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Why has ASIC still not got a chief executive?

ASIC senior staff including James Shipton resisted moving to a stronger internal governance structure, its acting chair Karen Chester has told the ASIC expenses enquiry.

Liberal senator James Patterson, who is chairing the enquiry into ASIC expenses, asked Chester why the regulator hadn't appointed a chief executive equivalent role, despite a previous report's recommendation to do so.

David Murray's Financial System Inquiry recommended the financial regulators undergo periodic capability reviews.  As a part of this, ASIC's capability review in 2015 was chaired by Chester.

Among its recommendations to government was that ASIC establish a head of office role to lead the day-to-day operational management and take them off the chair and commissioners.

It has since added a chief operating officer role, but a chief executive or head of office role still doesn't exist.

"Obviously my powers of persuasion aren't what I would have liked [or] thought they would be," Chester said, in response to Patterson's question on why the new internal governance model wasn't implemented.

"This was something that was discussed last year when I first arrived at the commission. I'd understood that that was going to be the internal governance model that was going to be put in place when I agreed to join ASIC as deputy chair but there was a change of view at most senior level."

Patterson pressed on, asking: "...It's been pretty clear from the public commentary that the government's intention at the time of appointing you was to ensure that the recommendations of your review were implemented but they haven't been. You are saying that Mr Shipton or other did not agree and did not wish to implement those recommendations?"

Chester's 2015 review noted that ASIC is allowed three to eight commissioners but only provides general guidance on their roles. As a result, the commissioners performed both executive (management) and non-executive (governance) roles. The senior executive leaders (such as for insurance, superannuation or managed funds) reported into the commissioners.

This left them drained of "bandwidth".

"The Panel believes that a dual governance and executive line management role inherently undermines accountability. Despite best efforts, individuals responsible for particular executive functions are unlikely to be consistently able to detach themselves from their concerns as an executive, to take a fully independent and organisation-wide perspective when acting in their governance role, to hold the executive team (including themselves) to account," said Chester's now-prescient-sounding final report in light of Shipton and Crennan's remuneration scandal.

Under Chester's recommendations, the ASIC had of office would have the senior executive leaders reporting into it. The ultimate accountability would remain with the chair, but commissioners would have more time to focus on governance.

Read more: Karen ChesterJames ShiptonJames Patterson
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