InFocus: Is it time to impose external oversight on ASIC?

James Shipton daniel crennan Josh Frydenberg James Paterson Graeme Samuel ACCC Ian Harper ANAO FASEA

5 February 2021
| By Mike |
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The question has to be asked: Would the expenses issues which surrounded Australian Securities and Investments Commission (ASIC) chair, James Shipton and his deputy chair, Daniel Crennan, have arisen if the regulator had still been fully subject to the Public Service Act?

It has not even been three years since ASIC was removed from Public Service Act and the situation which gave rise to the resignation of Crennan and the impending departure of Shipton arose from seeking to translate a public service regulatory entity into a Commonwealth statutory entity sitting outside of the strictures of the public service.

Notwithstanding the fact that the Treasurer, Josh Frydenberg, saw fit to accept Treasury legal advice that Shipton was not guilty of any instances of misconduct, it is evident from the review conducted by Dr Vivienne Thom that the structures and management of Australia’s core financial services regulator have fallen short of what ASIC expects of the entities it regulates.

And it appears that not least amongst those shortcomings has been the existence of a viable risk management and oversight regime within ASIC – something which would arguably have prevented the circumstances which gave rise to the embarrassments around the Shipton and Crennan expenses.

And it is therefore telling to read Dr Thom’s report in its entirely and to note that it points to questions raised about “the overall governance arrangements in ASIC, particularly in respect of the responsibilities of the Accountable Authority”.

In looking at those questions, Thom pointed to the manner in which the ASIC Act actually required the establishment of “an appropriate system of risk oversight and management for the entity” and “an appropriate system of internal control of the entity; including by implementing measures direct at ensuring officials of the entity comply with finance law”.

Thom then went on to suggest that her review had raised issues of concern regarding:

  • The proper use and management of public resources; 
  • Systems of risk oversight and management for the entity;
  • System of internal control for the entity; and
  • Co-operation between ASIC officials.

Frydenberg has noted Thom’s recommendations and said that the Government expects ASIC to implement them as a priority and report regularly to him on their progress.

What Frydenberg did not mention, however, was the manner in which a key Parliamentary Committee had actually canvassed closer oversight of the way in which ASIC is run, including the imposition of an external board.

In fact, the chair of the Senate Joint Committee on Corporations and Financial Services, Victorian backbencher, James Paterson, actively canvassed the benefit of such external board oversight when taking evidence from former Australian Competition and Consumer Commission (ACCC) chair, Professor Graeme Samuel, and economist and academic, Professor Ian Harper.

Importantly, it is open to Paterson’s committee to recommend the imposition of an external board when it makes it report to the Parliament later this year and this, in turn, could feed into Treasury’s consideration of the matter.

If the Government were to adopt the recommendation of an external board it would mean that Shipton would effectively become the last chair of ASIC to hold the sweeping “accountable authority” powers the use of which gave rise to many of the questions raised by the Australian National Audit Office (ANAO).

But the Government would need to be careful in selecting who it approached to be a part of that board given its recent experience with the board appointed to oversee the Financial Adviser Standards and Ethics Authority (FASEA).

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