Chapter 7Governance and leadership
7.1This chapter will discuss a variety of matters which relate to the governance and leadership of ASIC. It will discuss the current organisational and commission structure of ASIC, external governance, employment and accountability measures for commissioners and organisational culture.
ASIC organisational structure and governance
7.2ASIC is established by the Australian Securities and Investments Commission Act 2001 (the ASIC Act) as an independent statutory authority. As well as being established by the ASIC Act, it administers the Act and carries out the majority of its work under the Corporations Act 2001. For the purposes of the Public Governance, Performance and Accountability Act 2013 (the PGPA Act), ASIC is a non-corporate Commonwealth entity. Unlike most non-commonwealth corporate entities, however, ASIC does not engage its staff under the Public Service Act 1999 and instead engages them under section 120 of the ASIC Act.
7.3The management and administration of ASIC is handled by the Commission, which is made up of between three and eight members. From a recent report of the Auditor General:
ASIC is comprised of Commissioners who are appointed by the Governor-General on the nomination of the Treasurer. The ASIC Chair is the accountable authority of ASIC and is responsible for determining the ASIC Code of Conduct and the ASIC Values under sections 126B and 126C of the ASIC Act respectively. Under ASIC’s governance framework, there is a separation of decision-making powers relating to regulatory functions and governance matters. ASIC distinguishes between Commission committees that are comprised of the Commissioners (including the ASIC Chair and Deputy Chairs) and management committees that are comprised of the ASIC Chair and senior executives.
7.4The Commission is currently composed of five members, being the Chair, the Deputy Chair and three Commissioners.
7.5The Commission acts as ASIC’s governing body with responsibility for ‘achieving ASIC’s statutory objectives under the ASIC Act’. According to the ASIC website, its focus is on high-level regulatory and statutory decision making, as well as stakeholder management. It also provides organisational oversight and support to the Chair.
7.6The Commission has a dual regulatory and governance role, sharing the governance role with the Chair as accountable authority for ASIC. These dual roles are outlined in the table below:
Table 7.1Dual roles of the ASIC Commission
| |
Making decisions relating to ASIC’s powers and functions, including strategic and significant regulatory decisions. | Providing: strategic leadership; determining budget and resourcing priorities; ASIC’s values and code of conduct; overseeing management performance; and accountability and audit processes. |
Source: ASIC, ASIC's governance and accountability framework, April 2024, https://asic.gov.au/about-asic/what-we-do/how-we-operate/asic-s-governance-and-accountability/ (accessed 4 June 2024).
7.7As mentioned above, the Chair is the accountable authority for ASIC and is responsible for its operations. The Commission supports the Chair on oversight of ASIC while day to day management of ASIC is delegated by the Chair to the senior executives.
7.8Beneath the Commission and the Chair there are several committees which assist in the performance of these officers’ regulatory and governance roles. These committees are Commission Committees, Specialist Committees, Governance Committees and Management Committees. A visual representation of this is contained in figure 7.1 below:
Figure 7.1ASIC governance structure
Source: ASIC, ASIC governance structure, April 2024, https://asic.gov.au/about-asic/what-we-do/how-we-operate/asic-s-governance-and-accountability/ (accessed 6 June 2024).
7.9The Commission Committees were established to allow the Commission to dedicate time to and provide a specific focus on important areas of ASIC’s statutory mandate. These committees are:
the Commission Enforcement Committee, which oversees ASIC’s enforcement work, including making significant and/or strategic enforcement decisions;
the Commission Regulatory Committee, which makes strategic and/or significant decisions in relation to law reform, regulatory policy, policy frameworks and reports, as well as overseeing ASIC’s regulatory activities and functions; and
the Commission Risk Committee, which is responsible for setting and monitoring ASIC’s risk management framework and its risk appetite. It also considers all significant risk that affects ASIC, Australia’s financial system, Australian consumers and ASIC’s regulated population.
7.10The Governance Committees are made up of two committees, the Commission Risk Committee (mentioned above) and the Audit and Risk Committee. The Audit and Risk Committee assists the Chair to discharge their responsibilities for the use of Commonwealth Resources as well as providing assurance to the Chair and Commission on ASIC’s systems of internal control, its risk management and oversight, and its financial and performance reporting. This committee operates independently of management.
