ASIC chair James Shipton vows tougher action on bad corporate conduct
The Australian 12:00am May 18, 2018
Andrew White
Corporate Australia has been put on notice that the Australian Securities & Investments Commission will use “every inch” of new powers to crack down on bad behaviour in financial services.
New ASIC chairman James Shipton promised a new, more intensive supervisory approach by the regulator as he accused companies of failing to act as the first line of defence against bad behaviour and undermining the financial system and the corporate regulatory structure.
Mr Shipton said Australian businesses — and the finance sector in particular — were suffering from a “trust deficit” of their own making and it was the responsibility of business to repair this.
Just three month in the role, the former Harvard lawyer and Hong Kong securities regulator said he planned to use new regulatory powers as soon as they became available and confirmed he was in discussions with the government to get extra resources for enforcement and regulation.
“I am personally committed to using every inch of our powers and tools to get the outcomes that the community deserves,” Mr Shipton said in a landmark speech to the Australian Council of Superannuation Investors conference.
“And while we have been trying to do our job, unfortunately, all too often, the firms who have failed in their first-line responsibilities have made matters worse by not co-operating with us and, in some unacceptable cases, actually obstructed our work.
“What’s more, they have endangered the financial system they are meant to support. This cannot stand, because if firms continue to fail to step up to their responsibilities, the integrity of our regulatory structure, and our financial system, is undermined.”
Mr Shipton, who started with ASIC in February, said the regulator had done a good job on enforcement with the powers that it had, but needed new powers and a new approach to overcome a “jarring” trust deficit in the finance industry.
Following shocking revelations in the royal commission that AMP and Commonwealth Bank had charged fees to customers for services they did not provide and, in CBA’s case, that it had charged customers who had been dead, the federal government agreed to give ASIC substantial new powers and massive increases in fines.
The government has also agreed to appoint an enforcement commissioner, with Daniel Crennan QC to become a second deputy chairman of ASIC.
Mr Shipton, a former financial services executive in Australia, pointed yesterday to new powers, including for the first time a penalty for companies that fail to “efficiently, honestly and fairly” provide services.
He said many of the issues emerging from the royal commission had come from investigations by ASIC’s “Wealth Management Project” that focused on investigations into financial advice in large financial institutions.
Mr Shipton said ASIC planned to accelerate and expand the program and its “enforcement outcomes”, including using of external expertise in investigations and enforcement actions and delivering faster response times.
His comments were the first since the government revealed it was cutting ASIC’s funding in the federal budget, only for Scott Morrison to reverse course by the end of last week and reveal that Mr Shipton was in discussions with Treasury about additional resources.
Mr Shipton defended ASIC’s enforcement record and said many of the revelations at the royal commission had come from investigations by the corporate regulator.
He said that since 2011 ASIC had recovered $1.7 billion in compensation for consumers — including $230m this year — and 160 criminal convictions — including 19 already this year.
ASIC had also banned more than 800 people from providing financial services or credit, and more than 390 people had been banned from being directors.
“These bannings prevent individuals from engaging in misconduct again and thereby they are actions that protect the community,” Mr Shipton said.
“And while the principal purpose of a banning is protective, bannings also have a strong punitive impact on an individual’s livelihood. To this end they are an important deterrent tool.”
He was, however, forced to defend ASIC’s use of court enforceable undertakings to punish wrongdoing in the financial sector, saying it had provided an effective tool to obtain compensation for customers.
Mr Shipton said the financial services had lost sight of the fact that it was managing other people’s money and had failed to deal with conflict of interest.
While they were a perennial challenge for businesses, particularly in the financial services industry, the failure of companies to address conflicts of interest was “verging on a systemic issue” and had been at the heart of issues raised at the royal commission.
Citing actions against the sale of insurance in car yards, Mr Shipton said there had been “reluctance, and often resistance, to addressing conflicts, especially those embedded in remuneration” when ASIC pointed them out.
He promised a new supervisory approach that will involve “more intensive, and dedicated, supervision’.