Although Australia’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was heavily retail-oriented, the Commissioner’s February 2019 final report will be a catalyst for regulatory reform and will impact the entire industry, particularly on the enforcement front.

Having laid the groundwork in an interim report published in September 2018, the final report draws a line under the key issues identified from the matters examined in the Commission’s seven rounds of public hearings and sets out the Commissioner’s conclusions regarding the causes of those issues, the Commissioner’s responses and his recommendations for legal and regulatory reform to address the underlying failings. Key among these are recommendations designed to address cultural problems which the Commissioner perceives as permeating the industry and its regulators, including problems regarding the management of conflicts of interest and duty, and failings by regulators, particularly the Australian Securities and Investments Commission (ASIC), to properly take account of the public interest in its pursuit of enforcement outcomes.

With the May 2019 federal election looming, both major political parties have expressed clearly their intention to implement all but one of the Commissioner’s 76 recommendations. Quite how the recommendations will be transcribed into law remains to be seen, with a number of the recommendations having outlined only in principle the change which is to occur, leaving considerable room for political and policy considerations to influence the shape that any such reform will ultimately take. Nevertheless, the impact of several of the Commissioner’s recommendations is already being felt, including on the enforcement front, and the nature of several others is such that banks and financial services firms will be looking to take steps now to prepare for a new era of more intensive regulatory scrutiny.

Apr-Jun 2019 issue

Clifford Chance