Thom review set out 8 improvements for ASIC

The review, undertaken by the former inspector-general of intelligence, looked into concerns raised by the Auditor-General that the relocation payments made to ASIC chair James Shipton and former deputy chair Daniel Crennan QC may have exceeded the limits set by the Remuneration Tribunal. 

Mr Shipton “stepped aside” from his role last year while the review was undertaken into the matter, while Mr Crennan resigned from his role, bringing forward his planned departure date from ASIC.

Both men have since repaid the monies in question, namely: $118,557 paid by ASIC for Mr Shipton’s tax advice, and $69,621 paid by ASIC for Mr Crennan’s accommodation payments.

Treasurer Josh Frydenberg stated on Friday that while the review made no “adverse findings regarding Mr Shipton and Mr Crennan”, both Mr Shipton and Mr Frydenberg had agreed that he would step down from his position as ASIC chair once a replacement had been found.

Mr Frydenberg said: “Mr Shipton and I have agreed that it is in the best interests of ASIC that he will step down as chairperson of ASIC in the coming months. I thank Mr Shipton for his three years of service and dedication during his time as chairperson of ASIC.

“The Treasury will immediately commence a search process for a new chairperson.

“I intend to finalise the appointment within the next three months.”

Mr Shipton will resume his position on Monday, 1 February 2021, and continue in his role until a new chairperson commences.

What the review found

As the Thom review was provided as a confidential report to Treasury on 17 December 2020, only an abridged version of the findings have been released, so as not to disclose personal or commercial information or legal advice.

The 41-page abridged report summarises the inquiry’s findings and determinations.

Generally, the review found that ASIC should have moved more swiftly to resolve the issues raised by the National Audit Office in August 2019 relating to the payments, or seek to establish the facts. ASIC reportedly took 13 months to decide not to pursue a ruling or determination from the Remuneration Tribunal as to the payments’ legitimacy after the ANAO’s initial recommendation to do so.

Dr Thom also noted issues of concern regarding the adequacy of ASIC’s processes concerning: the proper use and management of public resources; systems of risk oversight and management; systems of internal control, and co-operation between ASIC officials.

Eight recommendations

Dr Thom put forward eight recommendations for improvements to ASIC’s internal practices, systems and processes to enhance its management of matters recommended for action by the ANAO.

Five recommendations were for ASIC. They included:

• ASIC should develop a central risk and breach register clearly identifying the party accountable for any resolution. This should have oversight and monitoring from the Executive Risk Committee and should provide regular reports to the Audit Committee.
• ASIC should progress its reforms in relation to commission oversight of audit findings and actions and the formation of an Executive Integrity Committee. ASIC’s Audit Committee should monitor the progress of the implementation of these arrangements. ASIC should review the effectiveness of these new governance arrangements within 18 months.
• ASIC should have regard to the findings in this report and proceed to finalise the investigation and review of potential breaches of legislation and policy related to the procurement of tax advice services from KPMG.
• ASIC should consider whether the matters identified in the report are indicative of a possible lack of quality assurance and investigate whether additional controls should be introduced to ensure accuracy in their legal advising processes
• ASIC should: 

1. Develop policies in relation to the payment of expenses for commission members setting threshold amounts and defining sensitive expenses that require additional controls;
2. Require the endorsement of the commission for expenses beyond a threshold and for sensitive expenses;
3. Report on the review of ASIC governance arrangements;
4. Require the chair’s approval for the expenses of Commission members; and
5. Require a deputy chair’s approval for the chair’s expenses.

Meanwhile, three recommendations were for Treasury. They were:

• Treasury could obtain legal advice about whether Mr Shipton’s conduct amounted to a breach of the Australian Public Service (APS) or any other obligation, and, if so, what action could be taken in relation to the conduct giving rise to that breach. 
• Treasury could obtain legal advice about whether Mr Shipton’s conduct amounted to a breach of the ASIC Code of Conduct or any other obligation, and, if so, what action could be taken in relation to the conduct giving rise to that breach. 
• Treasury should: 

1. Ensure there is a clearly documented agreement of all terms and conditions of employment, including relocation expenses with limits, prior to the appointment of a statutory officer. The employing authority would necessarily be a party to any agreement; 
2. Develop a policy document to ensure consistency of approach; 
3. Establish a central expert contact to respond to questions about matters regarding the terms and conditions of statutory officers in the portfolio; 
4. Hold the responsibility for formally approaching the Remuneration Tribunal through the Treasurer if further individual determinations are sought both pre-appointment and on an ongoing basis; and
5. Arrange briefings for statutory appointees including an overview of their responsibilities under their governing legislation and other relevant obligations that are particular to working in the Australian public sector.

Shipton’s behaviour not misconduct: Frydenberg

Speaking on Friday, Mr Frydenberg commented: “The government will implement significant changes to the governance of the Australian Securities and Investments Commission as a result of Dr Vivienne Thom AM’s review of ASIC governance…

“After considering Dr Thom’s report and supplementary legal advice provided to the Treasury concerning these matters, I am satisfied that there have been no instances of misconduct by Mr Shipton concerning his relocation arrangements, including ASIC’s payment for tax advice resulting from his relocation to Australia in early 2018, nor have there been any breaches of applicable codes of conduct.”

He continued: “Given the nature of the matters raised, the government expects ASIC to implement as a priority the recommendations made by Dr Thom concerning its internal risk, management and governance arrangements and to report to me regularly on its progress.”

Mr Frydenberg added: “The review also concluded that the Treasury could improve its processes for managing the appointments of statutory officers under Treasury portfolio laws. 

“In response, the Secretary to the Treasury has moved to implement a new system immediately.”

[Related: ASIC chair ‘steps aside’ over relocation expenses]