Former ASIC chair James Shipton calls for funds, reforms for nation’s regulators

Former ASIC chairman James Shipton has called on the government to address regulatory drift and better set expectations.

Former ASIC chairman James Shipton, writing in The Australian, says the government should set proper expectations for regulators if it is to see better outcomes for consumers. Picture: Aaron Francis

The former chair of the corporate regulator has warned new federal government funding is inadequate to meet its financial needs, and the government should also look at reforming its governance and setting expectations more regularly.

Writing in the Australian, former Australian Securities & Investments Commission chair James Shipton said the regulator faced a “vast, complicated remit”.

“Key institutions that support Australia’s economy and protect financial consumers have rarely been a government funding priority,” Mr Shipton writes.

“Unfortunately, one budget boost will not solve this decade-long funding deficit, especially in a high inflation environment.

“Even with the extra funding, ASIC is still being asked to do too much with too little.”

The recent budget revealed ASIC’s budget would be boosted from almost $422m to $470m, peaking at $500m in the 2023-24 financial year.

ASIC’s funding fell as low as $312m in 2015 before the funding model was reformed in 2017, requiring the industries it regulates by it to stump up the cash to fund its operations.

In 2021-22 ASIC collected $313.3m from sectors under its watch.

Mr Shipton said the Albanese government should update its statement of expectations for ASIC, as the previous one from the Morrison government was “almost two years old”.

“If these expectation statements are to be issued, then they need to be updated regularly so that they remain relevant,” he said.

“It is difficult for a regulator to do its work within a system that provides for government guidance when the government does not guide.”

Mr Shipton said ASIC, like the Reserve Bank, was in need of governance reform, noting the RBA’s recent review showed “what constitutes best-practice corporate governance has evolved significantly”.

“They reinforce the need for a review into ASIC’s governance arrangements to clarify the respective roles of its chair, its commission and its executive team,” Mr Shipton said.

“Put simply, the corporate governance structure of Australia’s corporate governance regulator also falls short of contemporary best practice.”

ASIC has faced scrutiny over its leadership arrangements, with a parliamentary inquiry spearheaded by Liberal senator Andrew Bragg investigating a complaint made against commissioner Karen Chester.

Ms Chester will leave ASIC in January, following former commissioners Sean Hughes and Cathy Armour.

ASIC commissioner Danielle Press’s term expires in September.

These string of exits come as ASIC moves to wrap up the last matters related to the 2018 banking royal commission.

Mr Shipton said ASIC needs better reporting aims to assess its effectiveness.

But he warned they risked creating a further “(one size fits all) layer of reporting about generic matters”.

“They do not emphasise reporting against core statutory objectives,” he said.

“What gets reported, gets done. Not requiring specific reporting on a regulator’s legal objectives runs the risk of those foundational goals being missed or deprioritised.”

Mr Shipton said regulators, like ASIC, faced often contradictory and competing regulatory goals, but better reporting on them could “highlight the significant structural complexity (and contradictions) that parliament endowed many of Australia’s key regulators”.

“Hopefully, this could catalyse much needed reform. These contradictions should not be swept under the carpet, nor hidden by generic reporting,” he said.