30 Jul ASIC’s shrink to face parliamentary scrutiny
JOHN KEHOE – The Australian Financial Review – Tuesday 30 July 2019
The corporate regulator’s deployment of a psychologist in company boardrooms will be scrutinised by a parliamentary committee.
Senator James Paterson, the new chairman of the Parliamentary Joint Committee on Corporations and Financial Services, said he was sceptical of the Australian Securities and Investments Commission’s move to regulate culture.
ASIC has also recently drawn questions over its appointment of an organisational psychologist to observe the inner workings of major companies such as Qantas, Lendlease, IOOF and AMP.
ASIC chairman James Shipton will be asked to appear at least twice a year at the committee’s public hearings, and Senator Paterson vowed to hold the regulator to account more vigorously following the banking royal commission.
“One of the things that is clear is that the public has lost confidence not just in banks, insurers and superannuation, but also our regulators,” he said. “The public believes regulators were asleep at the wheel.
“I want to lift the profile of the hearings we have with ASIC and make sure they are really robust interrogations of their work.”
The Liberal senator said he was not hostile towards ASIC but that some of its focus since the banking royal commission was “surprising”.
“Their focus on culture and sending psychologists into boardrooms doesn’t seem consistent to me with what the royal commission asked them to do,” Senator Paterson said.
“Regulating conduct and behaviour to enforce the law seems more like a direct route to address the problems.”
ASIC last week defended the deployment of Elizabeth Arzadon, who is not a registered organisational psychologist.
“The behavioural expert observed five board meetings and three board committee meetings in total,” ASIC commissioner John Price said.
“No further observations were planned, or occurred, and there are no plans for the expert to be ’embedded’ in boards, or to have other companies’ deliberations monitored by an external observer.”
Mr Price said all observations, interviews and written surveys by the behavioural expert with directors were conducted on a voluntary basis.
The move borrows a strategy used by the Dutch central bank in its regulation of commercial banks.
Senator Paterson, a former deputy executive director at the free-market Institute of Public Affairs, said he also wanted the committee to scrutinise unintended consequences of unnecessary regulation and red tape, particularly in financial services.
“This committee in the past has been a source of new regulation and red tape and I’d much rather it supports the government’s objective of reducing red tape,” he said.
“Regulation can make services less readily available and more expensive.
“I’m worried in things like life insurance, financial advice and mortgages that over-regulation will result in those things becoming less widely available and more expensive.”
ASIC’s enforcement of responsible lending laws since the royal commission has been blamed by bankers for worsening a credit squeeze, a claim ASIC has denied.
“It’s crucial they don’t end up reducing the availability of credit at this time,” Senator Paterson said.
In an interview published in The Australian Financial Review on Monday, ASIC commissioner Sean Hughes said banks were making the right noises about transparency and co-operation but there was plenty of litigation to get through first.