be in place to
ensure that ASIC indeed uses those powers appropriately?

BOWEN:

Oh, very significant, Carson. These are important powers, but it's also important that there are
checks and balances. It's important to note that ASIC will not be using telephone taps itself.
There won't be ASIC officials conducting telephone taps. The reforms we've announced are that
insider trading and other related offences will be regarded as 'serious' under the
Telecommunications Interception and Access Act, which will allow telephone tapping to occur. Now,
ASIC will need to go to the Federal Police and show the Federal Police that they have cause for
concern. And then a judicial officer, a judge, will need to issue a telephone tapping warrant. That
judge will need to be convinced that the telephone tap is warranted.

SCOTT:

So it's not going to be a rubber stamp? The fact that the police have green lighted it, the judge
won't then be minded to say "Okay, I've got two ticks in the box, I might as well put the third and
final one"?

BOWEN:

Well judges in my experience don't like being treated as rubber stamps and don't act as rubber
stamps. Judges will need to be shown that there are grounds for concern, that there are suspicions,
grounds for suspicion, to warrant a telephone tap. I mean, somebody used the term to me, "How will
you stop ASIC going on fishing expeditions?" Well a) I would say ASIC doesn't have the time and
resources to go on fishing expeditions, but b) even if they were that minded, they would need to
convince a judge, a federal judge, that that was the case. And in my experience, federal judges
would not give that lightly.

SCOTT:

Does ASIC have the time and resources to be looking at rumourtrage, or is that simply a wild goose
chase? If you look at the track record, last year 67 allegations of that and only one conviction.

BOWEN:

Well rumourtrage is of course, in my view, similar but separate to insider trading. And in relation
to rumourtrage, ASIC has a process. They have a discussion paper, a proposals paper, out for
discussion with industry. That's appropriate, they're getting feedback on that, and they're taking
on board that feedback. And that's as it should be.

SCOTT:

You don't think the whole market is, effectively, one big rumourtrage?

BOWEN:

Well you can put that point of view, Carson, but ASIC does have concerns about the market integrity
effects of rumourtrage. It's appropriate that they canvas ways of dealing with that. That's what
they're doing.

SCOTT:

How would you like to be remembered, Chris Bowen?

BOWEN:

Well, generally, Carson?

SCOTT:

Yeah, generally.

BOWEN:

I'm only 37, I've got a bit of time left before I start writing eulogies. [laughs]

SCOTT:

Well, let's perhaps narrow it down then, to your current role, then.

BOWEN:

Well, Carson, I like to take the approach that when an issue is raised with me, when a concern is
raised, then I deal with it. When I can be convinced that there is a case for reform, I embrace
that reform, I follow it through. Sometimes that is not easy. Sometimes that is controversial.

But in the eight months or so that I've been Corporate Law Minister, there've been significant
issues, significant reforms. Whether it be the overturning of Sons of Gwalia, whether it be these
insider trading reforms, whether it be dealing with access to share registers, whether it be the
transfer of market supervision from the ASX to ASIC. There've been a range of issues where I've
seen a case for reform and have acted, knowing full well that that would upset some people, knowing
full well that it would be controversial, but nevertheless more than happy to embrace the need for
that reform.