The media have recently reported dreadful stories about goings-on at some of our banks and other financial institutions.
The latter have allegedly transgressed by giving bad financial advice, failing to honour life-insurance policies and have allegedly manipulated the bank-bill swap rate.
Couple that with an increasing focus on innovation, the rise of what some see as disruptive financial technologies and the risks posed by cyber-hackers and you begin to understand why our lawmakers and regulators have been working overtime to keep up with the changing landscape and devise new ways of regulating our financial system. Offenders need to be held to account, they say.
More laws inevitably mean more red tape and costs for businesses and their advisers. While it is understandable that lawmakers, who need to be seen to be protecting the public, inevitably resort to wanting to make new laws, I remain to be convinced that this is the best first option.
Here is a snapshot of four important developments.
- Anti-bribery and corruption is now a major issue for corporate Australia. The resignation of the Australian Securities Exchange’s CEO following allegations that bribery took place under his watch at Tabcorp is testimony. On 1 March, the Commonwealth Criminal Code 1995 was amended to include new offences that deal with intentional and reckless false dealing with accounting records. Very significant terms of imprisonment, fines and annual-turnover-based penalties may follow conviction.
- The Senate Economics References Committee brought down its long-awaited report into the disastrous agribusiness managed-investment schemes. Retail investors took a financial pounding. No participant in the industry was spared from the committee’s criticism. The report makes 24 recommendations that include giving ASIC more powers to regulate financial planners, accountants and tax agents who give investment advice on schemes, extending responsible lending obligations, reviewing the tax incentives available for managed investment schemes and examining ways to improve financial literacy.
- Policing corporate culture is the next regulatory frontier. ‘Culture shock’ was the title of ASIC’s annual forum this year. Commission chairman Greg Medcraft is especially keen on the topic. In his speech at the forum, he said, ‘Culture matters to ASIC because culture is a key driver of conduct. Good culture leads to good outcomes for investors and consumers.’
- He also said that it was time for firms to stop blaming a few bad apples when things turn sour and to take responsibility for the behaviour of their organisations. ASIC is dealing with this challenge by incorporating culture into its risk-based surveillance reviews, including looking at remuneration, breach reporting, whistle-blower policies and complaints handling (auditors take note). ASIC has also just released report 474 into the management of conflicts of interest by holders of Australian financial-services licences in the funds management industry where there are multiple business divisions. Mr Medcraft is pushing for new criminal offences to deal with bad corporate cultures.
ASIC has released an information sheet (213) providing guidance to marketplace lenders (peer to peer) on the regulatory framework for different business structures, advertising rules and good practice examples and consultation paper 254 and a draft regulatory guide setting out ASIC’s proposed approach to the regulation of digital financial (‘robo’) advice.
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Lawyer,Hope Earle Lawyers
Posted on 21 April 2016
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