The Australian Securities and Investments Commission (ASIC) admits it has been remiss in its monitoring of independent experts tasked with examining regulation breaches.

Senator John Williams told an Economics References Committee hearing that PricewaterhouseCoopers (PWC) was appointed as an independent expert to review Commonwealth Financial Planning’s files after a number of breaches.

“PricewaterhouseCoopers is its auditor, yet it went in as the independent expert,” he told the committee, which is examining ASIC’s performance.

“Well, Anderson Young did the inspection of financial planners at Macquarie Private Wealth, and 80% failed the test, and Anderson Young ticked them off.

“You have got to look at these conflicts.”

He says a company being audited by the regulator should not be allowed to pick the independent expert that carries it out.

ASIC Commissioner Greg Tanzer disagrees. He says the regulator has been heavily involved in the selection of independent experts.

“We take into account our experience with the expertise of that company and what potential conflicts there may be,” he told the hearing.

ASIC Chairman Greg Medcraft says the regulator has a veto over the appointment of independent experts.

But Deputy Chairman Peter Kell admits oversight of independent experts has occasionally fallen short.

“We have had some experience with some of those companies that operate in this area that, frankly, we did not think were up to scratch,” he told the hearing.

“We have had some fairly vigorous communication with them because we still need to rely on them in many of these cases to do an important job.”

Committee chairman Senator Mark Bishop asked if ASIC was heavily involved in the selection of PWC to review Commonwealth Financial Planning.

ASIC Senior Executive Leader Greg Kirk says three companies tendered for the work and Commonwealth Financial Planning chose PWC. There was no veto.

“We were satisfied. All the tenderers had to address issues around whether there were conflicts and how they would be handled.”

Senator Peter Whish-Wilson says the issue is “black and white”.

“If your independent expert was also the auditor for the entire organisation – and who knows how many millions that would be worth to them per year – you would have a very definite conflict of interest.

“We saw this during the global financial crisis with ratings agencies, research houses and bonds and products. These were things that were really obvious but skipped the net.”

Mr Kirk says it was hard for Commonwealth Bank to find a major reputable organisation that did not already work for it.

Mr Kell told the committee: “I suspect we would take a different approach today compared with the approach we took back then.”