7.11The Management Committees have responsibility for overseeing the daily management of ASIC. The two Management Committees are the Executive Committee (responsible for managing ASIC’s budget and delivering its business plans, as well as the internal operations of ASIC) and the Executive Risk Committee (responsible for risk mitigation, overseeing and implementing audit and assurance processes, maintaining ASIC’s risk management framework and monitoring significant risks to ASIC).
7.12In 2021, a new position of Chief Operating Officer (COO) was established with the responsibility of long-term organisational planning and the implementation of strategy. The COO is the Chair of the Executive Committee.
External governance
7.13While ASIC is a statutory body that is independent from the executive government, it is accountable to the Parliament as well as other bodies.
7.14ASIC is accountable to the Parliament through a number of committees, including:
the Parliamentary Joint Committee on Corporations and Financial Services (the PJCCFS);
the Senate Standing Committees on Economics (both the Economics Legislation Committee and, this committee, the Economics References Committee); and
the House of Representatives Economics Committee.
7.15The PJCCFS is established by the ASIC Act and is required to inquire into and report on the activities of ASIC, the operations of the corporations legislation and any other legislation of the State, Commonwealth or a foreign law that significantly affects the operation of corporations legislation. The PJCCFS is also required to examine the annual reports of bodies established under the ASICAct.
7.16In addition, the government regularly issues a statement of expectations to ASIC which ASIC responds to through a statement of intent. The last statement of expectations and statement of intent in response was released in August 2021.
7.17ASIC’s decisions can also be subject to review through decisions of the Courts, administrative tribunals, the Commonwealth Ombudsman, the Privacy Commissioner and the Office of the Australian Information Commissioner. The Financial Regulator Assessment Authority (FRAA) and the National Anti-Corruption Commission also have oversight over ASIC.
7.18The FRAA was established after the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Royal Commission), in response to recommendations 6.13 and 6.14 of the report of the Royal Commission.
7.19Established in June 2021, the FRAA is required to report on the effectiveness and capability of ASIC and APRA every two years. So far it has provided one report on ASIC which was completed in August 2022 and tabled in the Parliament. In the 2023-24 Budget, the government announced an intention to reduce the review cycle of the FRAA from two yearly to five yearly.
7.20The Chair of ASIC also has responsibilities under various statutes both in their role as ASIC’s accountable authority and otherwise. These statutes include the PGPA Act and its associated rules, the Public Interest Disclosure Act 2013, and the ASIC Act. ASIC’s Commissioners also have responsibilities as officers under the PGPA Act.
History of ASIC governance
7.21There have been several changes made to ASIC’s governance framework throughout the organisation’s history, often made after the recommendations of various reviews. Most recently, the FRAA provided an overview of this history in its report, Effectiveness and Capability Review of the Australian Securities and Investments Commission. A diagram from this report (Figure 7.2 below) provides an overview of this history.
7.22The 2014 Report of this committee (SERC 2014 Report) raised concerns about the executive and non-executive roles of ASIC’s Commissioners:
…the current governance framework has led to ASIC operating in silos with individual commissioners performing executive functions. ASIC's commission sets ASIC's priorities and strategic objectives, but the same commission, and individual commissioners, are also responsible for exercising ASIC's powers. As a result, any internal monitoring of ASIC's performance or challenge to how ASIC operates relies on the willingness and ability of the commissioners to scrutinise the decisions they have made.
7.23While the committee at that time did not wish to make any recommendations that would result in disruptive changes to ASIC’s structures, it did make a recommendation that two years after the tabling of that report the government review the ASIC Act, including ASIC’s governance structures, and whether ASIC should be governed by an executive and non-executive board structure. We are still in the same position today.
7.24This recommendation was noted by the government with the Government Response stating that this recommendation would be considered alongside the recommendations of the Financial Systems Inquiry which was then stillongoing.
