The chairman of David Jones (ASX: DJS), Peter Mason, has revealed that the Australian Securities and Investments Commission (ASIC) is investigating the purchase of shares by two directors just days before the company announced a 2.1% lift in sales. The share price of David Jones went up by 15% immediately after the sales figures were released to the market.
I've been surprised by the lack of outrage. While sales numbers aren't always price sensitive, it was a good bet that these positive numbers would be. Why didn't the directors just wait a few days until the results were released to market? They would then have been on solid ground, but they might have missed that quick 15% profit. Peter Mason says that sales figures aren't price sensitive. Personally, I have to wonder why they bother releasing them at all, if that's the case.
Fingers crossed, ASIC actually does something about this. It's necessary to show that directors' duties are important, and that directors face sanctions for breaching them.
ASIC was very fast to take action against Jonathan Moylan when he issued a fake press release causing a temporary blip in the share price of Whitehaven Coal (ASX: WHC). However, the regulator was far less aggressive in response to the allegations of bribery and corruption in subsidiary companies of the Reserve Bank. ASIC has failed to even investigate the directors of the subsidiary companies.
ASIC has also been less than enthusiastic about investigating bribery by construction giant Leighton Holdings (ASX: LEI). Investigations by Fairfax have reportedly found documentary evidence that suggests that key management, including the company's then-CEO Wal King, were aware of the bribery. But ASIC chairman Greg Medcraft justifies the regulator's inaction by arguing that it is "extremely difficult to run parallel investigations." Thus, because the Australian Federal Police are investigating Leighton, ASIC is unwilling to investigate the potential breaches of directors' duties.
Foolish takeaway
To quote Senator Doug Cameron: "Whether it's an issue of not having enough resources, whether it's an issue of ASIC being outmuscled by corporate lawyers, whether it's an issue of ASIC being too close to some of big business, the investors of Australia must have confidence that there's a watchdog on the beat that's prepared to look after their interests. I don't think that's the view at the moment with ASIC."
