Will banks be required to maintain whistle-blowing protocols?
A discussion paper on whistleblowing issued as part of the Senate Economics Committee Scrutiny of Financial Advice inquiry has pointed to the need for private sector whistle-blowing protections to be raised to the same level as those in the Australian Public Service.
At the same time, the discussion paper has also traversed the argument that any legislative changes will need to avoid creating circumstances where whistle-blowing claims can become a revenue-generating focus for plaintiff law firms.
The discussion paper, released last week, also suggested that if the Commonwealth Bank of Australia (CBA) had been better equipped to handle misconduct claims within its financial advice division, it might have saved itself both the embarrassment and cost associated with its advice review and remediation programs.
"As explored at length in the committee's report on the performance of ASIC, the CBA failed comprehensively in its response to and handling of reported misconduct in its financial planning division. While this failure delayed action to end the misconduct and compensate victims, the entire episode has also proved very expensive for the CBA," the discussion paper said.
It said that prior to the launch of the current Open Advice Review Program (OARP) in July 2014, the CBA had already paid approximately $52 million in compensation to more than 1,100 customers and that, since then, another 110 offers of compensation totalling nearly $1.8 million have been made under the OARP.
"In the committee's view, it is highly likely that the cost to both victims of the misconduct and to the CBA itself would have been lower had the CBA had better internal disclosure systems in place at the time," the discussion paper said.
The committee's discussion paper has strongly canvassed requiring Australian companies to have internal whistle-blowing procedures and allowing whistleblowers protections to approach third parties such as the media in certain circumstances.
"In recent years, the committee has received testimony from whistleblowers who justifiably felt it was neither safe nor effective for them to make a disclosure within their organisation, or had confronted serious obstacles in doing so," the discussion paper said.
"Other whistleblowers, for a variety of reasons, felt unable to approach ASIC with their information, or were unsatisfied with ASIC's handling of their disclosure."
"In light of evidence received during the inquiry into the performance of ASIC and its experience in recent years with whistleblowers, the committee reiterates the recommendation made in its performance of ASIC report that whistleblower protections be extended to cover external disclosures to third parties in limited circumstances."
Recommended for you
A financial advice firm has seen a weekly decline of 10 advisers, with all moving to a new licensee, while Centrepoint Alliance continues its “growth story”.
Sequoia Financial Group has seen a top-level reshuffle as the chair of the board, John Larsen, steps down after five years in the position.
As statements of advice move into the rear-view mirror, Vital Business Partners explores how financial advisers are adopting innovative documentation strategies.
Adviser Ratings has explored whether there is a financial benefit to advice firms seeking to have a specialised client base in terms of client assets and fees charged.
