Managing Culture: A Good Practice Guide

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ASIC recognises that culture is at the heart of how an organisation and its staff think and behave, while APRA directs boards to define the institution’s risk appetite and establish a risk management strategy, and to ensure management takes the necessary steps to monitor and manage material risks.  

Whilst regulators don’t dictate the type of culture organisations need to have, culture is nonetheless part of their risk based surveillance and compliance reviews, looking at issues like remuneration structure, whistleblowers and complaints handling, as an indicator of bad culture and thus misconduct risk.

Managing Culture: A Good Practice Guide” is thus a timely and practical guide newly launched by the Institute of Internal Auditors - Australia, The Ethics Centre, Governance Institute of Australia, and Chartered Accountants Australia and New Zealand.

The launch today at The Ethics Centre in Sydney was accompanied by an insightful panel of expert commentators, ASIC Commissioner John Price, Elizabeth Johnstone, Pauline Vamos and Ethics Centre chief Simon Longstaff.

This guide argues that an ethical framework – which is different from a code of ethics or a code of conduct – should sit at the heart of the governance framework of an organisation. An ethical framework includes a clearly espoused purpose, supported by values and principles. 

You can download a copy of the paper here: http://ow.ly/Fpo930ha3Rs

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Royal Commission into Banking, Insurance & Financial Services Announced

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The Australian Government has today announced a broad-ranging Royal Commission into misconduct in the banking, superannuation and financial services industries.

The scope of the Royal Commission will be significantly wider than anticipated by many.

The draft terms of reference, which will become the Letters Patent when issued by the Governor-General, indicate the Commission is expected to inquire into conduct by ‘financial services entities’, being:

  • authorised deposit-taking institutions
  • insurers
  • AFSL-holders and authorised representatives and
  • RSE licensees (and those connected to such licensees) of registrable superannuation entities (nb this excludes self-managed superannuation funds).

The type of ‘misconduct’ the focus of the Commission’s inquiry is expected to extend to misleading or deceptive conduct, breach of trust, unconscionable conduct and breaches of professional standards. It is not limited to conduct which constitutes a criminal offence under financial services laws.

The draft terms of reference require the Commission to inquire into the following matters:

1. The nature, extent and effect of misconduct by a financial services entity (including by its directors, officers or employees, or by anyone acting on its behalf).

2. Any conduct, practices, behaviour or business activity by a financial services entity that falls below community standards and expectations.

3. The use by a financial services entity of superannuation members’ retirement savings for any purpose that does not meet community standards and expectations or is otherwise not in the best interest of members.

4. Whether any findings in respect of those matters:

- are attributable to the particular culture and governance practices of a financial services entity or broader cultural or governance practices in the industry or relevant subsector and

- result from other practices, including risk management, recruitment and remuneration practices;

- the effectiveness of mechanisms for redress for consumers of financial services who suffer detriment as a result of misconduct by a financial service entity

5. the adequacy of:

- existing laws and policies of the Commonwealth (taking into account law reforms announced by the Government) relating to the provision of financial services;

- the internal systems of financial services entities; and

- forms of industry self-regulation, including industry codes of conduct; to identify, regulate and address misconduct in the industry, to meet community standards and expectations and to provide appropriate redress to consumers and businesses;

6. the effectiveness and ability of regulators of a financial services entity to identify and address misconduct by those entities;

7. whether any further changes to:

- the legal framework

- practices within financial services entities and

- the financial regulators

are necessary to minimise the likelihood of misconduct by financial services entities in future (taking into account any law reforms announced by the Government) and

8. any matter reasonably incidental to a matter mentioned in the above paragraphs.

The Commission is to give priority to matters which have “greater potential for harm” if not addressed “expeditiously”.

The Commission is expected to submit an interim report to the Government by September 2018, with a final report (including findings and recommendations) due within 12 months and before 1 February 2019.

Recent Developments in Banking & Financial Services Regulation

There are numerous changes afoot in the regulation of banking and financial services in Australia. This blog surveys: establishment of an Australian Financial Complaints Authority, the new professional standards regime for financial advisors, the first civil penalty case for breach of the FOFA "best interests" duty, the proposed Bank Executive Accountability Regime (BEAR), and the new ASIC industry funding model.

International Bar Association Presentation on Good Advocacy in Mediation

My presentation at the International Bar Association's Annual Conference on "What role has good advocacy in mediations?" on Tuesday 10 October is now available for download (as PowerPoint PDF) and as an audio file.

The panel was hosted by the IBA's Arbitration Committee, Forum for Barristers and Advocates (Lead), Litigation Committee, and Mediation Committee.

Thanks to our panel chair David Barniville SC, Co-Chair of the Forum for Barristers and Advocates, our panel moderator Winnie Tam SC, past Chair of the Hong Kong Bar Association and fellow panelists.

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Women on Boards' Australia Sydney Directors' Circle, "Conflicts of Interest & Duty"

Delighted to lead a fantastic group of experienced and interested directors at last night's Women on Boards Australia's Sydney Directors' Circle discussing and debating Conflicts of Interest and Duty. Disclose early and often!

Introductory audio/Part I remarks available for download (17 mins)

If you would like a copy of the accompanying slides please email dhogan@barnet.com.au.

Centre for Law, Markets & Regulation: Directors & Officers Duties Recent Cases & Regulatory Developments

My address to the UNSW's Centre for Law, Markets and Regulation's 2017 Practitioners' Forum held at King & Wood Mallesons on Friday 10 March 2017 is now available online (PPT) and is also available as PDF for download.

An extended written paper is available to Forum attendees and may be available on request to dhogan@barnet.com.au.

The Forum included a broad-ranging Q&A with me and my co-panellists Justice Kathleen Farrell of the Federal Court of Australia and Professor Dimity Kingsford Smith, Centre Director, as well as lively discussion throughout the day with practitioner and academic attendees at this inaugural forum, including on 

  • Can Robo-Advisers be Fiduciaries? 
  • From FinTech to TechFin – from Technology-enabled to Data-driven Finance 
  • Tightening the Noose – Directors’ Liability for Illegal Phoenix Activity

Liability limited pursuant to a scheme approved under professional standards legislation.

Law Council of Australia Immigration Law Conference Address

It was a pleasure to address the Law Council of Australia's 2017 Immigration Law Conference today in Sydney, joining a panel of Ron Merkel QC, Professor George Newhouse, Madeline Gleeson and Min Guo on the topic "Beyond Merits Review & Jurisdictional Error: Accountability Mechanisms in Administrative Decision-Making".

Links now available to oral remarks (audio link - 14 min) and accompanying PowerPoint presentation.

Link to background paper on Automated Decision-Making.