SYDNEY: The inquiry into misconduct in Australia’s finance industry released its final report in Canberra on Monday.
The government said it would take action on all 76 recommendations contained in the report.
Here are the highlights:
Financial firms are likely to face tougher enforcement, with the Australian Securities and Investments Commission urged to consider court action as a starting point to tackle misconduct.
The Royal Commission has made 24 referrals of misconduct by financial firms to the regulators for potential further action, Treasurer Josh Frydenberg said.
The government will expand the Federal Court’s jurisdiction to tackle corporate crime, to ensure swift prosecution of financial crimes.
The government will also consider additional funding for regulators.
The Banking Executive Accountability Regime, which ensures banks and their executives are held accountable, will be extended to insurers and superannuation firms.
The industry should continue to be overseen by two key bodies, the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority.
However, the two regulators must cooperate with each other and share information.
A new independently-chaired oversight body will be set up to assess their effectiveness. APRA was told to bolster its focus on supervising culture and governance, and also oversee the design and implementation of banks’ remuneration systems.
Financial firms should use remuneration to “reduce the misconduct’’ and review the policy for frontline staff at least once a year.
The Royal Commission stops short of calling for an end to the one-stop shop of financial firms offering everything from advice to wealth management, saying enforced separation would be “costly and disruptive.’’
The government said it supported the competition regulator continuing to look at the issue of integration.Financial advice faces an overhaul, with fee arrangements renewed annually by the client.
There’ll also be tighter disclosure around independence and another review, to be completed by the end of 2022, on the effectiveness of new measures.The superannuation industry, which oversees the nation’s huge pot of pensions savings, also faces change.
The commission recommended a person should only have one default account, reducing around 10 million unintended multiple accounts that attract unnecessary fees.
Hawking of superannuation and insurance products will be banned.The government will set up a compensation system of last resort to ensure that consumer complaints are heard and that any compensation is paid.
Rules around mortgage brokers will be tightened, to ensure they act in the best interests of borrowers, or face a civil penalty.
Fees should be paid by the borrower, not the lender. Banks will be barred from paying trailing commissions.
Key Comments from Treasurer Josh Frydenberg:
“Too often the conduct within our financial institutions has been in breach of existing laws and fallen well below community expectations. The price paid by our community has been immense and goes beyond just the financial. Businesses have been broken, and the emotional stress and personal pain have broken lives.’’
“My message to the financial sector is that misconduct must end and the interests of consumers must now come first. From today the sector must change, and change forever.’’
Key Comments from Commissioner Kenneth Hayne:
“In almost every case, the conduct in issue was driven not only by the relevant entity’s pursuit of profit, but also by individuals pursuit of gain, whether in the form of remuneration for the individual or profit for the individual’s business. Providing a service to customers was relegated to second place.’’
“Too often, financial services entities that broke the law were not properly held to account. Misconduct will be deterred only if entities believe that misconduct will be detected, denounced and justly punished.’’
“Enforced separation of product and advice would be a very large step to take. It would be both costly and disruptive. I cannot say that the benefits of requiring separation would outweigh the costs.’’ - Bloomberg
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