This article was written by Tim Bednall.
The financial services Royal Commission concluded its fifth round of hearings (superannuation) in August and is conducting its sixth round of hearings (general and life insurance) in September. Barring any extension, the sixth round will be the last sector-specific hearing block, with the Commission's interim report to be delivered at the end of September, a final policy-focused round of hearings to take place in November and the Commission's final report to be delivered by 1 February 2019.
The fifth round of hearings was notable for the fact that a number of directors were required to prepare witness statements and attend to give evidence, whereas in previous rounds financial services entities had largely been able to select their own witnesses (often from upper middle management). With this came a focus on how boards of directors are able to be satisfied that the business of their company is conducted lawfully, especially in circumstances where functions of that business are out-sourced or dispersed across a corporate group. This issue is likely to arise again in the final round of hearings in November, where the implementation of the BEAR reforms and responses to APRA's Prudential Inquiry into the CBA are both potential avenues of inquiry. It is expected that a number of industry chief executives will be summoned to give evidence in that round and it is conceivable that Board chairs may also be called.
While it would be foolish to pre-empt the Commission's findings, some key, related themes have emerged from the Commission's work to date. In the March hearings, Mr Hayne identified industry attitudes to "the notion of obedience to the law" as an area of interest. This has continued to be a focus, especially in the Commission's "fee-for-no-service" case studies. On more than one occasion, Mr Hayne has questioned whether industry participants pay sufficient regard to their strict legal obligations and has raised the possibility that those obligations may be obscured by:
- a narrow-minded adherence to risk and compliance processes at the expense of legal substance;
- hollow "customer-centric" marketing jargon setting up expectations at odds with the underlying commercial and legal relationship with customers; and
- a regulatory regime which is unnecessarily convoluted and which could be boiled down to more basic precepts.