INDUSTRY Super Australia (ISA) said the Banking Royal Commission has shone a welcome light on serious conflicts within the financial services system and validated the important role industry and other profit-to-member super funds play in safeguarding Australians’ retirement savings.

ISA said the Royal Commission’s final report had correctly diagnosed the root causes finding: “in almost every case the conduct in issue was driven by the relevant entity’s pursuit of profit but also by individuals’ pursuit of gain…” (p1 Volume 1).

ISA said the structure of industry and other profit-to-member super funds has avoided such conflicts resulting in scarce evidence of misconduct or conduct falling below community expectations.

"However in assessing the recommendations they appear to stop short of systemic reforms suggested by some to address conflicts of interest at the heart of most misconduct," the ISA said.

"Instead, the report has opted for a series of changes to existing laws and stronger enforcement.

"Taken as a whole the proposed changes should in most cases lead to better outcomes for consumers but only time will tell whether ongoing conflicts of interest and remuneration settings will result in problems re-emerging.

"Turning to the specific recommendations on super, ISA agrees they should improve outcomes by prohibiting unsolicited sales of super, stronger penalties for trustees, annual renewal of advice fees and ceasing grandfathered commissions to stop fee for no service gouging.

"Industry super funds also support steps to reduce multiple accounts and development of mechanisms such as automatic rollover to prevent more than one default account being created for members.

"Surprisingly the final report does not appear to recommend any specific prosecution action arising from the evidence and case studies it explored. It would appear it is in the hands of ASIC to determine if misconduct is pursued through the courts."

ISA deputy chief executive, Matt Linden, said that by shining a light on the system’s deeply entrenched problems, the findings could prove the vital catalyst for long overdue reform. 

“That not-for-profit industry superannuation funds have emerged from the process relatively unscathed, is vindication of our governance structure and member-first ethos,” Mr Linden said.

“As a whole, the system must be more transparent and more accountable – it shouldn’t take a Royal Commission for workers to see whether their retirement savings are in safe hands or not.

 “The onus is now on the Parliament and industry to ensure superannuation works in the best interest of fund members – not that of shareholders or bank executives,” Mr Linden said.

Industry Super Australia provides policy, research and advocacy on behalf of 16 not-for-profit industry superannuation funds with around six million members.

ends

GREATER consumer protections, increased penalties for law breakers, expanded enforcement powers for regulators and industry-wide legislative simplification are among sweeping changes recommended by the Royal Commission into the Banking and Financial Services Industry.

The Law Council of Australia has welcomed the recommendations, which will have a far-reaching impact on the banking and financial services sector, ensuring consumers are treated fairly and honestly, in accordance with key principles of the law.

Law Council President, Arthur Moses SC, said the Royal Commission had shone a light on misconduct – some potentially criminal – in the banking and financial sectors, providing a unique and important opportunity for reform and renewal.

“Australians were rightly shocked by some of the stories heard during the extensive Royal Commission hearings – of profit being put before people and in some instances the rule of law,” Mr Moses said.

“The recommendations put forward by Commissioner Kenneth Hayne have placed consumers first and established a roadmap with the potential to set the path straight into the future, ensuring banks and those providing financial services are held to account.

“Central to the Law Council’s submission was the call for simplification of complex laws, making them easier to understand and administer and we are pleased by the recommendations supporting this shift.

“The ‘clear need’ for the disadvantaged to access financial and legal assistance to deal with disputes on equal footing with large financial entities was highlighted in the final report.

“Many of the cases before the Royal Commission involved matters where individuals were unable to pursue their rights because of an inability to access legal assistance. This resulted in injustices occurring and wrongdoers going undetected.

“We reiterate our calls for the Federal Government to ensure predictable and stable funding for the legal assistance sector, so all Australians can access justice,” Mr Moses said.

The Law Council summed up the recommendations as:

Changes designed to protect consumers, meaning

• banks would be prohibited from paying commissions to mortgage brokers, which would be paid by home loan borrowers;
• brokers failing to 'act in the best interests of the intending borrower' would be liable to civil legal action;
• prior to giving advice financial advisers will be required to disclose conflicts of interest in a written statement; and
• a compensation scheme of last resort for those with a 'viable claim' would be established in congruence with a government-appointed panel reviewing external dispute resolution and complaints arrangements. 

