Commissioner Kenneth Hayne has fired a warning shot across the bows of the financial services industry saying he will protect bank staff who come forward as whistleblowers to ensure they can testify against their employers.
In his opening address to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Melbourne on Monday, Commissioner Hayne said confidentiality agreements could not be used by financial institutions to silence staff or members of the public and that the commission could use its powers to overcome them.
“First, the commission would be very likely indeed to exercise its compulsory powers to secure the information in question,” he said.
Any organisation seeking to gag staff or customers would be put under the microscope.
“The very fact that an institution sought to inhibit or prevent the disclosure of the information would excite the closest attention not only to the lawfulness of that conduct but also what were the institutions’ motives for seeking to prevent the commission from having that information,” he said.
“Under section 6M of the Royal Commissions Act, if a witness gives evidence or produces a document under a notice of summons no injury can be done to that person. Suing the person would almost certainly fall within that prohibition.”
The Finance Sector Union supported the commissioner’s position.
“His comments that under the Royal Commissions Act, ‘no injury can be done’ to a witness giving evidence or producing documents when called on by the commission, should serve as a warning to banking and financial services providers,” an FSU spokesperson said.
What will be under scrutiny?
The commission will be looking for illegal activity, misleading and deceptive conduct and conduct that falls below community expectations and standards as well as breaches of trust in its enquiries, the commissioner said.
The commission will have only 12 months to investigate and report on scandals in the financial industry, whereas the commission into child sex abuse took six years to complete. It will rely on both confessions from financial institutions themselves on their misconduct as well as submissions from the public.
Public opinion and expectations will be crucial in setting the norms for how the industry should operate with the process “helping identify whether there’s a gap between what the industry sees as misconduct and what the public sees as misconduct”, Commissioner Hayne said.
“The ultimate purpose of the financial system is to facilitate sustainable growth in the economy by meeting the financial needs of its users.
“The financial system will achieve this goal if it operates in a manner that is efficient, resilience and just. It concluded that fundamental to this treatment is the concept that financial products and services should perform in a way that consumers expect or are led to believe.”
The commission will commence its hearings next month looking at bank lending. Gerard Brody, CEO of the Consumer Action Law Centre, said the commission’s work should “ensure there’s greater consequences brought to bear when financial institutions lend irresponsibly”.
“The law around responsible lending at the moment is relatively good but financial institutions are not complying with it,” he said.
Superannuation funds will also come under scrutiny. The commission will examine “management, administration and the payment of members benefits” to ensure that all spending “was in the best interests of members”. Commissioner Hayne said.