The Banking Royal Commission – Round 2 of Public Hearings – “Where was ASIC?”
“Round 2 of public hearings at the Royal Commission into Misconduct in the Banking, Superannuationand Financial Services Industry(‘the Banking Royal Commission’) will conclude today (it ran for 2 weeks from 16 April until 27 April). The focus of these hearings has been on financial advice.
There has been no shortage of scandal and drama unfold over the past 2 weeks with AMP’s chief executive Craig Meller standing down following revelations of misconduct within AMP; it was discovered that AMP and its lawyers, Clayton Utz, purported to present to an ‘independent report’ to ASIC, which appears to be anything other than independent; and
financial services company ‘Dover’ owner, Terry McMaster collapsed in the witness stand in the middle of questioning after being called a liar. The list goes on.
In her concluding remarks to the Commissioner today, some of the key points made by counsel assisting, Rowena Orr, include (in summary):
CBA’s culture has been aimed at ‘maximising revenue streams’ rather than providing meaningful advice to its clients. It is open to the Commission to find that CBA managers were aware for 18 months before ASIC was told clients were being charged fees for no service.
It is open to the Commission to find that AMP breached the Corporations Act for describing a Clayton Utz report as independent saying that the conduct is ‘at least inaccurate if not misleading’.
Changes to the Clayton Utz report by AMP’s general counsel Brian Salter appeared, ‘on their face’ to be intended to limit the findings about the knowledge of senior executives about the misconduct (being charging fees for services never provided).
Interventions by Mr Salter and the AMP chairwoman, Catherine Brenner constitutes misconduct consistent with the culture at the top of the company.
Between 2013 and 2015, AMP made 20 false or misleading statements to ASIC, which may have breached the Corporations Act.
It is open to the Commission to find that Westpac may have breached its obligations under the Corporations Act in relation to two of its financial advisers.
It is open to the Commission to find that CBA breached obligations under the Corporations Act by not reporting fees for no service issues to ASIC for two years.
It is one thing to learn of the disturbing revelations that have come out over the past weeks, and to hear first-hand how lives and livelihoods have been destroyed as a result of misleading financial advice and improper fees, but one can’t help but asking the same question over and over – Where was ASIC when all this was happening?
ASIC is Australia's integrated corporate, markets, financial services and consumer credit regulator. It is responsible for enforcing to law. It has a history though of failing to do this, and instead shying away from enforcement altogether - there is more on this in my August blog where I talked ASIC and the criticism it receives for being a ‘toothless tiger’, and I discussed the 2013-2014 Inquiry into the performance of ASIC undertaken by the Economics References Committee.
It seems that ASIC has a lot to answer for. Since the GFC (so in the last 10 years) ASIC has instituted criminal proceedings 2,438 times against directors of small businesses. In the exact same period, it instituted criminal proceedings in the Financial Services industry (where the banks and AMP sit) 40 times for ‘dishonest conduct and misleading statements’. In relation to “Other” financial services misconduct it instituted criminal proceedings 5 times.
Take a moment to read that again.
2,438 times against director of small businesses, and 45 times in the financial services industry.
Given what is being exposed by the Royal Commission, this warrants much more attention.
Round 3 of the public hearings will focus on small and medium enterprises and commences on 21 May.
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Tracey Mylecharane - Solicitor
Tracey Mylecharane has more than 12 years experience in legal practice and has been involved in numerous matters with clients who have experienced hardship and difficulty with their banks - this has ranged from simple advice and guidance, to assistance lodging complaints through the ombudsman system, to representing clients in court against banks.