Business voices concern about ASIC future

Business leaders call for a new mechanism to resolve disputes between the government and ASIC.

Australian Securities & Investments Commission (ASIC) chairman James Shipton. Picture: AAP

Business leaders have called for a new mechanism to resolve disputes between the federal government and the ASIC chairman so the office’s independence is preserved, after James Shipton agreed to leave the watchdog in three months despite an independent investigation of an expenses row making no adverse findings against him.

Josh Frydenberg announced on Friday that an investigation by Vivienne Thom had cleared Mr Shipton and deputy chairman Daniel Crennan of any wrongdoing in relation to the payment of relocation expenses.

Mr Shipton, who stood aside last October, will return to work on Monday but only remain in the job for about three months until a successor is found.

“Both James Shipton and I discussed these issues at length and he has served ASIC well for three years,” Mr Frydenberg said. “But we believe that it is time for a fresh start at ASIC, and a fresh start will begin with the search for a new chairman.”

While Mr Shipton will recoup about $200,000 in foregone pay since he stepped down, neither he nor Mr Crennan will be reimbursed for their relocation expenses. The chairman repaid $118,557 worth of tax advice to ASIC, while Mr Crennan, who resigned on October 26 last year, returned $69,621 in accommodation expenses.

Mr Shipton will not be paid out for the remaining two years of his five-year contract.

Despite the settlement, some business leaders warned of adverse consequences if any future government is able to exert pressure to remove an ASIC chairman without the required evidence of misconduct.

“There doesn’t appear to be any political interference here – James Shipton has resigned voluntarily,” a senior businessman said. “But the ASIC chairman’s position has to be totally independent and seen to be independent, which is why the chairman can only be removed for serious misconduct.

“There should be an agreed mechanism to resolve disputes between the chairman and the government so there can’t be any perception of interference.”

Mr Shipton said he was “pleased and unsurprised” that the review process had cleared him.

“I look forward to returning to my role as ASIC chair and working with the government to reform the corporate regulator,” he said in a statement.

“I am very appreciative of the confidence Treasurer Frydenberg and the government has placed in me to start the process of strengthening ASIC and transitioning to a new ASIC chair later this year.

“In doing so, I am committed to working constructively with my commission colleagues and ASIC’s leadership group to provide continuity and stability.”

The Treasurer dished out praise to Mr Crennan, saying he had made a significant contribution to ASIC and corporate law enforcement in Australia in his time at the regulator.

The deputy chairman, he said, had adopted a successful “portfolio approach” to dealing with large entities on enforcement matters, and put in place a dedicated program to finalise all royal commission-related enforcement matters.

Mr Crennan said he was pleased that the Treasurer had announced that there were no adverse findings against him.

“The conclusions were consistent with my expectations at the outset of the review process,” he said.

“I will continue to contribute to the financial system in a private capacity as a consultant to the private and public sectors.”

Mr Shipton has been in a legal limbo since October, awaiting Mr Frydenberg’s next move after Dr Thom delivered her report – as scheduled – by the end of 2020.

He has not been drawing on his annual salary of $855,364.

Despite this, the ASIC chief “lawyered up” in response to chatter on the Canberra grapevine that the Morrison Government did not believe he was the right person to lead a restructure of the conduct regulator.

Mr Shipton retained prominent commercial silks Philip Crutchfield and Jim Peters, who were instructed by the leading national law firm King & Wood Mallesons.

The controversy was triggered by a ballooning KPMG bill for tax advice to the former Goldman Sachs banker, whose affairs were complicated by a career spanning three jurisdictions – Hong Kong, the US and Australia.

An initial charge of $4050 in 2018 more than doubled to $9500, blew out to between $60,000 and $70,000, and then tipped the scales at a jumbo-sized $118,557 in August 2019.

ASIC also paid fringe benefits tax of $78,266 in relation to KPMG’s services.

An itemised bill shows KPMG completed 2017 and 2018 tax returns for the ASIC chairman in both Australia and the US.

The firm also provided tax advice on personal investments, “optimisation of the Australian taxation of foreign exchange gain or loss in foreign bank accounts”, and assistance in the resolution of Massachusetts state tax notices and penalties due to the late filing of Mr Shipton’s 2017 tax return.

The irony in the great expenses row is that Treasury was so keen to recruit Mr Shipton that it offered to pay $350,000-$500,000 in relocation costs.

The incoming chairman, who doesn’t have children, ultimately drew down less than $250,000.

Mr Frydenberg said Dr Thom had made recommendations for significant improvements to ASIC’s internal practices, systems and processes to enhance its management of matters recommended for action by the Auditor-General.

They included internal audit management, quality assurance of legal processes, and improving the management of and controls for spending relating to commissioners.

“Given the nature of the matters raised, the government expects ASIC to implement as a priority the recommendations made by Dr Thom concerning its internal risk, management and governance arrangements and to report to me regularly on its progress,” the Treasurer said.

With Mr Shipton flagging his exit, the search for a new chairman is expected to take several months.

Mr Frydenberg said a review of ASIC governance had found “no instances of misconduct” by Mr Shipton concerning his relocation arrangements.

“Nor have there been any breaches of applicable codes of conduct,” the Treasurer said.

“In the light of the outcomes of the review, Mr Shipton will return to his role, but Mr Shipton and I have agreed that it is in the best interests of ASIC that he will step down as chairperson of ASIC in the coming months.

“I thank Mr Shipton for his three years of service and dedication during his time as chairperson of ASIC.”