Executive summary
The Commission’s work, so far, has shown conduct by financial services entities that has
brought public attention and condemnation. Some conduct was already known to regulators
and the public generally; some was not.
Why did it happen? What can be done to avoid it happening again? These are now the key
questions.
In this Interim Report these questions – ‘why’ and ‘what now’ – are asked with particular
reference to banks, loan intermediaries and financial advice, with a view to provoking
informed debate about both questions.
Why did it happen?
Too often, the answer seems to be greed – the pursuit of short term profit at the expense of
basic standards of honesty. How else is charging continuing advice fees to the dead to be
explained? But it is necessary then to go behind the particular events and ask how and why
they came about.
Banks, and all financial services entities recognised that they sold services and products.
Selling became their focus of attention. Too often it became the sole focus of attention.
Products and services multiplied. Banks searched for their ‘share of the customer’s wallet’.
From the executive suite to the front line, staff were measured and rewarded by reference to
profit and sales.
When misconduct was revealed, it either went unpunished or the consequences did not meet
the seriousness of what had been done. The conduct regulator, ASIC, rarely went to court to
seek public denunciation of and punishment for misconduct. The prudential regulator, APRA,
never went to court. Much more often than not, when misconduct was revealed, little
happened beyond apology from the entity, a drawn out remediation program and protracted
negotiation with ASIC of a media release, an infringement notice, or an enforceable
undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the
entity’s conduct. Infringement notices imposed penalties that were immaterial for the large
banks. Enforceable undertakings might require a ‘community benefit payment’, but the
amount was far less than the penalty that ASIC could properly have asked a court to impose.
What can be done to prevent the conduct happening again?
As the Commission’s work has gone on, entities and regulators have increasingly sought to
anticipate what will come out, or respond to what has been revealed, with a range of
announcements. These include announcements about new programs for refunds to and
remediation for consumers affected by the entity’s conduct, about the abandonment of
products or practices, about the sale of whole divisions of the business, about new and more
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 intense regulatory focus on particular activities, and even about the institution of enforcement
proceedings of a kind seldom previously brought. There have been changes in industry
structure and industry remuneration.
The law already requires entities to ‘do all things necessary to ensure’ that the services they
are licensed to provide are provided ‘efficiently, honestly and fairly’. Much more often than
not, the conduct now condemned was contrary to law. Passing some new law to say, again,
‘Do not do that’, would add an extra layer of legal complexity to an already complex
regulatory regime. What would that gain?
Should the existing law be administered or enforced differently? Is different enforcement
what is needed to have entities apply basic standards of fairness and honesty: by obeying
the law; not misleading or deceiving; acting fairly; providing services that are fit for purpose;
delivering services with reasonable care and skill; and, when acting for another, acting in the
best interests of that other? The basic ideas are very simple. Should the law be simplified to
reflect those ideas better?
This Interim Report seeks to identify, and gather together in Chapter 10, the questions that
have come out of the Commission’s work so far. There will be a further round of public
hearings to consider these and other questions that must be dealt with in the Commission’s
Final Report.

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