Crennan first, Shipton next: Deeply flawed ASIC needs urgent cleanout

If ever there was a time to clean out ASIC, it’s now.

With the integrity of the office in question, following the Crennan and Shipton controversy, time is of the essence to fix a mess that has seen its deputy chairman Daniel Crennan resign, its chairman stand aside and Treasury launch an independent inquiry.

It is only a matter of time before chairman James Shipton topples.

Pressure mounts on James Shipton at ASIC to resign.
Pressure mounts on James Shipton at ASIC to resign.Credit:Eamon Gallagher

Whether it was sloppiness, laziness or something else that brought the institution into the sights of the Auditor-General, the corporate regulator and its chairman need to be above reproach.


What is glaringly obvious is the government needs to step in and dust off the Hayne royal commission’s recommendation to create a Financial Regulator Accountability Authority to oversee ASIC and the Australian Prudential Regulation Authority (APRA).

It also needs to overhaul the structure because it is deeply flawed. Currently the model makes the chairman all-powerful as the “accountable authority”, the single person that everyone reports to including the chief financial officer, chief risk officer, HR and the commissioners. There isn’t a board, like most companies, which means there isn’t enough accountability and issues such as this will continue to arise.

The government also needs to make sure it does a proper job of finding a good replacement. There has been a cultural problem at ASIC for years but it has worsened recently with disharmony at the top. It has botched a series of appointments over the past few years that reads like a script from Yes Minister.

The first botch occurred when the previous chair’s appointment, Greg Medcraft, was about to expire in May 2016. A strong British candidate was available, but Treasury failed to set up a selection process, which resulted in the candidate losing interest. Time ran out for a suitable appointment and Medcraft’s term was extended for another 18 months.

Daniel Crennan, James Shipton and Karen Chester from the Australian Securities and Investments Commission (ASIC) during a hearing with the Standing Committee on Economics at Parliament House in Canberra
Daniel Crennan, James Shipton and Karen Chester from the Australian Securities and Investments Commission (ASIC) during a hearing with the Standing Committee on Economics at Parliament House in Canberra Credit: Photo: Alex Ellinghausen

A year on, Medcraft announced his departure and the key candidate, John O’Sullivan, weeks from being named the new chairman, suddenly withdrew after negative publicity about his political connections.

With no heirs apparent and the shortlist dried up, Shipton’s appointment was out of the blue.

The government then made a series of other appointments to rebuild ASIC and its reputation, after years of being labelled the timid regulator that went soft on the banks and corporate Australia.

It appointed Crennan and three other new commissioners, Sean Hughes, Danielle Press and Karen Chester, who joined as a second deputy chair.

Less than three years on, one commissioner has gone, one is a dead man walking and a third, Chester, is facing a whispering campaign by certain forces in the government that she won’t get the job when Shipton topples over.

The fourth, Sean Hughes, is in a weakened state after a sizeable portion of his responsibilities were taken away when Treasurer Josh Frydenberg blindsided the regulator with a decision to trash responsible lending laws and strip ASIC of responsibility for bank credit regulation.

It makes for a sorry tale.

Since September 15, ASIC has been a festering embarrassment for the government. Perhaps that’s why it was the only regulator not to get a budget increase and why it has been kept out of the loop on a number of announcements that impact it. Or maybe it is its poor culture.

This was demonstrated by the fact that the upper echelons of ASIC were blindsided when Shipton told Parliament he would stand aside. None saw it coming.

Crennan took the weekend to see his future at ASIC was over. In a press release he makes it clear he is none too happy with the way ASIC has handled the matter.

In it he says he was first told in September the Auditor-General had a problem with the $750 a week rent relief he had been receiving for the past two and a half years.

“I requested ASIC cease paying me the rental allowance. I also offered and agreed to repay the rental allowance ASIC had paid for me,” Crennan’s statement said.

Crennan has gone but there will be a lot more twists and turns at ASIC before the end of the year.

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