Increased penalties for those breaking the law, including

• criminal penalties for financial services and credit licensees for failure to report a contravention as and when required;
• the introduction of additional civil penalties for financial services and credit licensees for failure to report a contravention as and when required;
• breaches of industry codes of conduct would constitute breaches of law; and
• civil penalties for breaches of superannuation trustees’ and directors’ covenants set out in the Superannuation Industry (Supervision) Act 1993.

Expanded enforcement powers, meaning

• ASIC should first consider the viability of court action before other enforcement tools such as infringement notices or enforceable undertakings;
• the establishment of a new disciplinary body for financial advisers, requiring registration, reporting of “serious compliance concerns”, and allowing reporting by clients and other stakeholders;
• ASIC would become the conduct regulator for the superannuation industry; and
• ASIC enforcement staff would be required, where possible, to avoid informal contact with members of the banking and financial services industry.

The Law Council noted that measures to simplify existing law require clearly definition of generally applicable norms of conduct to ensure the removal of exceptions and qualifications in law are appropriate. 

"We reiterate our recommendation for a referral to the Australian Law Reform Commission to develop propositions for simplification and related matters," a Law Council spokesperson said.

ends

“THE VOLUME of new apartment building is smaller than at any time since July 2012,” according to Master Builders Australia’s chief economist Shane Garrett. 

Just released figures from the ABS show that new home building approvals lost another 8.4 percent during December 2018. Detached house approvals were down by 2.1 percent but approvals for new apartments/units dropped by 18.6 percent during the month. 

“Today’s ABS figures complete the full 12-month picture for 2018. For the year overall, the volume of new home building approvals was pretty strong with over 212,000 permits issued for new dwellings. This was down only modestly (-5.6%) compared with the 2017 total,” Shane Garrett said. 

“More worrying is the pace at which approvals have been falling back over more recent months. During the final three months of 2018, total approvals were 23.7 percent lower than a year earlier – with apartment approvals suffering a 40.1 percent reduction over this period.

“Faltering new home building activity has been occurring against the backdrop of falling house prices, the Royal Commission’s work and uncertainty about what housing policy will look like after May’s Federal Election,” Mr Garrett said. 

“Clearing up some of these uncertainties would help get the housing market back on its feet." 

During December, new dwelling approvals increased in three markets including South Australia (+5.6%), the Northern Territory (+1.7%) and Western Australia (+1.1%).

The largest reduction in approvals hit Tasmania (-24.3%) followed by the ACT (-21.3%). The volume of approvals also declined in New South Wales (-8.6%), Victoria (-8.1%) and Queensland (-5.8%).

www.masterbuilders.org.au

ends

THE HOUSE of Representatives Standing Committee on Communications and the Arts will hold a public hearing in Brisbane on Wednesday, February 6, and a public hearing in Canberra on Wednesday, February 13 for its inquiry into the Australian music industry. 

The chair, Luke Howarth MP, said that the committee is continuing to examine the potential for continued growth and the factors affecting the success of the Australian music industry, both domestically and internationally. 

"Artists are the heart and soul of the industry. Without Australian artists there would be no Australian music industry. Australians are known for pushing the boundaries of music in their fields, combining musical excellence with fresh, bold, and innovative ideas," Mr Howarth said.

The committee will hear from a range of Australian songwriters, composers, and performing artists. 

Mr Howarth explained that, "As Australian band AC/DC famously put it, 'it’s a long way to the top if you want to rock and roll'. At this hearing, we will hear from Australian artists regarding their experiences and the challenges they face during that climb to the top."

On Wednesday February 13, the committee will hear from the Department of Communications and the Arts. 

The public hearings will be broadcast live on the web (audio only).

Public hearing details:

BRISBANE
Date: Wednesday, 6 February 2019
Time: 9.30am to 12.45pm
Venue: Undumbi Room, Queensland Parliament House, Crn George and Alice Streets, BRISBANE

CANBERRA
Date: Wednesday, 13 February 2019
Time: 12.40pm to 1.20pm
Venue: Committee Room 1R6, Parliament House, CANBERRA

Programs for the hearings are available on the committee’s website.

ends