The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was of profound significance for those who may have been victims of bank misconduct. The final report from the Commissioner, the Hon Kenneth Madison Hayne AC QC, was submitted to the Governor-General on 1 February 2019 and was tabled in Parliament on 4 February 2019.
Initially, the Federal Government had strongly opposed the Royal Commission but the outcomes justify the decision to proceed.
In an article by Nicole Pedersen-McKinnon inthe Australian Financial Review, 8 February 2019, , the following observations were made:
“The commission is probably the best thing ever that has happened to Australian financial services for the benefit of the public,” says Daniel Brammall, co-director of Brocktons Independent Advisory and president of the Independent Financial Advisers Association of Australia.”
“This is the value of independence – you don’t expect a royal commission to be dependent on anyone. Not the industry and not lobby groups. …”
The following are some of the key recommendations made by Justice Hayne:
- Borrowers, rather than lenders, to pay for the services of mortgage brokers.
- A requirement that mortgage brokers act in the best interests of borrowers, not the interests of banks. Fines to be applied for breaches of law.
- Banning of trail commissions paid to mortgage brokers for arranging new loans.
- A move toward a zero cap on commissions for life risk-insurance products.
- A move toward banning of conflicted remuneration exemptions.
- A requirement that all banking licence holders report “serious compliance concerns” about individual financial advisers to ASIC on a quarterly basis.
- Create a new single disciplinary body for financial advisers, with all advisers required to be registered.
The Federal Government’s response to the Royal Commission was released by the Treasurer, the Hon Josh Frydenburg in February 2019. Key statements include the following:
“The Government is taking action on all 76 recommendations contained within the Royal Commission’s Final Report and in a number of important areas is going further. … In outlining the Government’s response to the Royal Commission, the Government’s principal focus is on restoring trust in our financial system and delivering better consumer outcomes, while maintaining the flow of credit and continuing to promote competition.
… As we have heard, 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.
Commissioner Hayne’s recommendations and the Government’s response advance the interests of consumers in four keyways. First, they strengthen and expand the protections for consumers, small business and rural and remote communities. Second, they raise accountability and governance standards. Third, they enhance the effectiveness of regulators. Fourth, they provide for remediation for those harmed by misconduct.
For the first time the Government will establish a compensation scheme of last resort to ensure that consumers can have their case heard and be confident that where compensation is owed it will be paid. This will be a scheme paid for by industry reflecting their obligation to right their wrongs.”
The dynamics around the behaviour of Australian banks have changed forever and Roberts Gray Lawyers has been a central player in legal actions following the Government’s response to the recommendations of the Royal Commission.