Australia's corporate watchdog chief aims to limit, not eliminate, investment risk

Australia's corporate regulator is grappling with the fallout from the collapse of construction group Bathla, which owes creditors over $3.5 billion. The company's failure highlights growing concerns about the risks associated with private credit, a rapidly expanding investment sector operating largely outside traditional banking oversight.

ASIC chair Sarah Court, less than three months into her role, is navigating this complex landscape. The Bathla group, with over 520 subsidiaries and thousands of homes under construction, entered administration this week. The substantial debt owed to creditors, particularly ordinary Australians who have invested in private credit, underscores the potential for widespread financial harm.

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It's not possible to eliminate risk. We have a very permissive investment regime in Australia and people do very well from that permissive regime. But the consequence is that investors can suffer losses.

Private credit, promising high returns, has attracted approximately $250 billion in Australia. A year ago, ASIC identified it as a potential systemic issue, prompting a deep dive into the industry. Investigations revealed an opaque sector with concerns around asset valuations, fee transparency, and conflicts of interest. ASIC has since ordered industry practice overhauls and proposed legal reforms.

Court emphasizes that eliminating risk entirely is impossible within Australia's "very permissive investment regime." While this environment allows individuals to prosper, it also exposes investors to potential losses. ASIC's approach now involves gathering intelligence on shifting markets to proactively address potential issues rather than reacting to crises.

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When misconduct is addressed promptly, visibly and at the right level, it can prevent harm from spreading or repeating.