Hayne Royal Commission Report on Australian Financial Services Industry

This report is primarily constructed on an official document Final Report: Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry published by Kenneth Hayne in early 2019 to analyse those recommendations for better regulation to Australian financial services industry. In business, ethics is an important perception of governance and sustainability, so the degree of ethical awareness dominates the key to sustainable governance. The business world controls the world's resources and makes judgements that daily impact these resources and the lives of millions of people, so those who operate in the business world must understand the various ethical ideas to help guide their decisions. (Birt et al. 5th edition, Chapter 2 - Business Sustainability, pp. 53-62). This report is going to give an example of a real-life entity in the financial services industry to extensively discuss the ethical misconduct underlying with the key recommendation.

Main body

In the Hayne report, it exposes many ethical misbehaviours in the financial services industry. Three of those key recommendations to regulate this messy industry situation includes: misconduct by mortgage brokers affected that 20 Australian National Bank employees were dismissed after issuing mortgage due to inappropriate or unfinished application documents (Hayne Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry. Repot Volum1, page 116); misconduct by financial advisers causing banks and financial service companies clients lost millions of dollars based on insufficient financial advice from financial adviser (page 239) and no hawking of superannuation products since consumers are promoted to purchase additional life insurance policies under the protection of the employer's purchase of insurance policies by default (page 275).

According to the description from Financial Review, there is an example of misconduct by financial adviser from AMP Limited as the financial advice giant: a couple who are bullied to invest in high-risk investment choices, and then can't find their adviser for more than a year (https://www.afr.com/business/banking-and-finance/banking-royal-commission-amp-says-80-advisers-involved-in-misconduct-20180416-h0yt6u). Hence, it was identified as 'dishonest', 'illegal' and 'fraudulent” ethical misbehaviour.

When AMP Limited appeared the ethical scandal, its key stakeholders were expansively influenced their interests. For its customers, the existing customers would lose their royalty and reliance to the company. Also, they will miss the potential customers who could bring lots of business and investments. For its shareholders, company profits, dividends and share prices will face to pressure since the core-businesses suffered the loss of income and the investors moved to alternative investment products. In addition, the business would be further complied and regulated imposts and fines by the Royal Commission. For its employees, they would be less productive and willing to leave because it was disappointed and dissatisfied to their management and employers. For its director, it was essential that the conduct and lack of accountability of AMP Limited boards and senior management. After sacking CEO Craig Meller, who would replace him? Where does the potential candidates come from? And how do AMP Limited guarantee they get it correct in the future? Lastly, it was a ‘disaster’ for the financial services industry to lose their public trust in the society.

Ethical misconducts by the financial advisors would be explained by internal and external factors. In the teleological ethics, the consequences of a decision or action is the only determinant of what is right or wrong. AMP Limited financial advisors violated career ethics that demonstrate their outstanding performance far exceed the costs of fraudulence (the destruction to their career, fraud to the profits of customers and possible jail time for having the fraudulence exposed). Owing to self-interests occasionally transforms into greed and selfishness, it is unlimited self-interest at the expense of someone else. Therefore, AMP Limited financial advisors caused ethical misconducts since they made a decision solely depending on whether they profit from the customers. Simultaneously, the company did not provide the appropriate mentoring to those financial advisors so that they issued ethical misconducts. Suppose some of the unethical conducts were pushed by the clients. The customers always prefer to invest less and profit more, thus, the financial advisors would feel pressed and stressful. This situation could increase the probability of financial advisor offering the fault financial planning to the customers.

Recommendation 2.9 indicates all Australian financial services license (AFSL) holders will be required to make any queries reasonably necessary to determine the nature and full scope of the consultant's misconduct (when the licensee discovers) and to promptly notify and remedy the affected customer. There are obviously important financial issues such as the impact on professional compensation arrangements. The government's announcement to provide Australian Securities and Investments Commission with new directives as part of its response to the ASIC Enforcement review will be strengthened.

Conclusion

How accounting and reporting may be useful in encouraging ethical business conducts?

Reference Lists

1. Birt et al. 5th edition, Chapter 2 - Business Sustainability, pp. 53-62
2. Hayne Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry. Repot Volum1, page 116
3. https://www.abc.net.au/news/2018-04-27/royal-commission-exposes-financial-planning-industry-lie/9700982
4. https://www.scu.edu/ethics/focus-areas/business-ethics/resources/ethical-issues-in-the-financial-services-industry/