Banking Royal Commission lock-up
14 February 2019
Representatives from the Law Council attended the Royal Commission into the Banking and Financial Services Industry report release lock-up in Canberra last week.
Director of Policy, Natasha Molt, Chair of the Financial Services Committee, Henrietta Thomas, and Communications Adviser, Anne-Louise Brown, had the task of poring through the extensive report in three hours, highlighting the key points of interest for the Law Council.
The Hayne Report was comprehensive and addressed many of the issues raised in the Law Council’s submission. Greater consumer protections, increased penalties for law breakers, expanded enforcement powers for regulators and industry-wide legislative simplification were among sweeping changes recommended by the Royal Commission into the Banking and Financial Services Industry. These included:
Changes designed to protect consumers, meaning:
- banks would be prohibited from paying commissions to mortgage brokers, which would be paid by home loan borrowers;
- brokers failing to “act in the best interests of the intending borrower” would be liable to civil legal action;
- prior to giving advice financial advisers will be required to disclose conflicts of interest in a written statement; and
- a compensation scheme of last resort for those with a “viable claim” would be established in congruence with a government-appointed panel reviewing external dispute resolution and complaints arrangements.
Increased penalties for those breaking the law, including:
- criminal penalties for financial services and credit licensees for failure to report a contravention as and when required;
- the introduction of additional civil penalties for financial services and credit licensees for failure to report a contravention as and when required;
- breaches of industry codes of conduct would constitute breaches of law; and
- civil penalties for breaches of superannuation trustees’ and directors’ covenants set out in the Superannuation Industry (Supervision) Act 1993.
Expanded enforcement powers, meaning:
- ASIC should first consider the viability of court action before other enforcement tools such as infringement notices or enforceable undertakings;
- the establishment of a new disciplinary body for financial advisers, requiring registration, reporting of “serious compliance concerns”, and allowing reporting by clients and other stakeholders;
- ASIC would become the conduct regulator for the superannuation industry; and
- ASIC enforcement staff would be required, where possible, to avoid informal contact with members of the banking and financial services industry.
The Law Council also noted that measures to simplify existing law would require clear definition of generally applicable norms of conduct to ensure the removal of exceptions and qualifications in law are appropriate.
The Law Council maintains that a referral to the Australian Law Reform Commission is needed to develop propositions for simplification and related matters.