‘Opaque’ disclosures tripped up ASIC, says Karen Chester

ASIC acting chair Karen Chester has described as ‘opaque’ the information she and others were given on former colleague Daniel Crennan’s relocation package.

ASIC acting chair Karen Chester. Picture Gary Ramage

ASIC acting chair Karen Chester has described as “opaque” the information she and others were given on former colleague Daniel Crennan’s relocation package a year before the expenses scandal came to light, saying had she known it consisted of ongoing rental payments, it would have raised “an immediate red flag” with her.

Appearing at a parliamentary oversight committee hearing into the regulator’s performance and operations, Ms Chester also placed the blame for the regulator’s failure to appoint a CEO, as recommended by a 2015 capability review, squarely with stood-down chair James Shipton.

“If there had been full disclosure of the nature of the payments made to Mr Shipton and Mr Crennan … I don’t think I’d be sitting here in front of you today.

“We were informed (of Mr Crennan’s expenses) in a way that would be most generously described as opaque. We asked the quantum (of the payments), … no one ever told us it was ongoing rental payments. That would have been a red flag for me immediately.

“From our perspective there were no red flags in the payments to Mr Crennan … If there had been full disclosure, I think we’d be talking about other regulatory matters instead of this,” she said.

Instead of seeking guidance from the remuneration tribunal on Mr Crennan’s payments, once they were questioned following an audit last year, ASIC instead sought legal advice.

Ms Chester said this was because the monies had already been paid and so legal advice was more appropriate.

She agreed that there were issues with ASIC’s culture and that the lack of a CEO or head of office contributed to the situation the regulator had found itself in.

“We haven’t yet fully implemented the governance arrangements to get us closer to the ACCC. At the time of the capability review we had envisaged a CEO, or head of office … accountability would rest with that CEO. I think it indirectly contributed to the situation we’re in at the moment,” she said.

Prior to joining ASIC in early 2019, Ms Chester was a commissioner at the Productivity Commission from 2013 and chaired the 2015 capability review into the securities regulator.

Joining ASIC, Ms Chester expected the recommendations of the review, including that a CEO be appointed, would be implemented. She said she understood the appointment of a CEO was supported when she joined, but that there was then “a change of view at the most senior level.

“Obviously my powers of persuasion are not what I thought they were,” she said. Ms Chester confirmed it was Mr Shipton who didn’t agree with the move to install a CEO. Until he stood aside, Mr Shipton was effectively ASIC’s chairman and CEO.

Mr Shipton is currently on leave without pay following stunning revelations last month that the regulator handed over $118,000 to KPMG for personal tax advice it provided to the chairman, and paid out close to $70,000 to cover rent for Mr Crennan.

Ms Chester disagreed with the characterisation of the culture at ASIC as “poor”.

“We were all very united in terms of getting on with our job last year and especially this year with Covid. We did pull together as one to make very effective and tough decisions,” she said as she admitted decision-making had been easier with the now-smaller commission.

“We were a commission of seven, we are now a commission of four. At the moment we’re finding decision making easier and more effective at four.

Earlier on Wednesday, speaking at a banking summit, Ms Chester acknowledged the regulator’s failures of process and governance as identified by the Australian Auditor General.

“We stand ready to answer Parliamentary Joint Committee questions today, as we have done in no less than two recent hearing appearances. Doing so fully and transparently is fundamental to our accountability to the Parliament and ultimately the Australian people,” she said.

“In response to the Auditor General’s findings, ASIC fully supports the independent review being undertaken by Treasury under the lead of Dr Vivienne Thom. We will be informed by and act upon its findings and make the changes needed so this history is just that, a past not to be repeated.

“We also look forward to the PJC questions across the breadth of our regulatory work. At this time of disruption and uncertainty our work more than ever needs to be effective. And we need to be held to account.”

ASIC recognised that it was a time of a potential ‘new better’ for regulators and for business – “where boards step in early and step up decisively to manage both financial and non-financial risk,” she said.

“And with that ‘step in and step up’ by business, ASIC can step back. To only intervene when the data (early warning signs) of harm and misconduct require us to do so.

“We need to support the economy, promote market integrity and efficient and competitive markets. We need to protect consumers – be they individual consumers, be they vulnerable, be they retail investors, be they wholesale investors, be they small business.”

Ms Chester said it was time for ASIC to “simply get on with it” and that imploring the government for new regulatory powers and better field coverage was in the past.