Too late to rely on commercial-thinking for departing ASIC Chair

James Shipton, the Chairman of the Australian Securities and Investments Commission (ASIC), is set to depart the corporate regulator following an independent review conducted by Dr Vivienne Thom AM. The focus of the review was the sum of $118,557 paid by ASIC for personal advice received by Mr Shiption resulting from his relocation from the United States to Australia to take up the role in early 2018. 

The matter was first brought to the attention of Treasurer Josh Frydenberg in October last year when the Auditor-General wrote to Treasury following an audit of ASIC’s annual financial statements. At that time, Mr Shipton voluntarily took leave without pay for the period of the review and repaid the amount paid by ASIC for the tax advice.

Report findings not enough for Shipton

The report, delivered to Treasury last month, made no adverse findings against Mr Shipton. And supplementary legal advice obtained by Treasury also cleared the departing Chairman of any breaches of the applicable codes of conduct. These findings absolve Mr Shipton from any wrongdoing which would have otherwise empowered the Governor-General to terminate his appointment. 

However, despite these findings, Mr Shipton has agreed that it would be in the best interest of ASIC for him to step down as Chairperson in the coming months. The vacancy will now offer Treasury with the latitude to replace Mr Shipton and set ASIC on a new trajectory. 

It is worth mentioning, however, had Mr Shipton not agreed to vacate the position, terminating his appointment would have likely proven difficult for the government. Under the ASIC Act, the power to terminate the Chairperson’s appointment rests with the Governor-General, who is permitted to do so where there has been “misconduct, or the physical or mental capacity, of the [Chairperson]”. 

This provision, which is replicated across similar legislation governing other public office heads, provides limited grounds for termination relative to usual employment contracts. This reflects the legislative intent that the Chairperson be able to carry out their powers and functions impartial from government pressure.

Treasury and the regulatees demanding more

However, given ASIC’s role as Australia’s chief corporate regulator, it may be the case that the public demand a higher standard of conduct from its Chairperson to better reflect the standard that ASIC has recently been demanding from those that it governs. In such case, the political ‘pub test’ would seem the most appropriate yardstick to measure the reasonableness of ASIC’s tax bill expenditure. 

True enough, those working in the corporate sphere may argue, as Mr Shipton did, that his impugned tax bill is consistent with ordinary relocation packages offered in the private sector. Indeed, the quantum of the tax bill would seem reasonable in light of the fact that tax advice was a necessary expenditure as part of Mr Shipton’s relocation, his tax affairs spanned three jurisdictions, and involved ongoing reporting obligations. Thus, when applying such pragmatic commercial-thinking, one may reasonably argue that the expenditure does indeed pass the political pub test.

However, problematic with now deferring to such an approach and drawing analogies with standard private-sector relocation packages, is that ASIC has been strongly criticised in many recent high profile cases for failing to consider their allegations through a commercial lens before commencing proceedings. 

In the so-called ‘wagyu and shiraz’ case, the full Federal Court was scathing of the regulator, noting that it failed to understand how credit laws operated in practice. In that case, with respect to Westpac’s application of responsible lending laws, the Federal Court rightfully pointed out that “[i]t is plain that a consumer may choose to, and can be expected to, forgo particular living expenses in order to meet their financial obligations under a credit contract”.

Further, in proceedings against former Tennis Australia directors Harold Mitchell and Stephen Healy, Federal Court judge Justice Jonathan Beach criticised ASIC for failing to substantiate “conspiracy theories” and displaying “confirmatory bias”,  whilst at the same time failing to appreciate the dynamics of a corporate boardroom.

Following these actions against Westpac and the former Tennis Australia directors, it is somewhat incongruent for ASIC and Mr Shipton to now rely on a practical realities argument when such commercial thinking has seemingly eluded the corporate regulator in recent past.


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