Corporate Australia has wound down for the silly season, but the scandals haven't abated, particularly in the banking sector.
In the past few days the corporate regulator has gone into overdrive issuing legal action, enforceable undertakings, fines and remediation against the country's biggest banks.
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What is ASIC?
The 'corporate watchdog' has been everywhere in the last 12 months, but what do they actually do?
Some of the behaviours are eye-popping. They include: front running, insider trading, collusion, not acting in customers' best interests and conflicted sales incentives.
The regulator should be commended for taking action, but the timing of the release couldn't be worse as most people, including politicians, investors and the media, have tuned out for the holidays.
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For the banks it means they have managed to dodge the sort of media and political scrutiny such misconduct deserves.
By the time parliament returns next year, some of the wrongdoing outlined by ASIC should be revisited as a reminder why we desperately need a royal commission.
Despite all the protestations by the banks that the behaviour is down to a few bad apples, if a list of the scandals over the past few years was made, it would be glaringly obvious that this is system failure.
Yet not one senior executive has been punted from their job. Where are the boards on this? The guardians of the social licence.
A taste of the latest scandals in the past week include front running and insider trading inside the National Australia Bank and the Commonwealth's wholesale spot foreign exchange businesses. The misconduct reveals traders sharing confidential information about their clients and trading positions.
In the case of NAB, ASIC says on several occasions NAB employees on an offshore spot FX desk inappropriately exchanged confidential and potentially material information about the bank's client flow or proprietary positions.
CBA employees on an offshore spot FX desk took proprietary positions in a currency based on information they had received relating to large CBA fix orders in that currency.
In another case, CBA employees on an offshore spot FX desk disclosed confidential details of pending client orders to external third parties, including identification of the client through the use of code names.
Some of the behaviours are eye-popping. They include: front running, insider trading, collusion, not acting in customers' best interests and conflicted sales incentives.
This is nothing short of outrageous.
The banks have agreed to enter an enforceable undertaking with ASIC as well as make a $2.5 million "community payment" to financial literacy programs.
Given the gravity of the misconduct by these traders and the lax systems in place, a lot more needs to be done.
Under the enforceable undertaking, the banks will each "provide to ASIC an annual attestation from its senior executives that the systems and controls in its spot FX business are appropriate and adequate to effectively prevent, detect and respond to specified conduct."
But given the lack of transparency in enforceable undertakings, it will be hard to know how effective this will be.
Another of ASIC's announcements involved ANZ and an update on its OnePath compliance functions, following a "significant" number of breaches in relation to its life insurance, general insurance, super and funds management activities.
For instance, in early 2013 to mid-2015, an estimated 1.3 million customers were affected by ANZ breaches, requiring refunds and compensation to the tune of $4.5 million, rectifications and other remediation of approximately $49 million.
Breaches include: 1422 superannuation fund members had $28.7 million in contributions allocated to the incorrect super account of members.
The funds have now been returned to the correct accounts along with $400,000 in compensation for lost earnings and/or incorrect fees.
Following the breaches, ANZ appointed an independent expert PwC which has completed its compliance review and made six recommendations, four of which have been implemented, and another two that it will implement shortly.
Like enforceable undertakings, company-funded "independent" expert reviews lack transparency. The final reports are rarely released and the terms of reference remain confidential.
Even the recommendations can remain secret, which puts too much trust in the hands of the independent expert which is bankrolled by the perpetrator.
Turning to Westpac, ASIC announced it had taken civil action in the Federal Court against Westpac Securities Administration Limited (WSAL) and BT Funds Management Limited (BTFM) for failing the "best interests duty" that was introduced under the Future of Financial Advice reforms (FOFA).
The case is an important one as it lays bare the need for proper separation between products and advice to avoid conflicts of interest.
In this case it follows an investigation by ASIC into two telephone sales campaigns that targeted super fund members.
ASIC alleges Westpac sales staff called customers and recommended they roll out of their super funds into Westpac-related super accounts.
ASIC alleges this was personal advice not general advice, which is a breach because WSAL and BTFM are not allowed to provide personal financial product advice under their Australian financial services licences.
Westpac argues that consumers would have known they were getting general advice. It will be an important case for ASIC and even more important for the banks, which fought so hard to water down the best interests duty.
In early October ANZ boss Shayne Elliot took many by surprise when he told a Parliamentary inquiry that the banks had lost touch with its customers.
"We had become too internally focused and forgotten our role in society and in the community at large," he said.
"And when we've lost sight of that; that's taken us down a path that's created ... bad behaviours and poor culture, and really not treated customers with the respect that they deserve. And that's why we're here, to explain that … and say what we're going to do about it."
But if change is to occur, it will require more than a few mea culpas, senate inquiries and a series of reviews conducted by bank-funded independent experts.
Heads need to roll, remuneration needs to change, a proper compensation scheme needs to be rolled out and banks need to reset their culture. We need a royal commission into financial services.
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