Commissioner Kenneth Hayne has delivered his interim report on the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The report details the misconduct in the Australian financial services sector identified during the Commission's hearings; identifies the causes of that misconduct; examines the approach of the Australian regulatory authorities; and discusses the current Australian legislative, regulatory and policy framework.
This Brief Counsel is the first in a series focusing on the interim report. It provides a general overview of the report structure and content. Subsequent Brief Counsels will examine particular parts of the interim report, and the possible implications for New Zealand.
Relevance for NZ's financial service providers
Our financial service providers will be considering the interim report to assess whether they are vulnerable to the types of misconduct identified by the Commission and, if so, how they can address those vulnerabilities. That may involve them focusing on their remuneration structures, systems for detecting misconduct, and their complaints and remediation processes.
Regulators are expecting such a proactive approach. The FMA and Reserve Bank have stated they are watching the Commission, and are seeking assurances that the types of misconduct identified by the Commission have not occurred in New Zealand.
The interim report and the final report (when it is published) are likely to inform the legislative, regulatory and enforcement programmes in Australia for years to come.
Since the Royal Commission began its public hearings in March, it has heard many examples of alleged misconduct in the Australian financial services industry. Much of that misconduct has captured the public's attention. For example:
a couple losing their home and life savings due to "improper advice" while the adviser received a hefty commission banks charging advice fees for customers after they had been informed the customers had died an ill and disabled elderly woman being signed-up as the guarantor for her daughter's business loan and losing her house as a result a Down's Syndrome man being signed up over the telephone for significant insurance cover, and cultural sensitivities being exploited to sell funeral insurance to Aboriginal people. The report is comprehensive, comprising three volumes, and 1001 pages. It covers the misconduct considered during the first four rounds of public hearings, which focused on consumer lending, financial advice, small and medium enterprises and remote communities.
Due to Commission's time constraints, the report does not cover the recently completed rounds on superannuation and insurance...