7.25The Financial Systems Inquiry ‘considered the effectiveness of and need for financial regulation in Australia including the performance of financial regulators.’ The inquiry’s final report, released in December 2014, took an opposing view to the SERC 2014 Report, noting the blurred accountability at APRA in the years prior to the collapse of HIH Insurance, and rejected the proposal that financial regulators should be governed by a non-executive board. Instead, the Financial Systems Inquiry made the following relevant recommendations:
the creation of an external assessment board to conduct periodic reviews of APRA, the payment systems function of the RBA and ASIC; and
that financial regulators undertake periodic capability reviews.
7.26This recommendation led to the 2015 report, Fit for the Future: A capability review of the Australian Securities and Investments Commission (the ASIC Capability Review). This broad ranging review found that ASIC’s governance structure did not allow ASIC’s Commissioners sufficient time to focus on a number of matters, including oversight and accountability, external engagement and strategic matters. It also noted that ASIC’s internal culture was ‘more defensive, inward looking, risk adverse and reactive than is desirable for a conduct regulator.’
7.27The ASIC Capability review made several recommendations around governance coming from these findings, in particular:
that the Commission move to being a full time non-executive body with a strategic focus and external accountability without an executive management role;
that a new ‘head of office’ role be established in ASIC to handle the executive management responsibilities which would no longer be in the remit of the Commission; and
that senior executives be delegated these executive management responsibilities and report to the new head of office.
7.28Although not the primary focus of the Royal Commission, the Letters Patent for the Royal Commission included a requirement to report on the effectiveness of financial regulators to identify and address misconduct.
7.29The Royal Commission also considered the idea of ASIC having a non-executive board but did not make any recommendations around this. Instead, the Royal Commission made a recommendation for the introduction of capability reviews to occur every four years for ASIC and APRA, as well as the introduction of a new oversight authority. This led to the creation of the FRAA (as explained above).
7.30The PJCCFS also considered ASIC’s governance structure in its March 2022 report, Oversight of ASIC, the Takeovers Panel and the Corporations Legislation No. 1 of the 46th Parliament Report. This report considered the recent review of ASIC which had been completed by Treasury’s Abridged report on the review of ASIC governance arrangements (the Thom Report) that had been completed after the Auditor-General had raised concerns about payments made to management personnel at ASIC.
7.31The PJCCFS report considered the various reviews which had come before it, different models of statutory governance which were employed by similar independent statutory agencies, as well as the views of academics and other experts, and found:
While no governance model or framework for a statutory authority is perfect, ASIC’s current governance framework appears appropriate and fit-for-purpose. Apart from noting its concern about the position of Chief Operating Officer having sufficient seniority and authority within ASIC’s current governance framework, the committee considers it important for there to be a period of stability at ASIC. While the idea of an external board may be superficially attractive, it is manifestly inappropriate for an independent statutory authority such as ASIC and would create far more problems than those it purports to solve.
7.32The most recent report which discussed ASIC’s governance was the FRAA’s abovementioned first report into ASIC(the FRAA Review). While this review stated that governance was not an area of focus, they had received feedback from ASIC staff on governance, which will be discussed further below.
Figure 7.2Timeline of ASIC governance reviews and subsequent action
Source: FRAA, Effectiveness and Capability Review of the Australian Securities and Investments Commission, July 2022, p. 36.
Commentary on governance structure
7.33When questioned about the current state of governance at ASIC, ASIC was positive about its governance framework, stating that it considers its governance framework ‘to have operated effectively over a significant period of time.’ It further stated:
ASIC's Governance and Accountability Framework (Framework) was established in 2019 following the Financial Services Royal Commission and has been reviewed and refined since that time. This reflects the legislative framework within which ASIC operates, consistent with ASIC being an independent Commonwealth agency created as a statutory body corporate. The objective of the (Framework) is to promote effective, efficient and impartial decision making at ASIC and articulate clear accountabilities. The Framework seeks to ensure ASIC acts strategically, with integrity and effectively delivers on its statutory objectives.
7.34ASIC also noted that its current governance framework was similar to the frameworks in place at other independent statutory agencies such as the ACCC and APRA.
