'Fit for purpose': PJC Report gives ASIC corporate governance framework the tick of approval

4 minute read  06.04.2022 Kate Hilder, Siobhan Doherty

The Parliamentary Joint Committee on Corporations and Financial Services Committee's latest report into the Australian Securities and Investments Commission (ASIC) concludes that the regulator's corporate governance framework is now 'fit for purpose' and rejects outright the suggestion there is any need for an external advisory board.  

The Parliamentary Joint Committee on Corporations and Financial Services Committee has released its latest report into the Australian Securities and Investments Commission (ASIC).  Among other things, the report considers ASIC's corporate governance framework. 

According to the report 

'The impetus for the committee considering ASIC’s governance framework arose from the apparent failures at ASIC raised by the ANAO and investigated by the Thom Review'.  

[Note: You can find an overview of the context for the Thom Review and the concerns that prompted it in Governance News 28/10/2020 at p17]

'Fit for purpose'

The report makes clear that though the Committee considers that ASIC’s 'internal audit and accountability processes were inadequate' with respect to matters investigated by the Thom Review, it is now satisfied that in light of recent corporate governance reforms implemented by the regulator, ASIC's 'current governance framework appears appropriate and fit for purpose'.

In particular, the Committee approves of the steps the regulator has taken to 'clearly delineate the role of the Commission from the executive' on the basis that this will enable the Commission to focus on ASIC's strategic direction, rather than being caught up day to day matters.   

For example, the Committee considers it appropriate that organisational and operational matters be the responsibility of the Chief Operating Officer, again on the basis that the Commission should be 'insulated' from day to day operational matters.  To this end, the report emphasises the need for the Chief Operating Officer to be accorded sufficient seniority within the regulator to discharge their role effectively.  

The report states:

'the committee considers it vital that ASIC accords the role of Chief Operating Officer sufficient seniority to enable that person to carry out the requirements of the role, as well as ensure ASIC adheres to the separation of the Commission from executive and organisational responsibilities, and the separation of commissioners from directing or sponsoring individual executive groups within ASIC'

The Committee also approves of the shift to Commissioners adopting a 'whole of ASIC approach' to their decision making as a 'long overdue improvement'.  The report states:

'The committee notes that the Commission has now moved to a whole-of-ASIC approach where the executives bring regulatory and enforcement matters for the Commission as a whole to make decisions on. This is different to the previous governance model where commissioners were overly invested in certain areas of work and endeavour.  The committee welcomes the view put by both ASIC Deputy Chairs that the Commission now considers regulatory and enforcement matters as a collective.  The committee considers this to be a necessary, substantial, and long-overdue improvement on the siloed approach that previously afflicted ASIC’s decision-making'.

'No value': An external advisory board is not necessary

On the question of whether the introduction of an external advisory board would strengthen ASIC's approach/is desirable for that reason, a suggestion that the report notes has been considered by a number of previous inquiries, the Committee's view is unequivocally that the establishment of an external advisory board is not needed.  The report states:

'While the idea of an external board may be superficially attractive, it is manifestly inappropriate for an independent statutory authority such as ASIC and would create far more problems than those it purports to solve.  The committee is firmly of the view that the issue of an external governance board does not need to be revisited in the future'.  

In reaching this conclusion, the report notes the evidence of the ASIC Chair and Deputy that an advisory board 'would be of no value to ASIC' because: 

  • a formal advisory board is unnecessary as ASIC is 'already a very outward-facing consultative agency that engages widely with stakeholders'
  • the appointment of a formal advisory board would open the regulator, which is an independent agency, to 'potential conflicts of interest;
  • the addition of an advisory board would make ASIC's structure 'unwieldy as it would likely require including the entire range of ASIC’s regulated community from bankers to financial advisers and community groups'. 

In light of this, the report concludes that:

'The committee can see no value in such a proposal but can see many drawbacks.  Accordingly, the committee is firmly of the view that an advisory board for ASIC is inappropriate and unnecessary'.

[Source: Parliamentary Joint Committee Parliamentary Joint Committee on Corporations and Financial Services report: Oversight of ASIC, the Takeovers Panel and the Corporations Legislation No.1 of the 46th Parliament March 2022]

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