Regulator grilled over unwillingness to litigate

— 1 minute read

The corporate regulator’s response to misconduct involving the major banks has been brought into question by the financial services royal commission.

Appearing before the financial services royal commission on Friday (23 November), chairman of the Australian Securities and Investments Commission James Shipton was scrutinised by counsel assisting the commission Rowena Orr over the regulator’s decision to avoid court action after identifying misconduct related to bank bill swap rate (BBSW) rigging.

Ms Orr accused ASIC of rushing into settlement before its investigation into NAB’s BBSW misconduct was completed.


Ms Orr pointed to an email exchange between ASIC commissioner Cathie Armour and NAB’s chief risk officer David Gall, in which the commissioner told Mr Gall that if the investigation progressed, there was a chance that ASIC would uncover evidence of serious misconduct which would “render a weaker remedial outcome inappropriate”. 

“That is what she was referring to when she referred to investigation risk. What do you say to that, Mr Shipton?” Ms Orr asked.

In response, Mr Shipton contended that there was a “very clear willingness to continue the investigation”, but that as a result of “resource constraints”, a decision was made to reach a settlement with a NAB.

Ms Orr retorted: “Well, what Ms Armour said to Mr Gall, as recorded in this email, was that if Mr Gall wanted to make an offer, he better do it quickly because otherwise the investigation might progress to a point where misconduct was uncovered to an extent that a deal of this nature could no longer be done with Mr Gall?”

In response, Mr Shipton claimed that the royal commission was “reading a lot into” the exchange and claimed that there “wasn’t overwhelming confidence that the continuation of the investigation would come up with anything”.

Ms Orr put it to Mr Shipton: “Well, I want to suggest to you that the appropriate way to handle this situation would be to complete your investigation, form your views about what an appropriate outcome is on the basis of the completed investigation, and then use whatever measures are available to you to pursue that outcome. 

“That is not what happened here, is it?”

Mr Shipton then claimed that ASIC’s investigation into NAB’s misconduct was “plateauing”; however, the ASIC chair response provoked an interjection from Commissioner Kenneth Hayne. 

“Plateauing when it’s described as the relatively early stage of the investigation,” Commissioner Hayne said.

Mr Shipton replied: “My understanding is that the issue was plateauing, and there wasn’t a high degree of confidence as regards to what else would be found.

“I cannot explain that line.”

ASIC investigation into NAB’s involvement in BBSW rigging resulted in a $50 million settlement paid by the major bank, with separate investigations into ANZ and Commonwealth Bank (CBA) resulting in $50 million and $25 million settlements, respectively.

Later in the proceedings, when asked about ASIC’s decisions to favour enforceable undertaking over court litigation, Mr Shipton claimed that the EUs had produced better outcomes than the “expensive” litigation process.

Mr Shipton pointed to the regulator’s investigation into Westpac’s involvement in BBSW rigging.

The Federal Court recently ordered Westpac to pay a pecuniary penalty of $3.3 million despite ASIC seeking a penalty of $58 million for 58 contraventions it identified.

The seventh round of the financial services royal commission’s public hearings resume today (November 26) in Melbourne.


Regulator grilled over unwillingness to litigate
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Eliot Hastie

Eliot Hastie

Eliot Hastie is a journalist at Momentum Media, writing primarily for its wealth and financial services platforms. 

Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.

Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).

You can email him on: [email protected]

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