The Australian Securities and Investments Commission says it is unable to stop Timbercorp spruiker Peter Holt from returning to work as a financial adviser once his three-year ban expires.
And ASIC said it saw no "systemic" problem with the quality of advice from financial advisers about the value of investments in the collapsed companies Timbercorp and Great Southern.
Warren Day, ASIC senior executive leader, told senators in Canberra on Friday that if Mr Holt applied for a new license they would be unlikely to give him one.
Mr Holt, who has been described by Labor Senator Sam Dastyari as a "crook, a criminal and a fraudster" in Parliament, was one of the biggest spruikers of Timbercorp, the agribusiness operator that collapsed in April 2009 owing $750 million and leaving thousands of investors holding massive loans.
But Mr Day admitted Mr Holt would still be able to operate as an adviser, under someone else's licence, after his ban expired in September next year because ASIC would be powerless to stop him.
"If Holt came to me, and I was running a financial planning business, can he just start work with me without you having to tick off on that?" Nationals Senator John Williams asked.
"Yes he can," Mr Day replied.
"So he can come to a hypothetical John Williams financial planning business, and I can put him on, and he can start giving financial advice, and he collects money, and he doesn't have to go near ASIC to be ticked off?" Mr Williams asked.
"That's right," Mr Day said.
ASIC officials said if a company chose to hire Mr Holt that company would assume the responsibility and any liability that flowed from that decision.
On Friday in the Federal Court in Melbourne, Sydney insolvency specialist Andrew Wily's resignation as Mr Holt's bankruptcy trustee was confirmed. Timbercorp's liquidators had applied to the court to remove Mr Wily as bankruptcy trustee of Mr Holt.
ASIC commissioner Greg Tanzer also said on Friday the corporate regulator initially saw no systemic problem with the quality of financial advice provided to investors about the value of investments in Timbercorp and Great Southern.
"We did a high-level review of over 12,000 pieces of advice focusing on the top 20 advisers to both schemes and then [slimmed] that down to a more detailed review of over 1000 pieces of advice," Mr Tanzer said.
"We did not see a systemic issue with respect to the provision of advice at the time. By that I mean that in the general sense it appeared that people had been pointed to the risks and, as well as the returns, that it was pointed out to them that diversification was important for those types of things," he said.
Senator Deborah O'Neill said she was at the recent Senate hearing in Melbourne into the collapse of Timbercorp and she heard evidence of documents being signed illegally by financial advisers in the absence of investors.
"Is there a risk, when you do these audits of documents, that the reality is [that] documents can be tampered with, that you actually need to talk to real people? Was talking to real people part of your process of audit?" Ms O'Neill asked.
Mr Tanzer said it was.
"And despite that, you still were not able to pick up the scale of what's actually now been revealed with Timbercorp?" Ms O'Neill asked.
Mr Tanzer said the scale of what ASIC was seeing now was the fallout from the collapse of the investment.
"It's completely understandable, the concern that people have about facing this financial loss but that doesn't … immediately translate into ASIC being able to take action on a systemic level for some widespread wrong in the way that the disclosure was made to [investors] or that the advice was given."
