Day 479: 'Completely compromised and utterly incompatible'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 479.
Today in summary: CBA has been served a lawsuit by a former general manager who claims his 2013 dismissal violated whistleblower laws; the Attorney-General has commissioned a review of the criminal code which will also consider Hayne recommendations; non-bank lender Pepper says the banking royal commission has not impacted its lending practices; ASIC’s latest Enforcement Update has focused on credit misconduct; and Bendigo and Adelaide Bank is joining the wealth divestment bandwagon.
-- Alex
@AlexESampson
Current banker panic level: 🤐😬🤑🧐
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The Commonwealth Bank has been hit with a lawsuit by a former general manager who claims his retrenchment in 2013 violated whistleblower protections. A CBA spokesperson said the bank was served with the proceedings late last week and it will defend the claim.
Company executives may be more likely to face imprisonment for misconduct by staff as moves to increase corporate accountability ramp up. A review of the criminal code, ordered by Attorney-General Christian Porter, yesterday appointed former Federal Court judge Robert Bromwich to lead a Law Reform Commission review of Australia’s corporate criminal responsibility regime. The review will also consider options for implementing recommendations of the banking royal commission and the ASIC Enforcement Review Taskforce.
Non-bank lender Pepper chief Mario Rehayem says the banking royal commission has not impacted the company’s lending practices. The Sydney Morning Herald is reporting that while Pepper enjoys strong growth (20% a year), regulated banks continue to tighten their credit offerings as regulators have clamped down on lending.
Financial planners copped a big whack from Commissioner Hayne in his banking royal commission final report but have largely avoided mention in corporate regulator ASIC’s latest Enforcement Update. The report, which was released late yesterday afternoon and covers July to December 2018, came down hard on credit providers. ASIC noted it was focusing on responsible lending breaches, as well as the sale of inappropriate products to consumers, “which can potentially cause them harm”.
ASIC reported resolving 56 financial services-related cases and as of the start of this year had 15 criminal and 66 civil financial services-related matters underway that had not achieved a final result. Of those pending cases, six involved misconduct related to the provision of credit.
The report said:
“ASIC’s success as a regulator cannot and should not be measured solely on the outcomes of criminal and civil actions.”
Meanwhile, ASIC today released a report on CBA’s advice compensation program. It stems from the additional licence conditions the regulator imposed on the Australian financial services licences of CBA’s financial advice arms in 2014. ASIC appointed KordaMentha Forensic to monitor Commonwealth Financial Planning Ltd and Financial Wisdom Ltd.
CBA has paid a further A$2.3 million to 232 clients advised by five of its advisers, bringing the bank’s total remediation bill from the review to A$9.3 million. This was KordaMentha's fifth and final report on the matter and found the compliance breaches identified were failures by CBA to meet strict deadlines for providing information.
Bendigo and Adelaide Bank today announced it would offload its financial advice business to wealth manager IOOF subsidiary Bridges Financial Services. Meanwhile, ANZ’s plans to offload its OnePath pensions and investments business to IOOF have stalled. The BEN deal will see Bridges take ownership of the bank’s advice arm and provide ongoing financial planning and advice to the bank’s customers via a referral arrangement.
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Today’s burn prize: ASIC’s enforcement boss Daniel Crennan QC
“In line with public expectation and in the best interests of consumers and investors, civil or criminal matters brought by ASIC should not be treated by financial services firms as ‘ordinary’ litigation.”
Crennan was responding to news the ASIC Enforcement Review Taskforce will be part of a Law Reform Commission review of Australia’s corporate criminal responsibility regime.
The Commentariat
Koda Capital chief executive and partner Paul Heath writes in the Australian Financial Review that it is no wonder there has been a breakdown of trust between the providers and consumers of financial advice following the banking royal commission. But he points to some areas of the industry which appear untouched.
“How can an adviser possibly serve the interests of both parties? Any payments of sales commissions to promote a product that contaminates clear-eyed and independent advice should be seen as just that. This sort of ‘advice’ is completely compromised and utterly incompatible with the intent of FOFA.”