Labor and the Greens have warned Prime Minister Malcolm Turnbull not to appoint his friend, banker John O’Sullivan, as chair of the corporate watchdog ASIC, saying the move would wreck the body’s reputation for independence.

The two political parties claim Mr O’Sullivan’s close links to the PM – not to mention his long association with the Liberal Party and his involvement in the Utegate scandal – should automatically disqualify him from heading up a regulator that relies for its effectiveness on being above party politics.

The Australian Securities and Investments Commission, or ASIC, is tasked with making sure financial services companies do not rip off consumers. It protects ordinary Australians from dodgy financial advisers, predatory banks and unscrupulous insurers and super funds.

The current chair of ASIC, Greg Medcraft, is due to step down in November, and Mr O’Sullivan, who currently heads up the Australian investment banking arm of Credit Suisse, is emerging as his most likely successor.

Mr O’Sullivan is a Liberal Party member and donor, has been politically active in Mr Turnbull’s Sydney constituency and has been described as the PM’s “best friend”.

He is also a former executive of the scandal-ridden Commonwealth Bank of Australia, and – most sensationally – was drawn into the “Utegate” affair of 2009 that helped bring Mr Turnbull’s first tenure as Liberal leader to an end. There was no suggestion, however, of wrongdoing on Mr O’Sullivan’s part.

The Labor and Greens’ attack breaks the convention that regulatory appointments must remain above party politics. But shadow treasurer Chris Bowen claimed the controversial move was necessary to protect ASIC’s “independence”.

“Labor makes it very clear, we will not support Mr O’Sullivan’s appointment, should it proceed,” Mr Bowen said on Wednesday.

“Labor does not do this lightly. We do this in light if our most serious concerns and our respect for the importance of ASIC’s independence.”

Elaborating on the opposition’s position on Thursday, a spokesperson for Mr Bowen told The New Daily: “Federal Labor and the shadow economic team very rarely comment critically on such appointments, in fact we provided strong support to the Turnbull government’s appointment of Phillip Lowe as RBA Governor.

“Federal Labor is of the view given the circumstances, the importance of the integrity and independence of the ASIC chairperson role and Mr O’Sullivan’s links to the Prime Minister, that it warranted strong public comment outlining Labor’s position.”

On Thursday, the Greens added their voice to Labor’s opposition to the appointment, with finance spokesperson Sarah Hanson-Young telling The New Daily: “The Australian Greens strongly oppose John O’Sullivan even being considered to be appointed as chair of ASIC, let alone getting the position.

“This position needs to be filled by a strong regulator with a good history of reining in bad corporate behaviour. Anyone who has been on the side of the banks should be struck from consideration.”

The government can appoint regulators without consulting Parliament, meaning Labour and the Greens have no say in who gets the job.

However, were Labor to win the next federal election, Mr Bowen’s office said it would not rule out sacking Mr O’Sullivan.

Financial Services Minister Kelly O’Dwyer’s office would not comment on Mr O’Sullivan’s case, telling The New Daily an external recruitment firm had been enlisted to find a replacement for Mr Medcraft, adding: “No decision has yet been made.”

The Prime Minister’s office did not respond to queries about the nature of Mr Turnbull’s relationship with Mr O’Sullivan.

The spokesperson for Mr Bowen did not answer criticisms that the would-be treasurer was engaging in political point-scoring.