Parliamentary committee expects more from ASIC, APRA on probity

It is not good enough for the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) to be deemed just “largely effective” in meeting their probity obligations, according to a key parliamentary committee.

ASIC and APRA have been specifically referenced in the final report of the Parliamentary Committee of Public Accounts and Audit on Probity and Ethics in the Australian public sector, which assessed the Australian National Audit Office’s (ANAO’s) oversight of the financial services regulators on nine selected probity risks with the committee signalling they needed to do better.

The nine selected probity risks were: code of conduct; probity in procurement; management of public interest disclosures; management of senior executive remuneration; management of conflict of interest; oversight of credit card expenditure; management of gifts, benefits and hospitality; identification and management of fraud risks; management of key regulatory risks (regulatory capture risk and financial trading).

The committee report noted that “acting with probity is not synonymous with addressing the ‘probity risks’ examined by the ANAO, though managing these risks is part of acting with probity”.

“While the findings of the reports were broadly positive, the Committee is of the view ‘largely effective’ is not a standard that is appropriate for Australia’s key financial regulators, APRA and ASIC. Further, ‘partly effective’ is not an acceptable standard for the ACCC,” the committee report said.

It said the ANAO reports commented on the extent to which regulatory capture was identified and addressed; “there were shortcomings in gifts and benefits policies; compliance with internal policies and procedures in procurements was not universal; the administration of some credit card transactions was non-compliant with entity requirements; and in the case of APRA and ASIC, neither had senior executive remuneration policies”.

“With regard to gifts and benefits, the Committee supports the ANAO’s insight, ‘for officials of a regulatory entity, there is a risk that accepting any gift, benefit or hospitality from a regulated entity could be perceived as a conflict of interest’. And further, ‘the perception of a conflict of interest can be just as important as an actual conflict of interest’.”

“The Committee urges the regulators to consider the advice of the ANAO that an entity’s gifts and benefits policy sets the tone for an organisation. And further: If you have a gifts policy and an expectation … that people don’t accept gifts, do you expect people to report gifts offered and declined? That is a really strong signal to gift givers, because it will be public that a gift was offered and declined.

“It is a very strong signal to the organisation that leaders get offered a gift and say no. When we look at the policies, we look at what impact that policy might have, flowing through the culture of an organisation. Again, pay for your own coffee. Have a meeting. Take notes. If it’s a meeting, it’s a meeting.”