Last week Friday saw the release of the long-awaited the Interim report from the Royal Commission into misconduct in banking, superannuation, and the financial services industry.
While 2018 has seen a raft of regulatory change, the interim report will consider the why and what next.
While much of what was discussed might not be new information to those in the industry, this is an opportunity to see all the breaches in one place, and to get the sense of the magnitude of the problem in the financial services.
It was not only the financial industry is being challenged by the interim report but also the regulators and their perceived inaction.
Per the report:
The conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, APRA, never went to court. Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn-out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct.
In the media leading up to the report, there was heavy criticism about the regulator’s use of enforceable undertakings.
However, Peter Whyntie from Peter Whyntie and Associates has argued that in fact, the EU can actually be costlier to an organisation that the penalty or going to the federal court. If there is an issue it is that Whyntie thinks that ASIC may not have always have utilised EUs in the most effective way.
The executive summary of the report asks what more can be done when existing legislation already asks financial institutions to distribute their products ‘efficiently, honestly and fairly’.
The report states:
Should the existing law be administered or enforced differently? Is different enforcement what is needed to have entities apply basic standards of fairness and honesty: by obeying the law; not misleading or deceiving; acting fairly; providing services that are fit for purpose; delivering services with reasonable care and skill; and, when acting for another, acting in the best interests of that other? The basic ideas are very simple. Should the law be simplified to reflect those ideas better?
You can download the report here.