7.35The FRAA Review, which collected staff and management views as part of its review process, noted that ASC Commissioners and senior staff were positive about the recent changes to governance, saying the introduction of the Chief Operating Officer had assisted Commissioners in moving away from holding both executive and non-executive roles. However there was acknowledgment that these changes had not fully matured and there was further room for improvement:
ASIC’s commissioners and executive directors acknowledged that more time is needed to embed the shift in responsibilities and accountabilities arising from changes to the governance structure. In the ASIC staff survey, respondents noted that ASIC could provide greater clarity about the responsibilities of commissioners and executive directors. Some ASIC staff members below senior executive leader level noted that the separation of responsibilities and powers is unclear.
7.36Other evidence before the committee was less positive. Mr James Shipton, former ASIC Chair, described ASIC as having ‘Swiss cheese’ governance arrangements, noting that ASIC governance was covered by two Acts (the ASIC Act and the PGPA Act) over three different governing organs, being the Chair, the Commission and the Accountable Authority.
7.37Mr Shipton went on to state:
There is insufficient legislative cohesion between these three organs.This results in a lack of clarity in the executive, strategic and governance roles of the Chair (and Accountable Authority) and the other commissioners.This causes confusion, sometimes tension, in decision making settings, including when making enforcement decisions.In 2020 an organisational restructure was attempted to streamline this legislative complication, and the 2021 Statement of Expectations attempted to clarify the legislative uncertainty.Ultimately, Parliament ought clarify ASIC’s governance structures to provide managerial certainty given the statutory confusion.
7.38In evidence before the committee, Mr Shipton suggested that poor governance structures tied into the other matters the committee had considered through the course of the inquiry, saying ‘[p]oor governance will lead to poor outcomes’.
7.39These views were echoed by the Australian Institute of Company Directors (AICD), who commented on the dual nature of the ASIC Commission:
While the Commission is responsible for the exercise of ASIC’s functions and powers, ASIC’s strategic direction and its priorities, the Commission does not formally operate as a board of directors. External perspectives are instead provided through its external panels, which meet on a relatively infrequent basis and without any decision-making authority.
In their regulatory role, the Commissioners perform management functions in relation to business activities of ASIC. In this role, they lead groups of business lines with direct reporting from executive directors to individual Commissioners, and make decisions on regulatory and/or operational matters. At the same time, in their non-executive role, the Commissioners have ultimate decision-making authority as to the strategic oversight and direction of the organisation.
7.40The AICD went on to say that although the current composition of the Commission provides a high level of organisational understanding, it was of the view that performance and accountability could be improved by introducing a board composed of a majority of non-executive independent directors. This would bring a higher degree of executive oversight to the organisation and external perspectives.
7.41The AICD recommended that alternative governance models be considered for ASIC, such as:
RBA model: retaining some or all of the Commissioners as executive directors supplemented by a majority of practising non-executive directors with the appropriate knowledge, skills and experience to form a ‘board of the Commission’. Under this model the current ASIC Chair would be the Chair of the new board. This would be consistent with the board structure of the RBA; or
FCA [Financial Conduct Authority, UK] model: establishing an independent board, separate from the Commission, comprised of the current ASIC Chair and practising non-executive directors. Under this model, Commissioners would remain on the Commission and retain their executive role with oversight of day-to-day management functions, regulatory decisions and executive leaders. However, the Commissioners would be separate from the non-executive governance function provided by the independent board. The current ASIC Chair would become the CEO of the regulator and a new, independent non-executive Chair would be appointed. This would be consistent with the board structure of the FCA.
Employment and accountability arrangements for Commissioners
7.42In discussing ASIC’s governance arrangements, there was also discussion and evidence before the committee about the employment and accountability arrangements of ASIC’s Commissioners.
7.43As with other statutory appointments, ASIC Commissioners are not employees of ASIC, but are independent appointments by the Governor-General, made on the nomination of the relevant Minister, as per section 9 of the ASIC Act.
7.44Similarly, ASIC Commissioners can only be removed through section 111 of the ASIC Act by the Governor-General. They do not report to the Chair but are instead accountable to the Parliament and the relevant Minister. They are also accountable as officials under the PGPA Act. ASIC also has a Code of Conduct which Commissioners are subject to, however there are no formal sanctions which can be imposed on a Commissioner who breaches this code.
