We should abolish ASIC

James Shipton

James Shipton should be the last chair of the Australian Securities and Investment Commission (ASIC), a regulator unfit for purpose, led by a man who simply doesn’t seem to get it.

Last week’s extraordinary speech by Shipton to a superannuation conference was equal parts Pollyanna-ish about ASIC’s achievements and “its international reputation as a world class regulator” (he actually described it that way), and managerialist bromides.

More alarmingly, Shipton professed himself “surprised” about the willingness of financial institutions to “turn a blind eye” to the conflicts of interest that have been at the heart of the vertical integration business model, and many of the major scandals of recent years. Apparently, Shipton didn’t pay the slightest attention to scandals like Commonwealth Financial Planning during his years overseas, and no one bothered briefing him on what one of his now-colleagues described as the “target rich” environment of financial planning, when he arrived at ASIC. Rarely has a major regulator so obviously simply not got what the community now expects of it. 

Perhaps that’s why he clings to the co-regulatory model so strongly. Yet again, he devoted a speech to explaining how it was up to the industry to fix its problems, to restore trust, to change its culture, while the regulator would merely “stand ready” (a favourite phrase of Shipton’s, it seems) to intervene if they didn’t. Perhaps that’s why he thinks enforceable undertakings are an excellent tool for dealing with massive misconduct.

But it was a tad difficult parsing the logic of Shipton’s speech, given on the one hand he was claiming to be shocked — shocked! — that major financial institutions were screwing their customers so egregiously; on the other, he was reeling off what he considered a list of ASIC’s achievements. “Since 2011, more than 800 people have been banned from providing financial services or credit,” he boasted. Count ’em — 800 over seven years. Yippee. Judging by the royal commission hearings, there was another 8000 happy to take their places.

If you want to see how a real regulator handles spivs and shonks, take a look at the ACCC. The ACCC went after Japanese motor parts company Yazaki for price fixing with another Japanese company. Last year, it won a $9.5 million fine, but decided that wasn’t big enough, so it appealed it, and this week won the biggest ever cartel fine: $46 million. 

It’s not a patch on the US response, which was to fine Yazaki over $630 million and jail some executives, but we know the Americans take corporate regulation far more seriously than we do. The ACCC is the best we’ve got.

Last week, it took on the New South Wales government, voicing competition concerns about toll road giant Transurban being allowed to buy an interest in the WestConnex road project in Sydney, the single largest infrastructure project in the country. Transurban already dominates Sydney’s toll roads, with seven of the nine concessions in the state. We will know the ACCC’s decision by July 9 — another contrast with the dilatory ASIC, which is so slow penalties relating to Storm Financial were still being handed out in March this year, nearly 10 years on; it was still chasing penalties against the AWB spivs (remember them? You know, from the Howard years?) last year, more than a decade on.

The ACCC example is apropos, because if it wasn’t for the Howard government’s Wallis inquiry, it would be the ACCC that would be going after the crooks in the financial planning industry and the banks. Ian Harper, author of the Abbott government’s competition review and a member of the Wallis committee, a month ago ‘fessed up that the inquiry had got it wrong in deciding that a specialist body should handle consumer finance issues, not the ACCC. He also thinks they went too easy on the regulatory model. “We placed too much faith in the efficient market hypothesis … With the benefit of hindsight and what’s been coming out at the royal commission, the weaknesses of the specialist approach we took to regulation are also evident.”

Consumer finance regulation should be handed to the ACCC. ASIC can go back to being the Australian Securities Commission and focus on corporate regulation, where it has only partly, not completely, disgraced itself. And as for Shipton, he can always go back to the “finance profession” he proudly claims to be a member of.

Correction: The article previously referred to Toyota being fined following ACCC action. In fact it was the Yazaki Corporation, and the text has been updated to reflect this.