ASIC agrees it’s ‘not naming enough names’

The head of the corporate watchdog has faced a grilling for being too friendly with the banks and “not naming enough names”.

ASIC’s boss denies being too friendly with the big banks as he warns the corporate regulator lacks the resources it needs to do its job properly.

Australian Securities and Investments Commission chair James Shipton has defended his regular contact with bank CEOs and boards.

Mr Shipton agreed there were risks associated with frequent personal contact between regulators and the leaders of the entities they regulate.

“That is why I personally exercise the highest degree I can possibly apply of professional judgment when I have these interactions, when I have these meetings,” he told the banking royal commission on Thursday.

He said there was a risk the contact could be seen by the other side as too familial, friendly and social.

Mr Shipton said he and the other ASIC commissioners develop a professional relationship with the boards and senior executives of the organisations.

He said he has called CEOs of companies regulated by ASIC to express his dissatisfaction about issues including “legal trench warfare”.

“I have also expressed my dissatisfaction to these leaders about the lack of professionalism in the Australian financial sector,” he said. “I have also spoken to these leaders, to a man and a woman, about the fact that I believe that they have forgotten that they are dealing with other people’s money.”

Mr Shipton sparred with senior counsel assisting Rowena Orr QC about why the regulator did not name and shame more financial institutions.

She pressed him about a report in which two unnamed companies were said to have referred to paying remediation as a “distraction”.

“We believe that in that report we were reporting about themes and processes and failings,” he said. “We refrained from speaking about individual cases in relation to that report because this is a thematic industry-wide report.”

He said naming names would make the reports “far too long”. Ms Orr countered that it wouldn’t change the length of the report to name the companies cited in the case studies.

Asked by commissioner Kenneth Hayne QC “what’s the downside” of naming names, Mr Shipton said it “would have just taken more time to actually go through the process of agreeing — not agreeing, confirming the facts and situations, almost a right to be heard”.

“But I believe you make a very good point, Commissioner, about the naming of particular case studies moving forward,” he said.

Ms Orr said, “I put it to you you’re not naming enough names.”

“I think you make a good point, Ms Orr,” Mr Shipton replied.

Asked about ASIC’s policy of notifying financial institutions before it publishes its findings, Mr Shipton said he regarded it “as a matter of fairness”.

Ms Orr said she didn’t understand “why you’re concerned about fairness with your regulated population” when dealing with information revealing “disturbing conduct”.

“I do not believe that giving advance notice of our intent to publish their names in any way distracts from the importance and the impact,” he said.

He denied it was about maintaining good relationships with the banks. “Absolutely not,” he said.

“I see it as the exercise of professional judgments, ensuring we are tough, resolute, strong, but we also apply principles of fairness and follow due process. I do not see there is an inconsistency in those two concepts.”

ASIC now has a wider regulatory remit than comparable market conduct regulators overseas, but its staff numbers and budgets have only increased modestly, the inquiry heard.

Mr Shipton said ASIC was under-resourced compared to some of its global peers.

“It weighs very heavily on the regulatory choices that we have to make, because it means that we are restricted in our ability to take on matters or to pursue matters in a way that perhaps we would like to,” he said.

“We are constrained in probably every aspect of our regulatory work. It’s certainly in investigations, certainly in matters relating to enforcement, but I would also make the case that we are constrained in our surveillance, our supervision, our important work on financial capability, and other work that we undertake.”

Commissioner Hayne’s interim report was scathing of the regulators for letting much of the misconduct in the financial services industry go unpunished and failing to mark and enforce the bounds of permissible behaviour.

Mr Hayne said ASIC rarely went to court to seek public denunciation of, and punishment, for misconduct, while the Australian Prudential Regulation Authority never did.

He agreed ASIC needed to accelerate its enforcement program, noting its resource constraints.

“We need to do more enforcement actions in relation to this misconduct. More of it and quicker and more robust, utilising court-based tools because that would be at the apex of the enforcement pyramid,” he said.

“And realising that in the case of a number of financial institutions or segments of the financial institutions, that the previous tactics have not been as successful as we hoped them to be. Therefore we need to up our ante and be more agile in the deployment of that enforcement tool.”

Originally published as ASIC agrees it’s ‘not naming enough names’