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Royal Commission: The first reforms are on the way

I've spent a fair bit of time over the past week monitoring the ongoings at the Royal Commission. 

It's been clear that the government would have to react quite quickly to some of the revelations coming out. Last Friday the government made their first real announcement. Although they did not explicitly link it to the Royal Commission, rather arguing it was from the ASIC Enforcement Review Taskforce, the timing seemed to indicate that the Royal Commission was a factor. 

So, what will the new changes coming in be? Firstly, the penalties for serious criminal offences have been harmonised and increased under the Corporations Act to:

- 10 years' imprisonment and/or the larger of $945,000 or three times the benefit obtained from the wrongdoing for individuals; and

- the larger of $9.45 million, three times the benefit of the wrongdoing or 10 per cent of annual turnover for corporations.

The civil penalties available have also been increased to:

-the greater of $1.05 million (for individuals, from $200,000) and $10.5 million (for corporations, from $1 million); or

- three times the benefit gained or loss avoided; or

- 10 per cent of the annual turnover (for companies).

There will also be additional powers granted to ASIC to seek further remedies to strip wrongdoers of profits illegally obtained or losses avoided.

Other ASIC powers to be granted are:

- the expansion of ASIC's banning power to exclude individuals from performing any role in a financial services company where they are found to be unfit, improper or incompetent;

- strengthening ASIC's ability to refuse, revoke or cancel financial services and credit licences where the licensee is not fit and proper; and

- boosting ASIC's investigative tools, in particular giving it enhanced access to intercepted telecommunications. 

Other recommendations made by the Taskforce will be considered in the Royal Commission's final report. 

There is nothing yet to indicate when this will all come into effect so there may still be some time before we see draft legislation. 

What is clear is that there will be quite a number of reforms coming in a relatively small space of time once the Royal Commission findings are handed down. Like the announcement above, there may be other reforms that are implemented along the way as the government seeks to avoid negative publicity. This is likely to be even more the case given the circumstances surrounding the government's reluctance to implement the Royal Commission. 

On the Royal Commission last week, what I found interesting was the banks seeking to place the emphasis on individual financial advisers and paint a picture of the problem being rogue advisers in the industry. 

However, this tactic has clearly backfired and the Royal Commission has shown that the banks effectively turned a blind eye to some of the questionable behaviours in an effort to drive profits. 

There has also been plenty of questions asked about ASIC's role in the process. I think you'll see ASIC starting to look for some high profile scalps in the fallout from the Royal Commission. 

Clearly the Royal Commission is a watershed moment for the financial services industry, the effects of which will be wide ranging and significant. 

Liam Young