The Australian Securities and Investments Commission (ASIC) has acknowledged that serious matters have been referred to it by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and said they will be dealt with as a priority.
The chair of ASIC, James Shipton used a statement reacting to the Royal Commission findings to state, however, that it would not be commenting on actual or potential investigations.
The regulator also acknowledged the Royal Commission’s strong criticism of its past performance and claimed this accorded with its “change agenda” which included the adoption of a “why not litigate” enforcement stance.
The Royal Commission stopped short of specifically naming executives, but the Commissioner, Kenneth Hayne, made clear in its final report that he believed serious charges should flow from conduct within the banks and AMP Limited around fees for no service.
Hayne noted that until the Royal Commission was established, “ASIC and the relevant entities approached the fees for no service conduct as if it called, at most, for the entity to repay what it had taken, together with some compensation for the client not having had the use of the money”.
“That is, the conduct was treated as if it was no more than a series of inadvertent slips brought about by some want of care in record keeping. It is necessary to keep steadily in mind that entities took money (a lot of money) from their customers for nothing. The conduct was so widespread that seeing it as no more than careless must be challenged,” the Commissioner said.
Hayne also signalled that the fee for no service issue extended to companies which had not appeared before the Royal Commission and stated: “there is a real question whether, contrary to section 1041G of the Corporations Act, the licensee, in the course of carrying on a financial services business in this jurisdiction, engaged in dishonest conduct in relation to a financial product or financial service. Section 1311(1) of the Corporations Act makes that contravention an offence”.
“There is no doubt that money was taken from clients. Nor is there any basis for doubting that, when taken, the taker did not intend to return it to the client. If there was no adviser linked to the client, the money taken was applied by the taker to its own use. (I say the money was applied by the taker to its own use on the basis that the total of the amounts deducted exceeded the total amount paid out to advisers. The excess was constituted by the fees charged but not remitted.)
“If the client had died and the taker had been told and had recorded that the client had died, there could be no ongoing service given and the taker’s records showed that there could be none given. I consider that it is open to a jury to conclude, beyond reasonable doubt, that, in either of the cases described, the taker, in the course of its carrying on a financial services business in this jurisdiction engaged in conduct in relation to a financial service that was dishonest according to the standards of ordinary people and that the conduct was known by the taker to be dishonest according to the standards of ordinary people.”