The latest on the Royal Commission, illegal phoenixing and the ACNC

The Hayne Royal Commission Interim Report, Director Identification Numbers to combat illegal phoenixing, and the ACNC's five-year review are on the AICD agenda this month.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry continues to dominate governance discussions, with good reason. Public hearings to date have explored a range of issues in financial services, including in this (as required by the terms of reference) whether “culture and governance practices” have contributed to misconduct and/or conduct that has fallen below “community standards and expectations”.

Under the timetable set out in the Letters Patent, Commissioner Kenneth Hayne AC QC is to present an Interim Report to the Governor-General by 30 September, and a final report by 1 February 2019.

At the time of writing, we are waiting for the Interim Report. It will focus on the Royal Commission’s first four rounds of public hearings — covering consumer lending, financial advice, SME finance and experience with financial services entities in regional and remote communities. Without pre-empting the Royal Commission’s work, the AICD anticipates the Interim Report may include consideration of conduct and compliance issues arising from hearings to date and possible policy alternatives to improve customer outcomes and governance practices in financial services. Public and stakeholder responses to the Interim Report will be invited over a four-week period.

The AICD will be seeking to consult with members on policy issues raised in the Interim Report and welcomes feedback from members in formulating its response. Please email Advocacy Policy here if you would like to provide comments on issues raised in the report.

The Royal Commission had, at the end of August, received more than 8600 public submissions, published 29 background papers and held five detailed public hearings focused on aspects of financial services. The Royal Commission concluded hearings into superannuation in August, examining a range of conduct and policy issues in closing submissions. Hearings on the insurance sector will be held 10–21 September, to be followed with a round of hearings on policy issues commencing on 19 November.

Director identification numbers

The AICD supports the concept of director identification numbers (DINs). DINs involve a trackable, unique identifier for directors that could be linked to more robust ID verification. If well implemented, DINs should support anti-phoenixing measures and action by regulators.

While the vast majority of Australia’s 2.5 million directors govern their organisations with integrity and accountability, fraudulent phoenix activity by a small number of people hurts the economy, employees and creditors — and the reputation of directors overall. We strongly support targeted measures to effectively combat this activity.

Critically, a DIN system also presents an opportunity to address one of the AICD’s long-standing privacy concerns — director personal information held on publicly accessible ASIC registers. In the AICD’s view, the availability of detailed personal information about directors creates unnecessary risks in terms of safety, identity theft and privacy. Significant progress has been made in both the UK and New Zealand in removing unnecessary details from public registers. It is time for Australia to do the same, and the introduction of DINs would support this reform.

We made these points in a recent Federal Treasury consultation on modernising business registers, which is looking at reforms to a range of government registers as well as scoping DIN issues.

The implementation of DINs is part of an overall register reform project, a significant undertaking by government, with a range of linked reforms. It will also have significant practical impacts on directors and aspiring directors. Input from members will be particularly important.

Close to 500 members provided initial feedback on the consultation paper through our Leaders’ Pulse survey group. Based on this feedback, more than 93 per cent of respondents were supportive of an online application process as long as it is simple, while only 13 per cent considered residential information should be continue to be publicly available.

Email us here to join the AICD’s Leaders’ Pulse survey group.

Contact AICD senior policy advisor Kerry Hicks here for further information.