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Biggest issue for ASIC is lack of CEO

The leadership and governance structure of the financial services regulator was a key point of focus during a parliamentary hearing on Wednesday (18 November).

The governance and leadership structure of the Australian Securities and Investments Commission (ASIC) was called into question on Wednesday (18 November) as the Senate parliamentary joint committee, corporations and financial services undertook its hearing into the oversight of ASIC.

The hearing largely focused on the recent controversy surrounding ASIC’s relocation expenses paid to the chair and deputy chair, which has seen chair James Shipton “step aside” while a review into the matter is undertaken and resulted in the resignation of former deputy chair Daniel Crennan QC.

The joint committee asked members of ASIC, former ACCC chair Professor Graeme Samuel and Professors Fred Hilmer and Ian Harper how the organisation was structured. The committee sought to better gauge how it came to be that the expenses were approved and that concerns raised by the Australian National Audit Office (ANAO) during an audit of ASIC’s financial statements were not acted on earlier.

A key theme that arose was that there did not seem to be a key administrative/operations head, given that ASIC does not have a CEO or managing director.

Instead, it seemed that the chair and deputy chair and commissioners were all responsible for different areas of the regulator's administrative work.

Mr Samuel suggested that a key to running a regulator successfully was to therefore have a chair who is responsible for strategy and governance and a CEO who is empowered to run the organisation and work closely together. 

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Representatives from ASIC were then asked whether it was a case whereas Mr Shipton could have been signing off his own expenses, given the seeming lack of oversight and segregation.

Acting chair Karen Chester commented: “It wasn’t a case of [Mr Shipton] signing off on his own expenses. As [commissioner Cathie] Armour mentioned, it was actually a senior executive that was signing off on his expenses, and we consider that to be inappropriate.”

She also commented that the four currently remaining commissioners had not received full disclosure around Mr Shipton and Mr Crennan’s payments. 

“We were informed in a way that I would describe as... perhaps the most generous description would be opaque. We were told that it was a relocation payment for his family,” she told the committee, speaking on Mr Crennan’s expenses.

“We asked the quantum, what form of relocation payments it was, what was the issue with the ANAO [Australian National Audit Office]. No one ever told us… that it was ongoing rental payments because that would have been a red flag for me immediately.”

She added that she thought ASIC had “very clear differentiation between the role of a commissioner and the role of an executive director” but added that when she first joined: “I thought what was missing was the head of office/internal CEO role.”

Ms Chester also revealed that when she joined ASIC as a deputy chair, she had expected that there would be a CEO role put in place but “obviously [her] powers of persuasion are not what [she] would have liked to have thought they would be”.

“I’d understood that that was going to be the internal governance model that was going to be put in place when I agreed to join ASIC as deputy chair, but there was a change in the view at most senior level,” she said.

When a committee member suggested that there may have been “tension” at the commission as she had “not been able to convince people” to follow the governance recommendations that had been made in a 2015 Capability Review of ASIC governance (for which Ms Chester chaired an expert panel), Ms Chester clarified: “That’s normal for people at a board or a commission level to have different views. And, rest assured, that was robustly discussed at the time.

“But, at the time, there was no agreement to head in that direction. So, that was the consensus view, and when you’re a commission member or a board member, you go with the consensus view. That is why this is the first time this matter has been made public, because of the very direct questions from this committee.”

Ms Chester revealed that Mr Shipton’s appointment was made by the Assistant Treasurer on recommendation to Cabinet and that Mr Shipton’s tax advice (which has been the focus of the controversy) was included as part of his appointment package.

The ASIC commissioner said: “I think it’s important to understand the payments with respect to Mr Shipton’s tax advice were part of a package that was discussed between ASIC and Treasury; Treasury being the agency responsible for the appointment process involving the [Assistant] Treasurer, the Cabinet and the Governor General for Mr Shipton.

“So, it was part of that package where the issue of taxation advice was first discussed and included as part of the package. The issue then is, how does that dovetail with our internal procurement processes and internal expense processes, if that payment goes beyond that anticipated at the time of his appointment?

“I think... there is an opportunity for there to be a much more robust process, collectively, between ASIC (as the agency onboarding the statutory appointee) and Treasury (as the agency responsible for the appointment process). Clarity around what has been agreed as part of that package and making sure that what’s agreed as part of that package is consistent with the rem tribunal determinations. And thus... there is a clearer understanding of what’s been agreed, is it consistent with Rem Tribunal arrangements and then it goes through our normal procurement processes.”

Commissioner Cathie Armour told the committee that the commission has now introduced a new policy so that when there are relocation issues relating to any commissioner, including the chair, it “needs to come to the entire commission”.

“In relation to the chair, those issues have to be approved by a deputy chair. And the commission is charged with testing the running of remuneration tribunal questions. So we have, we have put in place a procedure [now],” she said.

Accountability and governance structure is expected to form a key part of the independent review of the payments, currently being undertaken by former inspector-general of intelligence Vivienne Thom.

Mr Shipton is expected to remain on unpaid leave until the conclusion of the review, expected to be before the end of the year. 

[Related: ASIC deputy chair Crennan resigns]

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