"We will be more adventurous in pushing points of law. We will be taking more risks, because we now have – through my direct engagement with the government – more funding to do exactly that."

Mr Shipton also pledged to sue more individual bankers and consider criminal actions, and called for the Banking Executive Accountability Regime to be extended so ASIC could jointly enforce it alongside the prudential regulator.

'Handful of times'

The hearing revealed major problems with ASIC's use of "enforceable undertakings", exposing that 15 months after National Australia Bank signed one of these deals, over a foreign exchange scandal, it had made such little progress in fixing its systems that it could not even be reviewed by an independent expert.

Even then, ASIC commissioner Cathie Armour agreed to extend the EU to give NAB another three months to comply. And no penalty was imposed.

"I want to make it crystal clear we will be undertaking more court-based actions," Mr Shipton told the commission on Friday. JOEL CARRETT

Mr Shipton said it had not been clear that the 2016 EU had been breached, forcing ASIC to flag its disappointment via a press release only.

"How many times has ASIC taken action against an entity for breaching an enforceable undertaking in the last 10 years, Mr Shipton?" Ms Orr asked. "A handful of times," he said.


"Twice. Is that right?" she continued. "I believe twice, yes," Mr Shipton said.

When negotiating settlements with banks, Mr Shipton said ASIC will now require admissions of wrongdoing – a move that carries big risks for banks because it could embolden plaintiff law firms to launch follow-on class actions.

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"The starting presumption should be a stronger, forthright and robust admission of wrongdoing and responsibility," Mr Shipton said.

Oversight an option

Mr Shipton also distanced himself from predecessor Greg Medcraft, who pushed back on calls for more accountability and independence in ASIC governance.

He agreed ASIC's governance needs an overhaul and its commissioners should guide strategy independently from ASIC managers who make decisions on individual cases.

The Council of Financial Regulators could play a larger role overseeing ASIC, Mr Shipton suggested, but flagging a potential recommendation for the final report in February, Ms Orr said "an independent assessment" might be needed "by a body designed for that purpose".


Rowena Orr, QC, questioning James Shipton about ASIC. Miriam Steffens

"Again, I'm not ruling that out," Mr Shipton said.

Staffing decisions questioned

Mr Shipton repeatedly pointed to ASIC's lack of resources but said he was working hard to toughen its resolve and increase its independence from banks to avoid growing perceptions of regulatory capture.

The inquiry also delved into ASIC staffing. Ms Orr said it was a missed opportunity not to inject external leadership given ASIC was appointing 10 new executive directors. All are internal appointments and ASIC decided not to advertise the positions externally.

Mr Shipton said ASIC commissioners should also not conduct settlement discussions with banks directly, like Ms Armour had with NAB over FX.

Like in the US, commissioners should not have executive responsibilities but rather provide strategic oversight.


Do donations 'ameliorate misconduct'?

The commission also probed the inadequacy of "community benefit payments", which are offered to banks instead of court-backed fines.

In the NAB FX case, it made a $2.5 million payment to improve financial literacy in the aged care sector, which Mr Shipton agreed would not help to "ameliorate the misconduct", which he had said earlier was the idea of the payments.

A key reason ASIC had pursued enforceable undertakings was because section 912A of the Corporations Act – which contains the core provisions requiring banks to act "efficiently, honestly and fairly", to manage conflicts of interest and ensure staff are properly trained – does not have a penalty attaching to it.

But a bill now before Parliament will amend this, allowing ASIC to seek pecuniary penalties for breaches, which Mr Shipton said would reduce the need to rely on EUs.

'We do not negotiate media releases'

Ms Orr also raised questions about ASIC's willingness to allow banks to negotiate the wording of media releases, which CBA did when it settled the CommInsure matter.

Mr Shipton said he had made a "very clear instruction ... that we do not negotiate the terms of a media release. We will check the factual accuracy of a media release, nothing more than that."


CommInsure was a case that required "a more robust public denunciation of the overarching conduct", he added.

Mr Shipton also distanced himself from predecessor Greg Medcraft, who pushed back on calls for more accountability and independence in ASIC governance. Louise Kennerley

The inquiry also questioned why ASIC needs to discuss the terms of "infringement notices" with banks before they are finalised.

"The parking inspector doesn't seek an indication from the person he's giving a parking fine to as to whether they will accept and pay it. He just does it. Why don't you just do that?" Ms Orr asked.

"My understanding from the team is that if there is an unwillingness to accept an infringement notice we would just go straight to court," Mr Shipton said.

'Civil actions against individuals'

He also pledged to take more action against bankers individually. "I think we should be looking at trying to commence civil actions in relation to the individual decision-makers," he said.

"Academic literature shows that it is difficult to establish deterrence of a corporation, and my personal and professional observation is that we should be looking at deterrent effect on the decision-makers and the individuals themselves, and that is also a core priority of ASIC moving forward."


The lack of proper performance measures was also explored. After Commissioner Hayne questioned whether ASIC is using data to assess its enforcement results, Mr Shipton agreed this could be improved.

"We should be starting with how the financial system is improving and performing as regards fairness and equity towards customers and adherence to the law. Once we develop those metrics, then we ... and assessments, both quantitative and qualitative, that will be a measure of our performance."

"I just reinforced my commitment to bringing more actions, because I firmly believe that there is a public interest in using court-based admonishment – admonishment and deterrence and punishment, particularly with larger financial institutions who have disappointed us and disappointed Australia so much," Mr Shipton said.

"We will be more adventurous in pushing points of law." supplied

The hearings will continue in Melbourne next week. NAB is first up.