Twin peaks should co-regulate, sharpen teeth
In the Banking Royal Commission’s final report, Commissioner Kenneth Hayne has advised the corporate regulators and ‘twin peaks’, the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA) to be statutorily required to co-operate, co-regulate when it comes to superannuation, and to sharpen their teeth when it comes to enforcement.
Commissioner Hayne recommended that ASIC in particular know when an infringement notice simply won’t cut it, which he says would generally be for provisions that require an evaluative judgment and ‘would rarely be an appropriate enforcement tool where the infringing party is a large corporation’.
“…Improving compliance with financial services laws cannot be achieved by focusing only on negotiation and persuasion,” he said.
“Negotiation and persuasion, without enforcement, all too readily leads to the perception that compliance is voluntary. It is not.”
Hayne recommended ASIC also recognise the relevance and importance of general and specific deterrence in deciding whether to accept an enforceable undertaking.
In particular, Hayne drew attention to the fact that the regulator must approach the work ahead with a clear view on what kinds of outcome would be considered.
“And unless it is plain that the public interest requires that there be no litigation, all forms of regulatory enforcement must remain under active consideration,” he said.
When it comes to superannuation, Hayne recommended the regulators learn to share, and that APRA should be responsible for establishing and enforcing Prudential Standards while ASIC look after the relationships between RSE licensees and individual consumers.
Without limiting any powers APRA has under the Superannuation Industry (Supervision) (SIS) Act, Hayne recommended ASIC be given the power to enforce all provisions in the SIS Act that are civil penalty provisions, and that there be co-regulation for these provisions.
“…Providing ASIC with the power to protect the interests of members would provide some consistency across the two legislative regimes that apply to RSE licensees,” said Hayne.
He also recommended the regulators should jointly administer the BEAR, with ASIC to oversee Divisions one, two and three of Part IIAA of the Banking Act that concern consumer protection and market conduct matters while APRA should oversee the prudential aspects.
On the subject of the BEAR, Hayne recommended the provisions modelled on the BEAR should be extended to all APRA-regulated financial services institutions, and those new provisions should also be jointly administered by and applied to the regulators.
Hayne finally recommended a new oversight authority be imposed on the regulators independent of the Government to assess the effectiveness of each regulator in discharging its functions and meeting its statutory objects.
Recommended for you
Government has introduced a bill to Parliament to legislate the first stream of the QAR reforms.
ASIC now has a 1:1 ratio when it comes to court success in the enforcement of crypto activities and more action is expected as Treasury seeks to introduce a regulatory framework.
A leading governance body has hit out at “specialist interest groups proposing ad hoc law reform” when it comes to reforms of financial services legislation and believes an independent body is needed.
The release of ALRC’s final report into financial services legislation has highlighted financial advice as a “significant” focus as it seeks to reduce costs and help advisers understand their obligations, alongside the Quality of Advice Review.
