Regulating for Loyalty in the Financial Services Industry

Abstract

A series of scandals in the financial services sector over the past twelve years has inspired concerted legislative action to protect customer interests. The Future of Financial Advice, Stronger Super, Protecting Consumers and Member Outcomes initiatives have each sought to reform the duties of loyalty, as variously expressed, owed by the providers of financial advice, superannuation funds and mortgage broking services to their customers. This article compares the legal regimes emerging from those initiatives with each other and with three other, analogous regimes: that applying to registered managed investment schemes, that applying to life insurers, and that applying to corporate directors generally. It finds that although similarly motivated, both the substance and the modality of the regimes vary. This variation needs to be acknowledged and respected when considering the operation of the regimes.

Keywords: fiduciary duties, directors' duties, loyalty, financial advisers, superannuation, mortgage broking, financial services regulation

JEL Classification: K10, K20, K22