John O'Sullivan has pulled out of the race to succeed Greg Medcraft at ASIC. Credit:Peter Braig The handling of Medcraft's succession since his term was up in May 2016 – then extended 18 months – has been nothing short of amateurish. Well-placed sources say the government has now botched its recruitment plans for Medcraft's replacement multiple times. The first occurred when Medcraft's term was about to expire in May 2016. A strong British candidate was available, but Treasury is understood to have dilly-dallied, failing to set up a selection process, which resulted in the candidate losing interest. Time ran out for a suitable appointment and Medcraft's term was begrudgingly extended by the government for another 18 months. The process began again with the same recruitment agency. The job was advertised in October 2016 and a year on, the key candidate, John O'Sullivan, who was about to be named the new chairman, has withdrawn due to political attacks. What is surprising is that everyone is surprised. When O'Sullivan's candidacy was first speculated in the media in June it attracted a lot of heat.

The shadow treasurer, Chris Bowen, sent out some strong tweets and a press release titled "Turnbull's Utegate man not the right way for ASIC". It said his appointment would not receive support from the Labor Party as it was partisan. But it wasn't just the opposition that opposed his candidacy. It is understood to have caused heartburn among some members of the Coalition. It was made clear to Prime Minister Malcolm Turnbull and some other key cabinet members that O'Sullivan's close political ties and previous employment at the Commonwealth Bank – and the flak that would attract – made him an inappropriate choice. Plea for apolitical leader Unfortunately, such important positions are often sullied by politics. Medcraft's appointment as chairman of ASIC was frowned on given his close affinity with the ALP and the fact that the position was never advertised. Nationals senator John Williams, who for the past 9½ years has been a close watcher of ASIC and at times has criticised it for being too slow to act on corporate malfeasance, said the boss of ASIC should be apolitical or be seen to be apolitical. "It saves mud being thrown from all sides of politics," he said.

I know John O'Sullivan and he is a very decent and capable man but it's a good thing he has withdrawn from the race. John Williams, Nationals senator "I know John O'Sullivan and he is a very decent and capable man, but it's a good thing he has withdrawn from the race," Senator Williams said. He said he would like to see a leader at ASIC who is fearless, apolitical and has the ultimate aim of making a cleaner corporate world. While being non-partisan keeps the critics at bay, another area of concern was that during a time when the banks are under scrutiny, O'Sullivan was CBA's general counsel between 2003 and January 2008, when some serious shenanigans were going down at the bank's financial planning arms, Commonwealth Financial Planning and Financial Wisdom. CBA is now embroiled in legal action from financial intelligence unit Austrac relating to 53,000 alleged breaches of anti-money laundering and counterterrorism finance laws. Allegations include "serious and systemic non-compliance" and between 2015 and 2016 millions of dollars were deposited into 11 accounts that were the proceeds of drug money.

At a recent parliamentary inquiry ASIC said it would launch an investigation into whether officers and directors at CBA complied with their duties under the Corporations Act, whether CBA complied with its continuous disclosure obligations, whether it complied with its licensing obligations and whether it complied with its financial reporting obligations. Back to drawing board With O'Sullivan out of the race, the Turnbull government will have to go back to the drawing board and revisit the next on their list or get one of the commissioners to step up as acting chairman until a suitable candidate is found. There is a lot riding on getting the right replacement, given the government's steadfast refusal to hold a royal commission on the financial sector. But the government needs to avoid the temptation to rush in and appoint in the next few weeks someone that it had not intended to appoint just to save face.

ASIC Chairman Greg Medcraft is seemingly a hard act to follow. Credit:Louie Douvis The ideal candidate has to be seen as a tough, proactive and feared regulator who is able to stare down corporate bullies with deep pockets and use whatever tools it has in its kit to make sure Australia doesn't remain a paradise for white-collar crime. The new leader also needs to be open to some of the proposals outlined in a government-commissioned capability review spearheaded by the Productivity Commission's Karen Chester, which examined ASIC's culture. A centrepiece recommendation of the Capability Review was to change the structure of ASIC along the lines of the internal governance model at the Australian Competition and Consumer Commission. This would improve its ability to be a conduct regulator, which is a good thing. At the end of the day, running ASIC isn't for the faint-hearted. It is one of the most powerful jobs in the country and with that comes scrutiny from the media, politicians and business. Medcraft knows that only too well. It is a tough juggling act, but it needs to be. But when it gets a win, it can have a profound impact on the way business conducts itself, which can affect the lives of all Australians.