The purpose of the paper is to provide an insight into the approach taken in these peer jurisdictions to some of the issues raised by the Royal Commission in its Interim Report provided to government in September 2018. The issues the Royal Commission has asked me to examine are:
controls on remuneration arrangements inside financial services firms (executive remuneration and variable remuneration)
controls on remuneration in connection with financial advice and financial product sales and distribution (commissions and ongoing advice fees)
laws requiring the separation of financial product sales from financial advice and addressing conflicts in the distribution of proprietary financial products
financial product hawking and other forms of unsolicited sales practices, and
regulators, including regulatory architecture, enforcement options and accountability.
What follows identifies, and explains something of the context of, legislation and codes of conduct that are germane to these issues in the selected jurisdictions. The discussion is necessarily high level. As the Commission’s work to date demonstrates, the regulatory arrangements for the provision of financial products and services to households are complex and can be highly path-dependant. There are inherent dangers in isolating particular rules and practices from their local history and conditions. Nevertheless, the peer jurisdictions have, over the decade since the Global Financial Crisis (GFC), grappled with these issues and the manner in which they have sought to address them is relevant to the second phase of the Royal Commission’s work.
This paper is a research report on extant legislation and codes. It does not examine the rich academic literature on the ways in which regulatory systems might optimally respond to these issues. Nor does it seek to draw out differences between the political, social and economic conditions in the different jurisdictions. These differences may be important in understanding why a particular regulatory response was adopted or why it was structured in a particular way (for example, as legislation rather than as a code).