Interim Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
The submission in relation to the Interim Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was prepared by the Business Law Section of the Law Council of Australia and also reflects input the Law Council has received from its following Constituent Bodies: the Law Institute of Victoria, the Law Society of New South Wales, Law Society Northern Territory and Law Society of South Australia.
In summary, the Law Council:
- submits that the law should be simplified, with a key focus on the principles already embodied in the law, such as acting honestly, efficiently and fairly, not misleading, and acting in the best interests of the customer;
- suggests that radical simplification which changes core compliance obligations should be avoided due to the substantial cost which would be borne by business and ultimately by consumers;
- cautions against extending a ‘best interests’ duty beyond the circumstances where the relationship with an intermediary is of a fiduciary character – rather it should be made clear to consumers that they are not in an advisory relationship, rather the opposite, they are being sold to by the intermediary;
- recommends that this include simplifying the information consumers receive from their financial advisers;
- notes that many of the issues raised in the Interim Report demand a careful and considered response to law reform at a fundamental policy level that capitalises on the experience since the introduction of the financial services and consumer credit regimes to build on the successes and target the failures of the existing frameworks, and leverage the results of advances in behavioural economics and psychology (for example to reduce the reliance on disclosure as the foundation of consumer protection and to recognise the behavioural biases of consumers’ decision-making); and
- accordingly, recommends a referral to the Australian Law Reform Commission (ALRC) to develop propositions for simplification and related matters identified in this submission.
You can read the full submission below.