James Shipton named new ASIC chair to replace Greg Medcraft

ASIC’s new boss warns he’s prepared to use all the tools at his disposal to fight bad behaviour in financial markets.

New ASIC chairman James Shipton

Improving the culture of the financial services industry is a “perennial” challenge that requires a response from the entire sector, the incoming head of Australia’s corporate regulator says.

But James Shipton, who will take over as Australian Securities and Investments Commission chairman in February, warned he was prepared to use all the tools in the regulator’s arsenal to combat bad behaviour in financial markets.

Financial Services Minister Kelly O’Dwyer this morning named Mr Shipton, a lawyer who has spent most of his career working in Asia, to succeed current chairman Greg Medcraft.

His appointment comes amid renewed focus on culture, particularly in banking, with the government recently introducing new legislation — the Banking Executive Accountability Regime — to clamp down on poor behaviour by executives and launching a prudential inquiry into the scandal-ridden Commonwealth Bank.

It followed a chaotic recruitment process that saw apparent frontrunner, former banker John O’Sullivan, bow out of the race last week following attacks from the opposition and questions raised about his time at the CBA.

Mr Shipton is currently the executive director of a finance law centre at Harvard University. He was previously an executive director, responsible for intermediaries including brokers and fund managers, at the Hong Kong securities regulator and before that worked at Goldman Sachs.

He told The Australian that during his three-year stint at the Hong Kong Securities and Futures Commission he “was a great proponent of the industry improving itself and I learned that this is an ongoing challenge which in many respects is perennial”.

“It is not something that can be done with a quick fix, it’s ongoing,” he said.

“It needs a tremendous amount of leadership attention so that good culture becomes a core part of the business plan of, and the business ethos of, an organisation, big and small.”

“It’s a challenge for all participants in the financial market and ultimately it’s up to the industry to respond.”

He said ASIC “can’t do everything and the regulator can’t do everything” but had a “crucial role”.

“The regulator has a leading role and the regulator should be prepared to use all of its regulatory tools to get the outcomes that are required for the financial markets, for the integrity of the markets and again, importantly, for the individuals who rely on the markets.”

Asked where he stood on the spectrum between the previous “light touch” model of financial regulation and the current government’s talk of “tough cop on the beat”, he said: “My view is that ASIC and other regulators need to be strong and proactive and strategic.”

“That means from time to time being tough but it also means being prepared to use different regulatory times depending on the facts on the circumstances.”

He declined to comment on his attitude towards ASIC’s Federal Court case against ANZ, NAB and Westpac for allegedly rigging the BBSW interest rate benchmark, which is due to start on Monday and which is likely to run for months.

Nor would he comment on other big issues confronting the regulator, including vertical integration, where banks both create financial products and sell them to consumers.

However, he said conflicts of interest were a “perennial challenge” in the financial services industry.

Last Wednesday, Mr O’Sullivan, who had been widely touted as the leading contender for the position, formally withdrew from the race in a letter to Treasury Secretary John Fraser in which he said he was “deeply shocked” by attacks on him mounted by Opposition treasury spokesman Chris Bowen.

Mr Bowen campaigned against Mr O’Sullivan on the grounds he was unsuitable due to his involvement in the 2009 Utegate scandal and his close friendship with Prime Minister Malcolm Turnbull.

As The Australian has previously reported, the government had already decided not to go ahead with appointing Mr O’Sullivan a month before he wrote to Mr Fraser.

It is believed Mr O’Sullivan’s time as general counsel of CBA during the mid-2000s also played a part in the decision.

This morning Mr Bowen said the Labor Party “welcome Mr Shipton” and he was “a far better appointment” than Mr O’Sullivan.

Mr Shipton said he would “not comment on other candidates or perception about priority”.

“My response is that I am really pleased and excited to have this ability to serve, to serve with the men and women of ASIC to make our financial markets safe and sound.”

Deputy chair Peter Kell will be acting ASIC chair after Mr Medcraft leaves next month and before Mr Shipton starts in February.