Courts no quicker than watchdogs when it comes to taking action on financial misconduct

Ken Hayne’s penchant for legal penalties over regulatory options seems to rest on a misplaced faith in the pace of court action.

03/08/2018 POOL PICS Royal Commission into misconduct in the Banking, Superannuation and Financial Services Industry Commissioner Kenneth Hayne makes his opening comments.Picture : David Geraghty / The Australian.

Ken Hayne’s brutal takedown of ASIC and APRA for pursuing soft regulatory options instead of court-imposed penalties and public denunciation shows an implicit faith in the courts to deliver better outcomes.

That’s no surprise for someone who’s spent his entire professional life in the law, scaling its peak as a High Court justice.

The real question is whether Hayne’s faith is backed by the available evidence.

Unfortunately it appears not, at least in terms of timeliness.

In response to the commissioner’s interim report, the Consumer Action Law Centre reviewed the 37 actions taken by the Australian Securities & Investments Commission on consumer credit and insurance since 2014.

This included enforcement action taken through the courts, enforceable undertakings and negotiated agreements.

CALC found that the average time taken from the misconduct incident to the conclusion of the action (or the EU or agreement) was about five years.

“Evidently, the court process is generally not conducive to speedy outcomes for consumers,” the consumer group found.

Last month, ASIC released the damning findings of its own review of remediation of significant breaches by 12 of the nation’s financial services groups, including the Big Four banks and AMP.

While the ASIC exercise started from the same point, it focused instead on the time taken until remediation.

The watchdog found that it took pretty much the same amount of time — five years or more.

The major banks were responsible for a large part of the problem, taking an average of 4.5 years to identify significant breaches.

They were rightly condemned for their inadequate systems and an inability to pull together group-wide misconduct data.

The royal commission picked up the same theme, targeting Westpac and National Australia Bank for a “disjointed, piecemeal approach to monitoring compliance with applicable laws”.

The court system might provide greater deterrence value and the potential for higher penalties, but it fares just as badly when it comes to speedy and efficient justice.

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