ASIC investigation of Karen Chester complaint taking a toll on regulator’s reputation: Gallagher

Finance Minister Katy Gallagher said an investigation of the handling of a complaint into deputy chair Karen Chester is taking a toll on the regulator’s reputation.

ASIC Public Hearing in Parliament House in Canberra. The Chair of ASIC James Shipton and Deputy Chair Karen Chester appeared at the hearing. Picture Gary Ramage

The public and ongoing re-litigation of a cultural investigation into Australian Securities and Investments Commission deputy chair Karen Chester is taking a toll on the regulator’s reputation, Finance Minister Katy Gallagher said.

Appearing before the Senate economics committee, the minister noted the cost of repeated hearings into ASIC and questions over its culture ahead of the finalisation of a major shake-up to the corporate regulator.

Ms Gallagher said the government expected regulators to uphold governance standards.

“When issues arise like this and ventilated in the way they are, that comes at some reputational cost to an organisation. I don’t think that’s peculiar to ASIC,” she said.

This comes as the committee heard ASIC chair Joe Longo decided against further pursuing a complaint against Ms Chester, after Treasury Secretary Steven Kennedy found “many of the instances of alleged conduct (by Ms Chester) could be wholly or partially substantiated”.

Ms Chester told the committee her lawyers had advised the investigation had made “no adverse findings” against her.

“To the extent that any conduct was substantiated, it occurred at a certain historical point in time before my term as chair commenced,” Mr Longo said.

“Given the change in circumstances since my appointment, in my view, the likelihood of the conduct that was the subject of the report recurring was very low.”

Mr Longo said he “had not seen any conduct by deputy Chester that concerned me” since start as ASIC chair and said reinvestigating the complaint against her would not be useful.

“I decided that I would not proceed with the formal investigation under the ASIC code of conduct at that time,” he said.

Mr Longo said ASIC had a strong internal culture, as demonstrated by the staff response to a looming shake-up to the regulator’s structure.

He said ASIC was preparing to land its biggest shake-up to organisational structure in 15 years in the coming months, with the regulator’s senior leadership in “intensive consultation” over the plan.

“That’s all about getting us to work more effectively together, more efficiently,” he said.

“To my mind that’s good culture, we wouldn’t be doing that if the commission didn’t think the staff were not ready for some change

Former ASIC chair James Shipton made a submission to a senate committee into the regulator, calling for employment rules around the regulator’s commissioners to be reformed and a change to enforcement.

Senator Andrew Bragg said Wednesday’s hearings into ASIC had not concluded “the matter of the attempted cover up of an investigation into an ASIC Commissioner”.

“I am concerned that the two leading office holders at ASIC cannot agreed on an internal matter. To me, it shows the culture of the organisation is troubled,” he said.

“I have asked ASIC how the “no adverse findings” statement complies with the Senate Privilege Resolution 6 (12) which provides that the giving of any evidence that a witness knows to be false or misleading may be treated by the Senate as a contempt.”

Originally published as ASIC investigation of Karen Chester complaint taking a toll on regulator’s reputation: Gallagher