Banking royal commission: ASIC chief James Shipton’s 50 shades of grey

Where the public sees black and white, James Shipton talks of a “spectrum of reasonableness”. He needs to cut to the chase.

ASIC chairman James Shipton arrives at the royal commission in Sydney. Pic: Britta Campion

Early in his testimony, ASIC chair James Shipton revealed that when he went out to talk to the boards and CEOs of Australia’s largest companies, he was surprised at how little they had to say.

Mr Shipton said he ended up doing most of the talking.

We can now see why.

During a marathon appearance giving evidence before the banking royal commission this week, Mr Shipton has gone to painful lengths to explain ASIC’s past mistakes and the actions he has taken since he took the helm at the regulator nine months ago.

Like Commissioner Kenneth Hayne, and counsel assisting Rowena Orr QC, Mr Shipton speaks, and apparently thinks, with an impressive degree of precision. He too is lawyer by training.

But unlike the commissioner and Ms Orr, he seems unable to cut to the chase.

Few if any answers were given without extensive qualification and explanation.

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The main stream of his answers was never more important than the tributaries they wandered off into.

But by about 10am on Friday, Commissioner Hayne had had enough.

“I just don’t understand you,” he informed the chairman after a particularly longwinded answer on the metrics ASIC was attempting to develop to measure its activities.

If his evidence is anything to go by, Mr Shipton brings a degree of academic rigour to the job of corporate cop. From what we’ve heard, that’s also the culture at ASIC. There is always careful measurement, evaluation and engagement.

Nothing is done in haste or without considerable consideration and consultation. Unfortunately, it seems that in too many cases the end result is that nothing is really done at all.

In the discussion about metrics, Commissioner Hayne rightly asked what ASIC did with all this data that it had so carefully gathered.

“It informs the team as to what has been allocated in previous years and in the past. But I will also add... I don’t think we do enough with those metrics and that is why I have asked the team to do more thought and give more consideration to how we can better utilise statistics and metrics like this,” Mr Shipton relied.

So not much, as it turns out.

Or consider this exchange, where Mr Shipton is attempting to explain how it came to be that an ASIC commissioner might, quite unbelievably, be advising NAB to accept an enforceable undertaking it was being offered, lest the investigation go further and uncover things that would warrant heavier sanctions.

Ms Orr: “The enforcement committee decided to accept a recommendation to resolve the matter with NAB by entering into an enforceable undertaking?”

Mr Shipton: “Yes.”

“And in your statement you say that ASICs acceptance of the enforceable undertaking in this case was not unreasonable?”

“Yes.”

“And is that as high as you would put it, not unreasonable?”

“That would be as high as I would put it, yes.

“You would not say it was reasonable?”

“I was using the expression yesterday that there is a spectrum of reasonableness, and it is on the spectrum of reasonableness.”

“Sorry, it’s on the spectrum of reasonableness?”

“Yes.”

“You might have to explain that to me, Mr Shipton.”

“Well, what - what I’m saying is that under the - at the time and the circumstances of the case, remembering that we were spending at that stage, millions of dollars - millions of dollars on the investigation. By way of background, we ended up spending $45 million on the BBSW investigation and action. So this was sort of a part, it was an expensive part, it was international, it was multi-jurisdictional, it was expensive, it was intense. BBSW was taking place at the same time. So I would agree that - and, again, I - I was not there at the time, so it’s difficult for me to put myself in that position then, and, therefore, I need to qualify my observation as to the decision, because, as I said, I - I just wasn’t there at the time. I would hasten to add - I would hasten to add, again, the processes and procedures that we have right now are very different to what existed in 2016.”

NAB didn’t stick to the enforceable undertaking that eventuated.

In response, ASIC issued a press release.

It said: “ASIC is disappointed with the delay in the development and assessment of a remediation program to address the conduct outlined in the EU. However, we are pleased that the process has been sufficiently robust to ensure any ongoing deficiencies have been identified and are being addressed with oversight by an independent expert.”

“That was the condemnation of NAB?” Ms Orr asks

“Well, that is - that is factually accurate,” Mr Shipton responded.

One of the reasons that the commission has continued to make headlines across most of this year is that the misconduct it has uncovered is so obviously wrong. To most of the community, the matters are black and white.

But to ASIC, as it measures, consults, engages and evaluates, black and white are but two of the shades on the spectrum of millions of grey-like tones through which it sees the activities of major Australian companies. Points on Shipton’s “spectrum of reasonableness”, if you like.

But if ASIC is going to go forth, as it is promising to do, to take more action to ensure that the actions of the banks and other companies don’t “fall below community standards and expectations”, as the royal commission puts it, things are going to have to change.

Mr Shipton and ASIC need to understand that as much as some matters may exist on the “spectrum of reasonableness”, as far as the wider community is concerned, they’re also pretty black and white.