Financial sector watchdogs must be more effective in denouncing and punishing misconduct, the banking royal commission has found.
The two key regulators – the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority – say they have heard the message and are already reviewing their enforcement tactics.
The final report of the royal commission, released on Monday, found in some cases Australia’s regulators had been “invisible” when it comes to wrongdoing.
Treasurer Josh Frydenberg says the government is confident ASIC and APRA will be better able to hold “those who abuse our trust” to account, through new laws and better resources.
But royal commissioner Kenneth Hayne said in the report too often those who broke the law were not properly held to account.
“Misconduct, especially misconduct that yields profit, is not deterred by requiring those who are found to have done wrong to do no more than pay compensation. And wrongdoing is not denounced by issuing a media release,” he wrote.
Mr Hayne said ASIC should only rely on infringement notices for “administrative failings” and instead took as its starting point for enforcement whether the courts should be involved.
ASIC chair James Shipton said the regulator would consider the final report carefully before laying out some of its next steps in the coming weeks.
He acknowledged the call for ASIC’s enforcement culture to change, saying that fits in with reforms already under way, such as what it calls its new “why not litigate?” stance.
Commissioner Hayne has sent 24 cases of superannuation and insurance conduct to ASIC and APRA, but as with his interim report has not formally referred matters already under investigation.
“Consideration of these matters will be prioritised,” Mr Shipton said.
APRA chair Wayna Byres said his regulator was also reviewing its enforcement tactics, with a report to come on the issue in March.
He’s pleased the government has committed to ramping up resources for both APRA and ASIC to bolster their work.
The two regulators will get an extra $170 million, along with the commonwealth prosecutor’s office and Federal Court.
ASIC and APRA will be overseen by an independent watchdog to ensure they are doing their job and both will be subject to regular reviews.
ASIC is set to become the main conduct regulator over the superannuation industry, with access to civil penalties for breaches of the law by superannuation trustees and directors.
As well, the Federal Court’s jurisdiction will be expanded to cover corporate criminal misconduct to speed up the consideration of cases brought by regulators.