7.45In response to written questions on notice asked to ASIC about the accountability arrangements for its Commissioners, ASIC was of the view that its current arrangements ‘have worked effectively, without significant issues for many years’ and noted similar employment frameworks are used for comparable agencies, such as APRA and the ACCC.
7.46Mr Joseph Longo, current Chair of ASIC, was clear that the bar for removal of Commissioners was a very high. He stated further:
The first point I would make is that the issues that might be raised in connection with ASIC are not unique to ASIC. There are other agencies in the Commonwealth that are outside the Australian Public Service. The ones that quickly come to mind are entities like APRA and the Reserve Bank…Secondly, it obviously raises some very significant and potentially sensitive policy issues…We're talking about statutory appointees appointed by the Governor-General on the advice of cabinet. So we're talking about a relatively small group of people who are put into very senior roles discharging duties of a wide nature in the public interest…wherever we land on this it has to be a whole-of-government approach…
7.47The former Chair of ASIC, Mr Shipton, advocated for the creation of an independent agency to deal with accountability for statutory office holders:
The accountability arrangements for statutory officials are also clouded, as these recent experiences are showing. There needs to be an independent agency that can deal with these types of issues with appropriate procedures and appropriate methodologies so that everyone can have confidence in them. These recent experiences show that they don't. These employment arrangements for statutory officials are extraordinary. The fact is that there's actually not an employment contract for a statutory official. They cannot point to one document and say, 'That exhaustively covers all of my employment contracts.' Nor does that contract then tie back to a code of conduct like an ordinary employee would have in most, if not all, workplaces.
7.48Mr Shipton underlined this point further:
The practical reality is that a CEO can only do something about an employee's behaviour if they have the support of the broader system and is empowered to act. ASIC's deficient governance structures that need reform meant that I did not have the authority over this person. Meanwhile, Treasury failed to intervene. So even though I was nominally superior to the transgressor, the behaviour continued right up to my last days in office.
7.49Recently, the Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, commented on ASIC governance, making the point that there was a balance to be found between the independence of statutory office holders and accountability for unacceptable workplace behaviour. He said further that this was a matter Treasury was looking into.
Organisational culture
7.50Evidence to the committee highlighted the organisational culture within ASIC as part of the issues relating to governance.
7.51The AICD made the point that going back to the 2015 Capability Review of ASIC, there had been concerns that ASIC’s culture was ‘variable, overly defensive, inward looking, risk averse and reactive’ and that this contributed to governance arrangements which limited the empowerment of staff and leadership and blurred responsibility and accountability.
7.52Several high-profile internal governance issues have also led to broad concerns about ASIC’s internal culture and whether its governance arrangements are adequate.
The Thom Review
7.53As mentioned briefly above, the Thom Review was instituted in October 2020 when the Auditor-General raised concerns with the Treasurer about payments made to senior management at ASIC. In brief, the two matters of concern were:
accommodation payments of $750 a week made to then Deputy Chair, Mr Daniel Crennan KC; and
the conduct of then Chair, Mr James Shipton, in relation to the ‘circumstances of a decision by a senior official to increase the level of tax advice support to Mr Shipton.’
7.54While this review made no adverse findings against Mr Shipton or Mr CrennanKC, it did made recommendations for significant improvements to ASIC’s internal practices and processes, including in relation to internal audit management, improving the management and controls for spending relating to Commissioners and the quality assurance of its legal advising processes.
7.55ASIC implemented the recommendations of the Thom Review. In its 2020-21 Annual Report, the Chair’s Report stated:
At 30 June 2021, ASIC had implemented a number of the recommendations of the Thom Review directed at ASIC through a program of change designed to deliver long‑term improvement to ASIC’s risk and compliance practices and capabilities. ASIC completed its implementation of the recommendations of the Thom Review in August 2021.
Bullying and misconduct allegations
7.56There have been several high-profile allegations of misconduct by senior members of ASIC which have received a great deal of interest from the committee. These have included the investigation of ASIC Deputy Chair Karen Chester regarding allegations about her behaviour towards other staff members of ASIC, as well as concerns about the behaviour of the Chair, Mr Joseph Longo.
