The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Financial Services Royal Commission) was established on 14 December 2017 by the Governor-General of the Commonwealth of Australia, His Excellency General the Honourable Sir Peter Cosgrove AK MC (Retd).
Today the Interim Report of the Financial Services Royal Commission (Interim Report) was released to the public after it was submitted by the Commissioner, the Honourable Kenneth Madison Hayne AC QC, to the Governor-General and tabled in Federal Parliament. The contents of the Interim Report is limited to the first four rounds of hearings on consumer credit, financial advice, lending to small and medium-sized enterprises and experiences with regional and remote communities.
Contrary to expectation, there have been no specific recommendations or findings made in the Interim Report. Commissioner Hayne made the following key observations from the work undertaken so far:
- many entities within Australia's banking, superannuation and financial services industry have engaged in misconduct that fell below community expectations and this misconduct was primarily the result of greed; and
- the industry regulators, being the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) respectively, have not taken sufficient action to punish the serious of misconduct that had previously been uncovered.
Commissioner Hayne's general perspective on the hearings so far is clearly encapsulated in his comment appearing in the Executive Summary of the Interim Report:
“Why did it happen? Too often, the answer seems to be greed – the pursuit of short term profit at the expense of basic standards of honesty. How else is charging continuing advice fees to the dead to be explained?”
The Interim Report poses a series of questions which have arisen out of the first four rounds of hearings. These questions are expected to be dealt with in the final report, which is presently due to be submitted to the Governor-General on 1 February 2019.
Given the observations made in the Interim Report, we expect Commissioner Hayne's final report to make both specific findings in relation to the misconduct of entities that have appeared before the Financial Services Royal Commission, as well as recommendations as to how the regulators should be monitoring and addressing misconduct across the industry moving forward.
It is anticipated that the Commissioner's findings and recommendations could give rise to both claims against specific entities in respect of instances of misconduct, as well as an increase in the enforcement activities of ASIC and APRA.