Commissioner Kenneth Hayne has questioned whether there would be anything to be gained from adding more laws for the financial services sector to abide by and asked if existing laws should instead be “simplified”.

“The law already requires entities to ‘do all things necessary to ensure’ that the services they are licensed to provide are provided ‘efficiently, honestly and fairly’. Much more often than not, the conduct now condemned was contrary to law,” Hayne wrote in his interim report, released on Friday. “Passing some new law to say, again, ‘Do not do that’, would add an extra layer of legal complexity to an already complex regulatory regime. What would that gain?”

In handing down his 1000-page interim report on Friday, Hayne did not make recommendations but sought to ask how the bad behaviour in financial services happened and what could be done to prevent it from happening again.

He lambasted companies for the “pursuit of short-term profit at the expense of basic standards of honesty”.

“How else is charging continuing advice fees to the dead to be explained? But it is necessary then to go behind the particular events and ask how and why they came about,” he wrote. “Banks, and all financial services entities recognised that they sold services and products. Selling became their focus of attention. Too often it became the sole focus of attention.”

Wealth manager AMP and the Commonwealth Bank have been singled out for charging insurance premiums and bank fees to dead people over the six rounds of the Hayne inquiry held so far in Brisbane, Darwin and Melbourne.

Hayne said “from the executive suite to the front line, staff were measured and rewarded by reference to profit and sales”.

The regulators – the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission – were also singled out for lack of action.

“When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done,” Hayne said. “The conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, APRA, never went to court.”

ASIC chair James Shipton noted “the report’s serious and important observations of ASIC’s role as a regulator”.

“ASIC will carefully consider these observations, as well as the broader findings in the report, and will respond fully in its submission by 26 October 2018,” he said in a statement issued on Friday afternoon.

Treasurer Josh Frydenberg, at a press conference to announce the release of the report, urged regulators to step up.

“What is clear from this report is that too often the regulator would seek a negotiated outcome as opposed to taking the next step, which would be to litigate and make these entities face court,” Frydenberg said.

Hayne singled out ASIC’s favoured approach of enforceable undertakings, with accompanying media releases.

“Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct,” Hayne wrote. “Infringement notice-imposed penalties that were immaterial for the large banks. Enforceable undertakings might require a ‘community benefit payment’, but the amount was far less than the penalty that ASIC could properly have asked a court to impose.”

In the interim report itself, Hayne asked what duty intermediaries, including financial advisers, “owe the consumer and who would be responsible for the intermediary’s defaults”.

He also asked how intermediaries should be remunerated and whether there should be a mechanism of last resort.

On the topic of grandfathered commissions, Hayne asked if “carve outs and exceptions [should] be reduced or eliminated”.

The royal commission began its first round of hearings in March. Its final report is due on February 1, 2019. Bank chief executives and the regulators will appear at the final round of hearings, which start on November 19 in Sydney.

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