Investigation of matters relating to Ms Karen Chester
7.57This matter was initially raised in the 2022-23 Supplementary Budget Estimates of the Senate Economics Legislation Committee, with Senators questioning the Chair of ASIC about whether there had been any investigations into ASIC Commissioners. Ms Chester advised in the same session that she was aware that in 2021 allegations were made against her which led to a referral and subsequent investigation conducted by Treasury. Furthermore, when first asked about the investigation at this Estimates hearing, ASIC Chair Joseph Longo initially appeared to mislead the Senate about the existence of such an investigation:
Box 7.1 2022–23 Supplementary budget estimates, 16 February 2023 Senator Andrew Bragg: Have there been any investigations under the PGPA Act, Chair, into any of the commissioners? Mr Joe Longo: Not that I’m aware of. Senator Bragg: In the past two years? Mr Longo: Not that I’m aware of. Senator Bragg: There have been no inquiries that you are aware of into any ASIC commissioner in the last two years under the PGPA Act? Mr Longo: Not that I’m aware of. |
Source: Senate Economics Legislation Committee Estimates, Committee Hansard, 16 February 2023, p. 6.
7.58Later in the same Estimates session this line of questioning continued:
Box 7.2 2022–23 Supplementary budget estimates, 16 February 2023 Senator Bragg: Have you received any letters from the secretary of the Treasury in relation to any investigations conducted into any of the ASIC commissioners in your tenure? Mr Longo: I would like to take that on notice. Senator Bragg: You don’t know? Mr Longo: I receive a lot of correspondence. Let me step back from this. As far as I am aware—I think Chris Savundra has confirmed this—I'm not aware of any provisions of the PGPA Act that provide for investigations or inquiries into the conduct of statutory appointees. I am happy to be corrected on that. I would just like to confirm that's the case before answering that question, which I think is what you are particularly interested in. |
Senate Economics Legislation Committee Estimates, Committee Hansard, 16 February 2023, p.7.
7.59The committee discovered there had been an independent investigation of alleged conduct by Ms Chester which had cost Treasury $180000 and that one of the initial complaints had been made by former Chair of ASIC, Mr James Shipton. The committee received evidence, through a letter from the Treasury Secretary to ASIC Chair Mr Longo dated 1 February 2022, that the investigation found that ‘many of the instances of alleged conduct could be wholly of partially substantiated.’
7.60The Senate made an order for the production of documents (Order of 7March2023 [160]) for the investigation report into Ms Chester’s alleged conduct which had been completed by a law firm engaged by Treasury. The government made a claim of public interest immunity over this document based on the grounds of unreasonable disclosure of private information of persons who took part in the investigation (both as complainants and third parties) and the undue prejudice to Ms Chester which would arise should the report be released.
7.61A further order for the production of documents (Order of 9 August 2023 [291]) was made in relation to a summary document which was used to brief the Treasurer on the investigation into these allegations. A similar document called a Ministerial Submission was provided to the Senate with redactions (a claim of public interest immunity being made in relation to the redacted parts) in response to this.
7.62The Ministerial Submission document noted that the investigation into Ms Chester had concluded and, while many of the instances of alleged conduct had been wholly or partially substantiated, none of them reached the level of recommending that Ms Chester be terminated from her role under section 111 of the ASIC Act.
7.63This should be contrasted with Ms Chester’s comments during 2022-23 supplementary budget estimates where she contended that there had been a ‘very comprehensive’ Treasury investigation into allegations made against her but there were no adverse findings from that investigation.
Treasury assurance review into the conduct of Mr Joseph Longo
7.64At the same budget estimates session, Mr Longo confirmed that there had been a Treasury assurance review of his conduct after an ‘emotional outburst’ during a meeting of ASIC’s enforcement committee.
7.65On 1 August 2023, the Senate agreed to an order to produce documents for the Minister representing the Treasurer to provide by 10 August 2023:
…the final report of a Treasury assurance review into the conduct of the Australian Securities and Investments Commission (ASIC) Chair, Mr Joe Longo, referred to in an article published in the Australian Financial Review on 30 January 2023 entitled ‘ASIC chairman gave ‘abject’ apology for emotional outburst’.
