Knives out for ASIC in Canberra

ASIC chairman James Shipton addresses a FINSIA web forum in Sydney.

At the risk of understatement, ASIC is on the nose big time in Canberra and its performance over the next week could play a big role in its future make-up.

The message acting chairman Karen Chester will try to sell is that the team is on the job and it’s business as usual. Better than usual, in fact, because with four commissioners and highly regarded chief operating officer Warren Day at the helm its actually functioning as recommended by Chester in her 2016 report on the regulator.

She will not be spending any time defending her predecessor, but will aim to show that the regulator is functioning well doing its job.

Business reaction to the ASIC attacks is mixed, in part because it is the corporate cop. But some legal practitioners working with ASIC worry about the attacks on its credibility, saying this hits staff morale unfairly and, at the end of the day, ASIC works best collaboratively with the market

Josh Frydenberg has a fine line to walk between an obvious desire to its performance and supporting those working to achieve those ends.

Australia Post’s ex-CEO Christine Holgate, ASIC’s Daniel Crennan and James Shipton are not exactly pin-up poster examples of the rewards of public interest duty.

The whole ASIC team will present to a joint parliamentary committee under senator James Patterson next Wednesday and Chester will also sell the message in a separate speech to an industry seminar on the same day. Earlier in the week, ASIC is also expected to release its report on the “buy now, pay later” sector.

The latter being a touch controversial given the Gang of Four in Canberra have attacked ASIC for doing too much policy work and not enough enforcement.

The ACCC releases industry reports for transparency as part of its enforcement armoury.

The Gang of Four being the aforementioned Patterson, former retail super lobbyist Andrew Bragg, former Institute of Public Affairs policy director Tim Wilson and NSW backbencher and former IAG strategy executive Jason Falinski.

While running clearly straight party political lines, the cover is that it is in the interests of government accountability.

These four have front-run government attacks on industry super funds and led the attack on ASIC that hit paydirt late last month with the Auditor-General reports on excessive pay deals for chair Shipton and former deputy Crennan QC.

These deals are subject to a report from former inspector-general of intelligence and security Vivienne Thom, and the Treasurer won’t be talking publicly about ASIC’s future until this report is in next month.

Wilson, too, among other issues, has exposed ASIC for what he says is misleading and deceptive conduct over a report inflating the costs of running a self-managed superannuation fund.

The much-repeated lines about too much policy and not enough enforcement are plainly factually incorrect, but that doesn’t stop them being repeated and in myriad press reports attributed to government sources and on occasions in a second way to Frydenberg himself.

Ask any of the Gang of Four to detail the policy excesses and the response will be brief and, in any case, if ASIC had erred in earlier incarnations for asking too often for legislative changes post the royal commission all its prayers were answered.

Next attack is on the commission structure, saying that no one has clear responsibility.

Ironically enough, with Shipton and Crennan gone ASIC is down to four commissioners and in Warren Day a highly regarded chief operating officer, which is precisely the model recommended by Chester.

Contrary to popular misconceptions, the four people on the ASIC commission have clear lines of responsibility — Chester dealing with government and on investment managers, Cathie Armour on market supervision, Sean Hughes on credit and banking and Danielle Press on superannuation and financial advisers.

As with the ACCC, decisions are taken as a collective on key ­issues.

Staff level executive directors are responsible for their own area.

The government can question the capability of the personnel but not the structure and, given Frydenberg and/or Scott Morrison appointed all four commissioners, what does it say about them if the people are wrong.

Frydenberg has been careful not to say too much, but is clearly disappointed with ASIC and with former boss Shipton.

Shipton was former minister Kelly O’Dwyer’s captain’s pick.

The pay issue is seen in the market as being a gross overreaction from a government embarrassed by the same Auditor-General showing it had paid $30m for a block of land that was worth $3m.

Last month, without a word of consultation, Frydenberg stripped ASIC of its conduct powers over bank responsible lending and handed them to APRA, which has gone from regulatory villain to safe pair of hands.

Life as a regulator is often a no-win situation, being attacked for not doing enough litigation then criticised for taking the wrong cases and, in ASIC’s case, the infamous Wagyu beef and Shiraz is often cited.

It is forgotten that regulators need to test the law and would be failing if they won every case.

For now, acting chair Chester has to take on Canberra to showcase ASIC and win from a long way back in the court of public opinion.

Orica’s bang for buck

Orica’s Alberto Calderon has timed a deal to perfection, winning an explosives contract from rival Incitec on the eve of the latter’s profit report on Tuesday.

The contract is for Glencore Metals, which covers its Australian copper and zinc mines, and the wireless initiation system will in a couple of years run to 45,000-plus detonators.

Winning a new explosives contract is not the same as swapping brands of petrol for your car, given the extent of the systems across multiple mine sites.

This makes the Orica five-year contract win all the more impressive, showcasing its claimed technology superiority after a couple of years of systems trials.

The contract loss amounts to a small percentage of revenues for Incitec, but comes ahead of a disjointed year with four different plant shutdowns for maintenance that could cost the company as much as $55m in earnings, which is a big loss against last year’s earnings before interest and tax of $374.5m.

The shutdowns, which in the case of the Waggaman plant in the US will last up to seven weeks, are one-off items, but the question is why have so many in a single year?

Incitec chief Jeanne Johns did a good job managing the global empire from her Southbank, Melbourne apartment with net profit up 23 per cent to $188.2m.

Debt was down 40 per cent to $1.03bn, after raising $646m in equity earlier this year.

No dividend was paid, which helps explain the 2.8 per cent fall in the stock price to $2.10 a share.