ASIC chief James Shipton to step aside amid expenses bombshell

ASIC chair James Shipton has made the shock announcement he will step aside and repay moving expenses related to his shift into the job.

Chair of the Australian Securities and Investments Commission (ASIC) James Shipton.

The corporate regulator has dropped a bombshell in a parliamentary inquiry with ASIC chairman James Shipton saying he will step aside and will repay moving expenses relating to his shift into the job.

Mr Shipton told the committee he had offered to the treasurer Josh Frydenberg to step aside pending an independent review into the expenses.

ASIC’s most senior deputy chair will take on his role while the matter is investigated. The Treasurer is considering how to fill the role.

ASIC said it was working with Treasury on the scope of the review into his expenses, which the Australian National Audit Office indicated had exceeded guidelines.

Deputy chair Daniel Crennan’s expenses relating to his move had also exceeded guidelines, the committee heard.

“Following its audit of ASIC’s financial statements, the ANAO stated a belief that the total remuneration paid to both office holders may exceed the limits set within the relevant Remuneration Tribunal Determinations,” Mr Shipton said in a statement.

“ASIC acknowledges the processes supporting the approval of these relocation expenses were inadequate and, given the high standard ASIC holds itself to, it is disappointed that such situation has occurred.

Mr Shipton said he had recused himself from matters where the issue may have created a conflict of interest.

“I have advised the Treasurer this afternoon that, in the circumstances, it is appropriate to stand aside pending the outcome of the review.

“Whilst I believe that I have acted properly and appropriately in this matter, I hold myself to the highest possible standard.

“What matters is that I act with integrity and honour. That means I need to act in the best interests of ASIC and its vital purpose to build a fair, honest and efficient financial system for all Australians.”

The ANAO’s findings were fully raised just two weeks ago and ASIC received a final management letter on Thursday, ASIC deputy chairman Karen Chester said.

Both men have voluntarily repaid the full amounts.

Mr Crennan has not stood aside and remains in his post.

Josh Frydenberg said the review would be undertaken by former inspector-general of intelligence and security, Vivienne Thom.

He said further action may be taken after the review. “As the matters identified by the Auditor-General relate to the Accountable Authority of ASIC, I have asked the Treasury to undertake an independent review into the findings of the ANAO financial statements audit,” the Treasurer said in a statement.

“Following the review, Treasury will advise me on the findings of the review and any further course of action that may be appropriate.

“I have written to ASIC and the Auditor-General confirming this course of action.

“The independent review will be undertaken by Dr Vivienne Thom and is expected to be completed with the full co-operation of ASIC by the end of the year.”

Costly advice

Mr Shipton took costly tax advice from KPMG as he moved from the US which was covered by ASIC and Mr Crennan had his rent covered as he moved to Sydney.

Auditor-General Grant Hehir wrote to the Treasurer on Thursday formally notifying him the Australian National Audit Office had identified payments made on behalf of Mr Shipton and deputy chair Mr Crennan during its audit of the 2019-20 financial statements audit of the Australian Securities and Investments Commission.

In the letter, the ANAO said the payments “may exceed the limits set in the Remuneration Determination made by the Remuneration Tribunal”.

“In reviewing these payments made in relation to the Chair, the ANAO also identified instances where the Commonwealth Procurement Rules were not followed and payments were made on behalf of the Chair where appropriate governance mechanisms were lacking,” the letter said.

Mr Shipton’s high-priced relocation expense package from the US ran afoul of guidelines as he received tax advice from KPMG and the cost of the advice blew out above expectations.

Before he was appointed an initial tax briefing costing $3000 and annual tax return submissions of $5000 were discussed by Treasury.

ASIC approved an engagement letter from KPMG for the provision of taxation services to the incoming chair at a cost of $4050.

Mr Shipton was told by KPMG in September 2018 that its fees for taxation services would be “approximately $60,000-$70,000” and discussions with ASIC representatives confirmed a total of $9500 would be covered by ASIC with any additional fees requiring a “separate engagement with the Chair on an individual basis”.

The auditor-general’s letter said email correspondence provided by ASIC indicated that on October 11, 2018, advice provided to Mr Shipton by ASIC was that “the full amount” that would be paid by ASIC given it fitted within the overall relocation limits discussed with treasury.

The procurement of taxation services from KPMG was documented in ASIC’s procurement workflow system and approved as three $25,000 procurements on October 30, 2018, 10 months after the initial KPMG tax briefing.

The ANAO said invoices issued in August 2019 totalled $118,557 and were in excess of the approved procurements. The fee increases were described by KPMG as being due to the complexity of the tax affairs being managed.

In addition to the invoiced amounts paid by ASIC, Fringe Benefits Tax of $78,266 was paid by ASIC in relation to these benefits.

ASIC covering Mr Crennan’s rent as he shifted to Sydney also breached rules, the letter said.

In both 2018-19 and 2019-20 regular accommodation payments of $750 a week were made by ASIC on behalf of Mr Crennan following a request by ASIC for him to move from Melbourne to Sydney. The payments were over and above his total remuneration package.

Under the pay rules he was eligible to be reimbursed for accommodation costs where he had a principal place of residence away from their office.

“The Deputy Chair did not have a principal place of residence in a locality other than the office locality and is not listed as receiving such an allowance in the relevant Determination,” the letter said.

The ANAO in early August 2019 recommended that ASIC seek advice from the Remuneration Tribunal on the classification of the payments but it still had not done so by the end of September 2020.

Prompted by ASIC’s draft finding in October, ASIC said Mr Crennan would repay the full amount.

The issues were not included in the ANAO’s Independent Auditor’s Report to the Treasurer on the ASIC 2019-20 financial statements as they did not impact on the audit opinion.

Wide-ranging investigation

Scott Morrison says he’s open to a wide-ranging investigation into the remuneration and tax and bonus arrangements for all government-appointees after the controversies at ASIC and Australia Post.

“It’ll be important to receive the recommendations of the reports, the inquiries that are being initiated. It may well be that that (an audit of government agencies and their senior staff) comes forward, let’s wait and see. I’m very open to those recommendations,” the Prime Minister said.

“There wouldn’t be a board member of a government agency or a CEO of a government agency that didn’t get my message yesterday. I think they got it with a rocket. My advice to them is to get it.”