New leadership at the Australian Securities and Investments Commission and its implications.
The sudden decision of David Knott to stand down as chairman of ASIC has surprised everyone. The decision is not a welcome one, particularly because Knott has been a very good leader at ASIC and has shown a willingness to tackle the difficult tasks that are imposed on the organisation with great dedication and energy.
While the author and AICD does not support the push by Knott and his colleagues for a fining power in relation to breaches of the continuous disclosure regime of the Corporations Act (a matter which will no doubt be discussed quite soon in the pages of Company Director once CLERP 9 is released for discussion), in general terms the pursuit by ASIC and by Knott of those who have breached the Corporations Act has been both fair and impartial.
Some commentators have suggested that he has targeted the wrong cases and should be targeting the bigger companies in the community which allegedly do not comply with the provisions of the legislation.
However, assuming that there have been issues raised by the activities of those bigger companies, it is important to remember that compliance with legislation can occur not only through litigation.
In many instances, compliance will be achieved through sensible negotiations and discussions between the regulator and the companies and their executives, with appropriate steps being taken by those organisations to put in place compliance and other strategies. As a result of the ongoing work of ASIC and Knott, there has been a growing interest and emphasis on a compliance culture in this country. This is to be welcomed.
The search for a successor will not be an easy one. A number of persons have the necessary qualifications on paper to undertake this very significant and important role.
However, Knott's resignation reminds us of the fact that in Australia there is not a sufficiently strong culture in our business, professional and academic communities recognising the need for high profile persons in business, the professions and academia to undertake the kind of role that Knott has pursued (and Graeme Samuel has put his hand up for in relation to the Australian Competition and Consumer Commission).
If we are to have effective regulation in our business area – corporations law, competition law, taxation, environment protection, occupational health and safety, etc – the governments of the day will need to be able to tap into a much richer pool of talent than they have been able to attract in the past.
A greater willingness on the part of Australian business, professional and academic leaders needs to be displayed to provide service to the community through taking up these important positions.
The US-style revolving door process whereby high profile persons move out of academia into government positions, then into business and then back into academia (and so on) is something that could be more generously followed and built upon in this country.
The resources made available to our regulators are often inadequate, not just in terms of the amount of money that is devoted to them but in the way in which those resources are to be used.
What we need is to see the governments loosen up the structures under which regulators have to apply the funding made available to them so that the regulators – and ASIC in particular – can utilise outside firms and organisations more regularly and with greater flexibility to ensure that the regulator is on equal terms with the private sector. This will ensure that the issues, if they have to come before the courts or tribunals, will be progressed more speedily and with greater assuredness that all relevant issues are being covered than might otherwise be the case.
This comment is not intended to be a criticism of the way in which matters are handled by regulators but rather to emphasise the need for regulators to be able to use the very best skills that are available in the community to pursue matters which are in a high public profile. Greater flexibility in the funding regimes that are imposed by governments on regulators such as ASIC will permit the regulators to better achieve these aims.
The Australian business and general community deserves a very high calibre person to replace David Knott. His record will be one that will be reflected upon favourably in years to come and he deserves much credit for the respect and credibility for the way in which the work of ASIC is now being evaluated by the general community.
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