Gilbert + Tobin's roundup of the Royal Commission

Friday, 01 March 2019


    Law firm Gilbert + Tobin summarise the findings of the Hayne Royal Commission final report.


    14 recommendations

    • Increased use of litigation as enforcement strategy.
    • Retention of the “twin peaks” model of prudential (APRA) and conduct (ASIC) regulation.
    • No material changes to ASIC’s remit. Independent oversight body to review regulators.

    Remuneration, culture and governance:

    7 recommendations

    • Remuneration structures perceived as a key limb of the root causes of misconduct.
    • No mandated changes to remuneration models, but annual reviews by entities and more active oversight by APRA recommended.

    Consumer lending:

    8 recommendations

    • No changes to the responsible lending framework, including the use of assessment benchmarks such as the Household Expenditure Measure (HEM).
    • Significant changes to the mortgage broker industry, including the introduction of a “best interests” duty, abolition of trail commissions, and requiring the borrower, not the lender, to pay a broker’s fees.
    • Removal of the point-of-sale exemption to responsible lending laws for retail dealers in the auto finance industry.

    Small business lending:

    8 recommendations

    • Change the definition of small business to any business or group employing fewer than 100 full-time equivalent employees, where the loan applied for is less than $5 million. No changes to the way guarantees are taken or enforced.
    • The National Consumer Credit Protection Act should not be extended to small business lending.

    Financial advice:

    10 recommendations

    • Reform ongoing advice fee arrangements – annual “opt in”. “Fee for no service” issues heavily criticised.
    • Review and repeal of exceptions to prohibitions on conflicted remuneration.
    • No mandated structural separation of vertically integrated financial services firms recommended.


    9 recommendations

    • No prohibition on retail superannuation funds or structural separation between product manufacturers and distributors.
    • Prohibit “dual regulated entity” structures (where one entity is a superannuation trustee and MIS responsible entity).
    • Significant restrictions on deduction of advice fees and unsolicited sales practices.


    15 recommendations

    • Expansion of anti-hawking provisions.
    • Application of unfair contracts regime to insurance, and removal of claims-handling exemption from section 912A of the Corporations Act.
    • Tighten life insurance avoidance provisions. Deferred sales model for add-on insurance.


    5 recommendations

    • Financial services laws should be simplified and identify “fundamental norms” of behaviour.
    • Require regulator approval for all industry codes.
    • Establish compensation scheme of last resort.

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