In a statement, Cowell Clarke Commercial Lawyers partner Hillary Ray said she expected to see tighter regulation and harsher penalties imposed upon wrongdoing from firm directors as a result of the banking royal commission.
“I think that we will see the Australian Securities Investments Commission given additional powers under the Corporations Act 2001 and the ASIC Act 2001, as well as a broader arsenal of civil and criminal penalties,” Ms Ray said.
The royal commission, which has raised the question of whether boards are monitoring the provision of advice under their AFSL, should be a “wake-up call” for the company boards of financial services and financial advice firms “to ensure their houses are in order”, she added.
“It’s clear that the provision of financial services in Australia has fallen short of acceptable standards.”
Ms Ray urged the board directors of financial advice firms to review monitoring and oversight processes, as well as re-articulating company values and behaviours to their employees.
“In some cases, these processes may need to be totally reconsidered to ensure that checks and balances are operating effectively, and that the board is being kept informed.
“This includes reporting to the board on all aspects of the financial services business day-to-day operations, from giving advice to retail consumers, to reviewing compensation arrangements and disclosure documentation for clients.
“Ultimately, directors must be confident that they understand what is happening at customer level and that best practice is being maintained.”
Ms Ray warned company board directors that financial services industry regulators ASIC, APRA and AUSTRAC would be looking more closely at the culture of financial services firms, indicating that the responsibility ultimately fell on those at the top rungs of the company.
“Boards should be setting the tone from the top and must ask themselves: ‘what is our prevailing culture and how do we influence this and monitor our business to ensure we are fulfilling our responsibilities under our AFSL, to our shareholders, customers and the community?” she said.
