Royal Commissioner Kenneth Hayne’s emphasis on culture in his final report signals clearly that responsibility for misconduct lies with the senior management and boards of the entities involved, an executive at Ernst & Young (EY) has said.
Hayne’s suggestions that criminal action be pursued for some misconduct in the industry, combined with a $51.5 million boost in funding for the Commonwealth Director of Public Prosecutions and the Federal Court to pursue criminal misconduct by financial institutions late last year, suggest that the law could take a similar stance.
“Hayne’s comments around culture sent a clear message to boards that responsibility for misconduct lies with the entities concerned and those who manage them; their boards and senior management,” EY Oceania financial services leader, Graeme McKenzie, said.
“Management and boards need to consider that, while they are busy planning for and executing these changes, they also need to communicate more actively, often and openly with both regulators and shareholders.”
He also warned that financial institutions should expect increased enforcement from the ‘twin peaks’ of the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA). Hayne’s report recommended enhanced enforcement powers for those bodies as well as a new oversight body to hold the regulators themselves accountable.
The report did not recommend many dramatic legal changes but did seek to improve adherence to existing law by removing exclusions, suggesting using remuneration to direct conduct, improving accountability, and strengthening the regulators.
McKenzie also recommended that institutions be proactive in implementing the changes the final report would bring in, especially around the ceasing of hawking and cross-selling of products and services.