ASIC says it will up enforcement, but root cause is still financial industry

Corporate regulator chair James Shipton told Senate Estimates tonight that ASIC now has the “urgent imperative” to launch court enforcement against large financial companies as Kenneth Hayne suggests in his banking royal commission final report.

He told the Senate Estimates economics committee that ASIC had “the very clear will to take wrongdoers to court” because it was what the community expected and ASIC was ready to deliver. Shipton said the banking royal commission demonstrated that ASIC “should never be reticent or reluctant” to head to court to enforce the laws at its disposal.

Shipton pointed to ASIC’s adoption of a resolution to create an Office of Enforcement that would adopt a “why not litigate?” stance.

But despite his assertion that ASIC was ready to enforce and litigate, and manually attempt to change culture, Shipton made it clear that the “root cause of the problem … is in the financial sector itself”.

Shipton spoke of his own exit from financial services (working for Goldman Sachs in Asia), saying he was compelled to leave the industry because he “wanted finance to come back to serving the community”.

“I left because I thought financial services had lost its way and I needed to do something about that … so my next job … was to become a regulator,” Shipton said.

Shipton said he had told ASIC staff during training to read the book “Billion Dollar Whale”, which covered the 1MDB affair, where a Malaysian wealth fund was pillaged by Goldman Sachs. He said it was important to understand the depth of misconduct the financial industry was capable of.

“I hope all of finance learns from this. I see my job is to limit the future publication of these books … because we don’t want these stories to happen in Australia,” Shipton said.

ASIC has 50 staff addressing 100 referrals, breach reports and case studies for potential enforcement action.

As things heated up Senator John Williams pointed to previous inquiries that had found ASIC weak and lacking: “Has ASIC got the message that the expectations of the Australian people are that you are to lift your game?”

Shipton replied: “Loud and clear, Senator, loud and clear.”