ASIC chief James Shipton: Culture at top of watch list

Culture will remain the top focus at the corporate watchdog, says new chairman James Shipton.

New ASIC chief James Shipton. Picture: Kym Smith

Culture will remain the top focus at the corporate watchdog, says new chairman James Shipton, who warned Australian businesses of increased legal actions in his first public comments.

Appearing before the parliamentary joint committee on ­corporations, the Australian Securities & Investments Commission, where Mr Shipton replaced former chairman Greg Medraft in November, also kept up pressure on the Turnbull government to pursue its payday loan reforms, which have been under attack by backbench MPs.

Mr Shipton, a lawyer at Harvard who worked at the Hong Kong securities regulator and Goldman Sachs, yesterday said he was keen to maintain ASIC’s focus on culture inside large institutions.

“Mr Medcraft rightly had a very strong reputation among ­financial agencies for highlighting this important topic,” Mr Shipton said.

“When I was a regulator in Asia I was saying similar things. One of the important points I hope to continue is this focus on culture in financial institutions.

“A key indicator of culture is good professionalism and professional culture. I want ASIC to be taken very seriously by the sectors that we regulate.

“We will be using enforcement tools when the circumstances re warranted. We should be taken very seriously and we will take serious responses when serious responses are warranted.

“We will be serious and we will be stern where necessary.”

For years, ASIC had been criticised as a toothless tiger. But towards the end of Mr Medcraft’s tenure, the regulator had secured hundreds of millions of dollars in extra funding and has now launched rate-rigging suits against all four major banks. New reforms have seen industry foot the bill for ASIC’s funding, while the regulator has scored a series of enforceable undertakings at the nation’s largest institutions.

Outgoing deputy chairman Peter Kell told MPs to hold the line on government reforms in the payday lending sector. Consumer groups have recently stepped up pressure on the government to bring on legislation cracking down on payday lenders and appliance rental companies that is at risk of stalling after intense industry lobbying. The changes have run into opposition from some Liberal backbenchers, who have raised concerns that the crackdown imposes too many restrictions on the operation of the free market.

“We’re talking to Treasury and others about the progression of the reforms that are intended in this area,” Mr Kell said. “We’re very supportive of those reforms advancing. It’s a perennial area of focus,” he said, noting customers of payday lenders were typically low-income, vulnerable and with lower levels of financial literacy.

ASIC has already taken action against Thorn Group and Radio Rentals, Cash Converters and Nimble. But Mr Kell said ASIC needed a stronger anti-avoidance tool at its disposal to properly tackle the predatory industry.

“Our view is that some stronger anti-avoidance provisions would be useful. A lot of the players don’t have too much reputational capital and seek to avoid compliance,” he said. “Too often we have to take individual cases to court — the diamond trading scheme that purported itself not to be a small amount-lending business but a venue for people to trade diamonds. No one ever sighted the diamonds but they ended up with a small amount of cash for a very high price.”

This week The Australian obtained the confidential briefing handed to Mr Shipton in November that revealed ASIC is investigating whether Australia’s stock­markets are being targeted by crime syndicates that could be using company listings to launder dirty money.

The watchdog is also turning the screws on the nation’s biggest banks over whether there are “significant” and “potentially systemic” problems with the way large institutions monitor rogue financial advisers.

ASIC last month issued a damning review following a two-year investigation into the conflicts of interest between the largest banks and AMP and their wholly owned financial advice businesses. In that report, ASIC found financial advisers did not comply with their duty to act in the best interests of clients in 75 per cent of advice files it reviewed.

Mr Kell yesterday said it was not the regulator’s remit to push big firms out of the market in favour of smaller businesses.

“Vertical integration is perfectly OK in our market. There may in fact be advantages for some customers sometimes who look to deal with some large institutions,” he said.

But he said financial advice companies should be more transparent about approved products lists, which are used by large firms to restrict the amount of competitor-owned products financial planners are able to offer customers. Mr Kell said ASIC did not have a position on whether vertically integrated banks should be split up.