Commissioner Hayne’s interim report was released on 28 September 2018. It addresses the case studies from the first four rounds of Royal Commission hearings (consumer lending, financial advice, loans to small and medium enterprises and issues affecting Australians who live in remote and regional communities) and raises a number of policy questions.
In the report, Hayne does not make adverse findings in relation to breaches of the law (on the basis that is the role of a court), but does identify conduct that may have amounted to misconduct or fell below community standards and expectations. He expresses a view that entities and individuals have been motivated by financial gain or short term profit at the expense of basic standards of honesty.
Hayne expresses a preference for simplification of the legal framework rather than additional regulation, noting that complexity can promote a ‘tick the box’ approach to compliance and obscure the simple principles that should govern behaviour in the financial services industry.
While Hayne states that each financial services entity is responsible for its own conduct, he also addresses the failings of the regulators. He is particularly critical of ASIC as the conduct regulator and notes that its approach so far has been insufficient to achieve deterrence.
The report also raises a number of policy questions, many of which go to core governance issues such as remuneration, culture, accountability, and risk management.
The Royal Commission has also separately released policy questions in relation to issues arising out of the Round Six (insurance) hearings.
The structure of this paper is as follows:
- Section 2: Implications for directors and the regulators;
- Section 3: Key observations on regulation and the regulators;
- Section 4: Key observations on culture, governance and remuneration; and
- Section 5: Potential areas of policy focus for the AICD.
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