ASIC needs to be a regulator, not a revenue centre
It is unusual in the extreme for the chair and the deputy chair of a Commonwealth regulator to feel compelled to stand aside from their roles and for the deputy chair to then resign his position.
But that is exactly what has happened at the Australian Securities and Investments Commission (ASIC) and all because some administrative anomalies were identified by the Australian National Audit Office (ANAO) in the form of a six-figure tax advice bill paid for the chair, James Shipton, and a relocation allowance paid for the deputy chair, Daniel Crennan QC.
All of this has emerged in circumstances where ASIC is no longer covered by the Public Service Act and has been operating, not unlike Australia Post, as a Government agency rather than as an integral part of the Australian Public Service and therefore subject to the rules and conventions which go with being overseen by the Public Service Commission (PSC).
Why does this matter to financial advisers? Because they are fundamental to funding ASIC’s operations under the user-pays regime imposed by the Government to enable the removal of ASIC from the Public Service Act – something which was enthusiastically pursued by former ASIC chair, Greg Medcraft, and equally enthusiastically embraced by his successor, the now stood-aside, James Shipton.
And perhaps their enthusiasm is explained in a key section of ASIC’s annual report tabled in Parliament at the same time as Shipton and Crennan stood aside – a document which reveals that Shipton’s total remuneration for the 2019-20 financial year was $855,364, while Crennan trousered $674,628 and the regulator’s second deputy chair, Karen Chester, took home $623,459.
That’s right, the chair and two deputy chairs account for over $2 million in salaries and that is before you even start looking at the salaries paid to lesser ASIC executives such as the executive director of wealth management, Joanna Bird, who received total remuneration for the period of $407,744.
Yes, they are working in the financial services environment and it is true that some of the best funds management portfolio managers can easily be rewarded with seven-figure sums in a financial year but the salaries being paid to executives within ASIC will not sit comfortably with other public servants such as nurses, policemen and even public hospital medical registrars who are earning considerably less.
When Medcraft pursued removing ASIC from the Public Service Act a part of his argument was the need to remove the salary structures so that the regulator could better compete for experienced talent in the financial services industry. That appeared to most publicly manifest in the recruitment of a senior lawyer in the form of Queens Counsel, Crennan; former Productivity Commission (PC) deputy chair, Karen Chester; former super fund chief executive, Danielle Press; and former chief executive of the Financial Markets Authority in New Zealand, Sean Hughes.
While all of these recruits arguably have a degree of broad financial services experience, that does not necessarily translate into the type of technical, detailed experience that is vital to overseeing the minutiae of complex financial sectors such as financial planning and, indeed, funds management. What we have witnessed is what you would expect of two lawyers, an economist and a fund manager.
So, the question arises whether releasing ASIC from the Public Service Act achieved any genuine change beyond lifting the lid on salary levels and access to bonuses. The observations of the ANAO suggest that ASIC has not become administratively cheaper or more efficient.
ASIC is supposed to be a regulator, not a business. It is there to look after the interests of consumers and taxpayers. Not to be a profit centre. Government policymakers need to come to terms with that reality and treat the regulator accordingly.
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