Shipton to return as ASIC chairman until successor found

James Shipton will return to ASIC as chairman after settlement of a row over relocation expenses, but only until a replacement is hired.

James Shipton to return as chairman of Australian Securities and Investments Commission (ASIC) (Photo by Tracey Nearmy/Getty Images)

James Shipton will make an extraordinary return to the securities watchdog as chairman but only serve for about three months until a successor is found.

Josh Frydenberg confirmed on Friday a report in The Australian that an independent investigation by Vivienne Thom of relocation expenses claimed by the Australian Securities and Investment Commission’s Mr Shipton and deputy chairman Daniel Crennan had made no adverse findings.

“After considering Dr Thom’s report and supplementary legal advice provided to the Treasury concerning these matters, I am satisfied that there have been no instances of misconduct by Mr Shipton concerning his relocation arrangements, including ASIC’s payment for tax advice resulting from his relocation to Australia in early 2018, nor have there been any breaches of applicable codes of conduct,” the Treasurer said.

Mr Shipton, who stood aside last October pending completion of the Thom investigation, will recoup about $200,000 of foregone pay.

However, he will not be paid out for the two remaining years of his five-year contract.

The chairman has already reimbursed ASIC for the $118,557 in tax advice received from KPMG.

Mr Crennan, who resigned on October 26 last year, has reimbursed the regulator for $69,621 in accommodation expenses.

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

“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.”

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 to exit, Mr Frydenberg said he intended to name a replacement within three 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.

He added: “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.”

Josh Frydenberg says it’s in ASIC’s best interests that Mr Shipton step down aa chairman. Picture: David Geraghty

Mr Shipton has been in a legal limbo since October, awaiting Mr Frydenberg’s next move after Dr Vivienne 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.

On October 22, the Auditor-General Grant Hehir sensationally wrote in a letter to Mr Frydenberg that Mr Shipton’s disputed expenses were of such importance he was directly contacting the Treasurer to “gain greater confidence that appropriate action would be taken”.

The ASIC chairman said the next day that Mr Shipton said he would step aside pending an independent report by Dr Thom, the former director-general of intelligence.

In the meantime, he would “voluntarily” reimburse ASIC for his taxation-related expenses.

“While I believe that I have acted properly and appropriately in this matter, I hold myself to the highest possible standard,” Mr Shipton said.