The final report of the Financial Services Royal Commission was handed down on 4 February 2019, so a little more than six months after the report it is time to take stock and think about the impacts that it is having on business, not only in the financial services industry but also corporate Australia more broadly.
The first aspect to note is that Australia stands on the precipice of a significant level of legislative and regulatory reform. The Government indicated, off the back of the final report, that it would take action in support of all 76 recommendations arising from Commissioner Hayne's final report. Of those 76 recommendations, 56 fall to Government to action, and over 40 of them require some form of legislative reform in order to be implemented.
The Government has recently released its implementation roadmap which sets out the steps that it has taken since the report was handed down and the timing for the introduction of further reforms. In the six months since the report, the Government has taken 15 actions in relation to those recommendations, and it says that by the end of 2019 it will introduce a further 10 pieces of legislation to meet the recommendations of the final report.
Most importantly, 2020 shapes up as an incredibly busy year, with the Government introducing all other aspects of legislation to meet the recommendations in the final report.
Now the Government has described this as the largest and most comprehensive corporate and financial services legislative reform in over three decades, since the 1990s. And so no doubt, general counsel and the industry participants will be watching carefully as the consultation periods and legislation are released for consideration. Like all aspects of regulatory reform, the devil will of course be in the detail, and while people have a general sense of the nature of the reforms based on the recommendations, it won't be until the legislation is released that people will be able to think about how it impacts their businesses specifically.
The second most significant thing that we have seen following the final report is a significant increase in the level of regulatory investigation and enforcement action, particularly by the corporate regulator ASIC. This comes on the back of significantly increased funding, with ASIC's funding in the last Federal Budget now over A$400 million, an increase of 25%; and APRA's funding was also increased by 30%, to a little over A$105 million.
In terms of regulatory posture ASIC has said that it will start to think about its regulatory investigation and enforcement through the lens of "why not litigate". Now, that of course doesn’t mean that ASIC will litigate every single matter. But, stung by the criticisms made by Commissioner Hayne, they have indicated quite clearly that is the lens through which they will consider investigations and enforcement. And so corporate Australia is bracing itself for a significantly increased number of court proceedings to be commenced by ASIC.
ASIC's deputy chair, Daniel Crennan QC, who leads ASIC's newly created Office of Enforcement, said that ASIC is currently investigating in excess of 50 matters arising from the Royal Commission, including 13 that Commissioner Hayne specifically referred to ASIC for its consideration. And so with the combination of a large number of regulatory legislative reforms to be introduced, and a corporate regulator testing the boundaries of the law, there is no doubt that the matters that arose during the course of 2018 in the Royal Commission, or the ramifications of that, are going to be felt for a number of years to come in the business community.