7.66A redacted version of this report (the Review Report) was provided to the Senate on 10 August 2023 and a claim of public interest immunity was made by the Treasurer on the redacted sections of the report. The ground relied upon was impact on the privacy of individuals who were mentioned and took part in the review as well as the integrity of fact-finding investigations.
7.67The Review Report came to the conclusion that the matter had been handled appropriately and there was no factual dispute about what had occurred. In one of the unredacted sections of the report it stated:
The Chairperson [Mr Longo] has acknowledged the seriousness of his conduct, its potential damage to ASIC and his change agenda and its negative impact on ASIC officers. He apologised to the relevant officers both in person and through a general apology at the next ASIC Enforcement Committee meeting on 25August 2022…
7.68On 5 September 2023, the Senate agreed to an order for the production of documents for an unredacted version of the Review Report to be provided to the committee by no later than midday, 7 September 2023. This was recorded in the Hansard as OPD 298.
7.69The Review Report was not provided to the committee by the due date. ASIC provided a response to the order to produce documents via letter, stating that it could not provide the Review Report due to the Minister representing the Treasurer’s previous public interest immunity claim.
7.70ASIC explained further:
If ASIC were to respond to OPD 298 by producing an unredacted copy of the Report to the Committee this would be inconsistent with ASIC’s understanding of the practices established by the Senate. The relevant practice being that following a determination to not accept the Government’s claim of public interest immunity, the Senate will engage with the Government on its refusal to provide information. ASIC is also concerned that if it were to take steps to produce an unredacted copy of the Report to the Committee, that doing so would not provide proper regard to the Government PII Claim, and would undermine that claim in the absence of the Minister being provided the opportunity to give due consideration to the Senate’s orders.
7.71The committee reported on ASIC’s compliance with the order and confirmed that ASIC had not complied with the Senate’s order to produce documents.
7.72In a supplementary submission provided to the committee, ASIC provided the following information about its response to orders by the Senate to produce documents:
…ASIC has produced material and provided evidence to the Committee where it is possible and appropriate to do so. In some instances, it has been necessary for ASIC to raise concerns about the production of such material in light of the Government’s claims of public interest immunity. We refer in particular to the Government’s claims made on 9 March 2023 in response to Order for Production of Documents No. 160, and on 4 September 2023 in response to Order for Production of Documents No. 290 and 291. Where ASIC has not produced materials to the Committee or redacted information, it has done so with proper regard to the Government’s claims and to ensure that it has not acted inconsistently with, or undermined, those claims. In those circumstances, there is no basis, nor evidence before the Committee, to support a finding that ASIC has dealt with requests by the Committee for such information with the intent to obfuscate or undermine the Inquiry.
ASIC staff survey
7.73More recently, in a response to a written question on notice, ASIC provided the committee with its most recent staff survey. This document showed concerning results for staff satisfaction within ASIC, with staff reporting low levels of satisfaction, motivation, role clarity, and high levels of job insecurity and stress.
7.74Data included in the survey indicated that under 20 per cent of ASIC employees were satisfied with their role and that just over 30 per cent registered an intention to stay with the agency. Further, only approximately 25 per cent of ASIC employees stated that they had clarity regarding their role, with overall organisational level quality rated at just five out of 100.
7.75Responding to the results of this survey, Mr Longo claimed that there were positive aspects of ASIC’s culture but acknowledged that ‘there are areas we can and will improve.’ This acknowledgement marked a clear departure from previous evidence provided by Mr Longo to the Senate Economics Legislation Committee in March 2023, where he denied that ASIC had a poor internal culture. In his evidence, Mr Longo stated:
I think ASIC has a strong culture. From the day I started, all the people I’ve worked with at ASIC are highly motivated and hardworking. We have a very diverse group. I think people feel good about working at ASIC; there’s a good culture. I personally don’t think ASIC has a cultural problem.
7.76Further, Mr Longo discussed the survey at the 2024–25 Budget Estimates hearings, characterising the results of the survey as ‘mixed’. Mr Longo stated that the survey indicated both areas of strength and areas for improvement within ASIC’s culture and that the cultural issues revealed by the survey had built up over an extended period. He confirmed that ASIC’s executive was committed to ‘addressing areas for improvement’.
