Lawyers at odds on bank­ing sys­tem


Aus­tralia’s le­gal sec­tor has split over how the gov­ern­ment should re­spond to the scan­dals en­velop­ing the bank­ing in­dus­try, with Vic­to­rian lawyers telling the fi­nan­cial ser­vices royal com­mis­sion there should be more reg­u­la­tion in some ar­eas as their coun­ter­parts else­where call for across-the-board sim­pli­fi­ca­tion.

And a high-pow­ered group of mar­kets and reg­u­la­tion lawyers has poured cold wa­ter on the need for any sim­pli­fi­ca­tion of Aus­tralia’s fi­nan­cial ser­vices laws, say­ing the na­tion’s sys­tem is al­ready far less com­plex than those in other coun­tries.

The sub­mis­sions are in re­sponse to an in­terim re­port re­leased in late Sep­tem­ber by royal com­mis­sioner Ken­neth Hayne, who is due to hand his fi­nal re­port to Josh Fry­den­berg in a lit­tle over a fort­night, on Fe­bru­ary 1.

Law Coun­cil of Aus­tralia pres­i­dent Arthur Moses SC said laws cov­er­ing bank­ing, su­per­an­nu­a­tion and fi­nan­cial ser­vices needed sim­pli­fi­ca­tion and “there would be no gain in adding new laws to what is al­ready a com­plex reg­u­la­tory regime”.

“Any sim­pli­fi­ca­tion must en­sure the laws are clearer for con­sumers, strik­ing a bal­ance be­tween clar­ity and the cost to busi­ness in meet­ing core com­pli­ance obli­ga­tions,” he said.

“We don’t need more royal com­mis­sions or laws.

“What we need is more le­gal aid fund­ing for peo­ple to pur­sue their ex­ist­ing rights and hold banks ac­count­able.”

In its sub­mis­sion to Mr Hayne’s in­quiry, the Law Coun­cil called for sim­pler rules that fo­cused on prin­ci­ples al­ready in the law, such as the over­rid­ing obli­ga­tion of fi­nan­cial ser­vices com­pa­nies to pro­vide their ser­vices hon­estly, ef­fi­ciently and fairly.

The sub­mis­sion, signed off on by Mr Moses but pre­pared by the coun­cil’s busi­ness law sec­tion, which is headed by Free­hills merg­ers and ac­qui­si­tions part­ner Re­becca Maslen-Stan­nage, cau­tioned against ex­tend­ing the obli­ga­tion to act in a cus­tomer’s best in­ter­ests from ar­eas such as fi­nan­cial ad­vice to sales channels in­clud­ing mort­gage bro­kers, say­ing it should in­stead be made clear to clients they are be­ing sold to.

It said “rad­i­cal sim­pli­fi­ca­tion” that in­creased costs to cus­tomers and busi­ness should be avoided, and the Aus­tralian Law Re­form Com­mis­sion should be com­mis­sioned to de­velop pro­pos­als for sim­pler laws.

How­ever, the sub­mis­sion also re­veals sig­nif­i­cant dif­fer­ences of

opin­ion within the pro­fes­sion, es­pe­cially be­tween the peak bod­ies of Vic­to­ria and NSW.

It noted that the Law In­sti­tute of Vic­to­ria wanted new reg­u­la­tions that re­quire mort­gage bro­kers to act both in the best in­ter­ests of bor­row­ers and in good faith.

In ad­di­tion, the LIV wants new laws re­quir­ing clients to be told when an ad­viser or in­ter­me­di­ary is sacked for fraud.

The LIV also wants tighter reg­u­la­tion of lend­ing, con­trary to the Law Coun­cil’s po­si­tion.

Mean­while, a high-pow­ered team of lawyers at the Univer­sity of NSW, led by for­mer NAB cus­tomer ad­vo­cate Dim­ity Kings­ford Smith, has told the com­mis­sion that “by com­par­i­son with other coun­tries, Aus­tralia’s reg­u­la­tory struc­ture is rel­a­tively sim­ple”.

The sub­mis­sion, from the univer­sity’s Cen­tre for Law Mar­kets and Reg­u­la­tion, con­trasts Aus­tralia’s na­tional ap­proach with the frag­men­tary, state-by-state ap­proach of some other ju­ris­dic­tions.

It points to the re­duc­tion of reg­u­la­tors from “at least 10” to just two, the so-called “twin peaks” of the Aus­tralian Se­cu­ri­ties & In­vest­ments Com­mis­sion and the Aus­tralian Pru­den­tial Reg­u­la­tion Au­thor­ity, as a re­sult of 1997’s Wal­lis In­quiry.

“Be­cause Aus­tralian fi­nan­cial reg­u­la­tion is na­tional and be­cause the Wal­lis ar­chi­tec­ture re­moved a host of in­sti­tu­tional reg­u­la­tors, Aus­tralia’s reg­u­la­tory struc­ture is rel­a­tively sim­ple in­ter­na­tion­ally,” the cen­tre’s sub­mis­sion said.

“De­tach­ments from ASIC’s re­mit would dam­age the reg­u­la­tory de­sign of the twin peaks model: it would add co­or­di­na­tion costs and would not pro­vide sav­ings.”

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