With the announcement last week that Executive Director of Financial Services Regulation Ian Johnston is to quit the Australian Securities and Investments Commission (ASIC), the hunt is on in earnest for his replacement. Mr Johnston’s role has been one of the most high-profile – and complex – during the lead-up to, and the bedding-in of, the Financial Services Reform Act (FSRA).

Not surprisingly, there is plenty of speculation about the kind of person who could replace Mr Johnston. It is generally acknowledged that his replacement will have to have many and varied skills.

Interested observers (and there are many) have mixed opinions on who might be best placed to succeed Mr Johnston. Some say the appointment will have to be made from within Australia, and hopefully from within the financial services sector rather than the bureaucracy. Others say an appointment from within ASIC is possible.

However, many observers say the level of financial services knowledge required – particularly since the introduction of the FSRA – would be difficult to grasp for anyone who has not worked at high levels within the sector.

One senior industry source – who preferred not to be named – told Sunrise Exchange News it would be understandable if the position was filled by an executive from the life insurance and funds management sectors, because the general insurance industry has already been “re-directed and is sailing along smoothly after HIH”.

“The general insurance area has been fixed. Life is a topical area and ASIC needs to be on top of this,” he said. “Funds management and life accounts as well as unit trusts and unit prices require attention.”

But another source says the applicant will require leading-edge regulatory skills and may be an internal appointment. “People in the private sector don’t have the knowledge or skills that senior ASIC people who worked on the financial reforms have.”

Mr Johnston’s decision to take up a regulatory position in Hong Kong has prompted the Australian Financial Review to criticise ASIC Chairman Jeff Lucy for allegedly not showing enough leadership, and says the regulator is suffering a brain drain.

The article says Mr Lucy “is seen as the emperor with no clothes in the face of falling productivity and a slowing economy”.

“His low-key style allows the departure of the likes of Ian Johnston… to take on more importance than it should. The fact Ian Johnston will be earning more than double that of the circa $300,000 collected by Lucy is one reason staff leave.”