Committee view
7.77The committee is highly concerned about governance as it stands in ASIC. As this chapter has shown, there are significant gaps in the legislative model for ASIC governance as well as continuing problems in both a practical and a personal sense.
7.78This is a matter of key importance, as ASIC being competently governed has a clear downstream effect on its ability to effectively perform its remit in regard to investigation and enforcement.
7.79The committee notes the various reviews which have been written about ASIC examining its governance structure. The PJCCFS’s view that ASIC did not need any significant changes in management, and the FRAA’s views that the current governance structure needed time to mature are noted by the committee. However, these reports were both completed in 2022 and the committee is left wondering how much more time ASIC needs to mature its governance structure before there can be an admission of failure.
7.80Indeed, ASIC’s behaviour throughout this inquiry process, both in its behaviour towards the committee (as discussed in detail in Chapter 2) and the disputes within ASIC’s leadership, seems only to confirm that the views expressed in the 2015 ASIC Capability Review–that ASIC’s culture is defensive, inward facing and reactive–is still as relevant as it was when it was written.
7.81The committee does however agree with the PJCCFS’s view that the solution to ASIC’s problems is not an executive and non-executive board structure. There are other statutory agencies with similar structures which do not seem to face the continuing issues ASIC faces.
7.82Despite this, the committee found the evidence provided, that ASIC was operating with a ‘Swiss cheese’ approach to governance, compelling. The current governance arrangements, with overlapping pieces of legislation, are clearly unsatisfactory and have left ASIC vulnerable to poor leadership. It is difficult to see how commissioners can exercise significant executive functions without any formal method of accountability as to their performance or conduct.
7.83It is also clear to the committee that there is a need for more governance rather than less in relation to ASIC. As discussed in other chapters, ASIC’s remit has expanded significantly since its inception, however ASIC’s governance has not changed to suit this.
7.84The committee is of the view that the FRAA is an important addition to the governance arrangements for ASIC and is concerned by the government’s decision to reduce its reporting timeframe from two yearly to five yearly. The committee strongly encourages the government to reconsider this decision and has made a recommendation to that effect in Chapter 8 of this report.
7.85It is also very clear to the committee that ASIC’s employment and accountability arrangements for its Commissioners are inadequate. The continuing waves of scandal which have engulfed ASIC’s senior leadership, both prior to and through this inquiry process, are evidence of this. The infighting played out through various media outlets in the past few years does not instil confidence in the committee or the broader public that ASIC is performing its functions to the highest level, and must no doubt give some comfort to the corporate criminals operating within Australia.
7.86The committee is also concerned by the government’s decisions to make public interest immunity claims over the investigation into Ms Chester. It is highly concerning that a government would seek to prevent the release of an investigation report into the conduct of a senior statutory appointee of an independent regulator. This raises serious concerns about the government’s approach to transparency.
7.87It is clear to the committee that once the independent report had substantiated the allegations (in whole or in part), there were extremely limited options available to the Minister. The only option available was the Minister recommending termination to the Governor-General, an extreme but undesirable outcome. A law reform process is needed to avoid repetition of this unfortunate situation.
7.88Without wanting to cast any judgements, the committee is of the view that it may have been better if there were more opportunities to address issues such as this through a graduated penalty scheme, which is addressed in a recommendation in Chapter 8.
7.89Further, at a minimum, this investigation should not have been kept secret from the public.
7.90The committee is also alarmed by the poor state of ASIC’s internal culture, as revealed by ASIC’s most recent staff survey. The committee is dismayed by low levels of confidence in the regulator’s capabilities and its effectiveness among ASIC’s own staff. The committee considers these results an indictment of ASIC’s leadership and its approach to staffing.
7.91Recent news that ASIC has made changes to its senior leadership are encouraging, but until the committee sees evidence that these changes have resulted in positive investigation and enforcement outcomes, the committee cannot help but see this as another shifting of the deck chairs on the Titanic.
7.92The committee is pleased to note that the Australian Government is looking into accountability measures for statutory office holders and strongly urges the government to make progress on this issue. The committee has also made a recommendation in this regard in Chapter 8 of this report.