ASIC has released an update on its planned actions responding to the recommendations directed at ASIC in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Royal Commission).
On matters directed at ASIC, or where the Government’s response requires action now by ASIC, without the need for legislative change, ASIC says:
Recommendation 1.8 — Amending the Banking Code
ASIC will commence work immediately with the Banking Industry on appropriate amendments to the Banking Code in relation to each of the recommendations.
Recommendation 2.4 — Grandfathered financial advice commissions
ASIC will monitor and report on the extent to which product issuers are acting to end the grandfathering of conflicted remuneration for the period 1 July 2019 to 1 January 2021. This will include consideration of the passing through of benefits to clients, whether through direct rebates or otherwise.
Recommendation 2.5 — Reducing the cap on life risk insurance commissions
ASIC will consider this recommendation and factors identified by the Royal Commission in undertaking its post implementation review of the impact of the ASIC Corporations Life Insurance Commissions Instrument 2017/510, which set commission caps and clawback amounts, and which commenced on 1 January 2018. As noted by the Royal Commission, and consistent with the Government’s timetable, ASIC’s review will take place in 2021
Recommendation 4.4 — Cap on commissions for add-on insurance products
Pending the Parliament legislating to provide ASIC with the ability to place a cap on such commissions, ASIC will continue to work to address problems in relation to the sale of add-on insurance products in the context of motor vehicle sales.
Recommendation 6.2 — ASIC’s approach to enforcement
ASIC has adopted a ‘Why not litigate?’ enforcement stance and initiated an internal enforcement review (IER). ASIC’s Commission has determined to create a separate Office of Enforcement within ASIC and this will be implemented in 2019. ASIC will take the IER report and the Royal Commission’s comments on it into account, as it makes its final changes to its enforcement policies, procedures and decisionmaking structures to deliver on its ‘Why not litigate? enforcement stance.
Recommendation 6.10 — APRA Co-operation memorandum
ASIC will, working with APRA, implement this recommendation, including in relation to any statutory obligation to cooperate, share information and notify APRA of breaches or suspected breaches, that the Government puts in place… ASIC and APRA are currently working together to enhance cooperation arrangements including by revising the existing Memorandum of Understanding. The aim is to improve outcomes across the financial sector, increase efficiency of regulation and promote a whole of system view. This work will be completed in 2019.
Recommendation 6.12 — Application of the BEAR to regulators
ASIC agrees to implement this recommendation. In anticipation of the Government’s establishment of the external oversight body, ASIC will commence work on developing accountability maps consistent with the BEAR. ASIC will consider the approach of the Financial Conduct Authority in implementing this recommendation. ASIC will develop and publish accountability statements before the end of 2019.
Royal Commission referrals
In its final report the Royal Commission also made 11 specific referrals to ASIC in relation to eight entities. This was in addition to two referrals made during the course of the Commission’s hearings. ASIC says it has prioritised work on those matters. While ASIC does not comment on actual or potential investigations, ASIC says it will provide an update (when appropriate to do so publicly) on the handling of those matters – if proceedings are commenced, for example.
Royal Commission related enforcement work
ASIC says:
“In addition to the specific referrals, ASIC’s enforcement teams are undertaking investigations into 12 matters that were case studies before the Royal Commission and have commenced proceedings in relation to two other case studies (Nulis and MLC, and Dover Financial Advisers and Terry McMaster). ASIC is assessing another 16 case studies to determine whether investigations should be commenced. Aside from the Royal Commission case studies, ASIC’s enforcement teams are undertaking a large volume of work on a range of misconduct relating to major financial institutions and their representatives. ASIC expects these investigations to result in a number of referrals to the Commonwealth Director of Public Prosecutions for assessment for criminal prosecution. ASIC will continue to work closely with all relevant agencies, including the Australian Prudential Regulations Authority (APRA) and the Commonwealth Director of Public Prosecutions during the course of these investigations.”
