ASIC: Hayne royal commission lessons not being heeded by financial sector

The corporate regulator is concerned financial services companies continue to make the same mistakes as identified by the 2018 Hayne royal commission.

ASIC deputy chair Sarah Court during the ASIC annual forum in Melbourne last year. Aaron Francis / The Australian

The deputy chair of the corporate regulator has warned the financial sector may not have learned the lessons of the landmark Hayne royal commission, noting many companies continue to make similar mistakes in dealing with customers.

Sarah Court, speaking on the five-year anniversary of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, said too often financial firms were facing the consequences of under-investment in back-end systems.

“We just need to be very vigilant both on the regulator side and across the financial services industry that we don’t see these things reappearing over time,” she said.

“A lot of the issues are about failing to invest in legacy systems … we continue to receive a large number of breach reports.”

Ms Court said the Australian Securities & Investments Commission was not seeing “a lot of red flags”, but noted it had seen a number of recent matters marked by “poor customer impacts and system failures that were not given enough attention”. “(They were) issues that could have been fixed or escalated,” she said.

“Nobody could be unaware of this impact and many of them have had to spend hundreds of millions in remediation in addition to court penalties on those failures.”

Ms Court said the financial system had been “squarely on notice” in the wake of the royal commission.

“We at ASIC have been asking boards and companies to be investing to fix and remedy these systemic issues for quite some time, we certainly have not got a great deal of sympathy where a company comes to us and says it wasn’t deliberate,” she said.

“It doesn’t matter whether you mean to or not, it was the outcome and you are responsible.”

The 2018 royal commission, run by former High Court judge Kenneth Hayne, saw a number of changes made to Australia’s regulatory landscape.

Mr Hayne handed his report to the Morrison government on February 1, with 76 recommendations to reform the financial sector. But then-treasurer Josh Frydenberg did not release the government’s response until February 4.

The report made a number of recommendations including a push for ASIC to take more companies to court for wrongdoing rather than striking settlement deals.

Mr Hayne’s report made 13 referrals for ASIC to investigate, as well as examining a number of other case studies, of which 32 led to investigation.

ASIC data shows it extracted $79m in penalties tied to the 13 referrals, with one still before the courts. The regulator also fined the 32 case study companies $97.47m.

Ms Court said it was “chalk and cheese” between how ASIC approached misconduct before and after the inquiry.

The veteran regulator said Mr Hayne showed his concern about ASIC’s focus on consumer redress and remediation and its hesitancy to take court-based action.

Ms Court said ASIC had taken a cautious approach before the royal commission, because it “perceived that court-based action was expensive, took a long time and the outcomes were uncertain”.