In Hayne's first report, the regulators get it in the neck

Tagged. Photo: Christian Petersen/ Getty Images.

The interim report of the Hayne Royal Commission into financial services misconduct has just been released and on first inspection it’s clear the regulators are in the firing line.

The corporate regulator, ASIC, and the prudential regulator APRA, both have their names up in lights in the Executive Summary.

This excerpt makes it clear the commission is of the view that the pursuit and punishment of wrongdoing has been insufficient (emphasis added):

When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done. The conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, APRA, never went to court. Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct. Infringement notices imposed penalties that were immaterial for the large banks. Enforceable undertakings might require a ‘community benefit payment’, but the amount was far less than the penalty that ASIC could properly have asked a court to impose.

This is withering stuff.

The report goes on to suggest that what may be needed is not more regulation but smarter regulation and enforcement of existing rules. Another excerpt, emphasis added:

The law already requires entities to ‘do all things necessary to ensure’ that the services they are licensed to provide are provided ‘efficiently, honestly and fairly’. Much more often than not, the conduct now condemned was contrary to law. Passing some new law to say, again, ‘Do not do that’, would add an extra layer of legal complexity to an already complex
regulatory regime
. What would that gain?

Should the existing law be administered or enforced differently? Is different enforcement what is needed to have entities apply basic standards of fairness and honesty: by obeying the law; not misleading or deceiving; acting fairly; providing services that are fit for purpose; delivering services with reasonable care and skill; and, when acting for another, acting in the best interests of that other? The basic ideas are very simple. Should the law be simplified to
reflect those ideas better?

There will be some interesting conversations in the offices of the regulators this afternoon.

READ MORE: ‘Too often, the answer seems to be greed’ — the banking Royal Commission’s first report is out >>

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