Ethics and Governance: Analysis of the Royal Commission Final Report

This report provides an in-depth analysis of the Royal Commission's final report concerning misconduct in the banking, superannuation, and financial services industry, also known as the Hayne Royal Commission. It examines the ethical theories applied, particularly deontology, and evaluates the commission's recommendations. The report delves into the Freedom Insurance case study, highlighting ethical violations and the application of the APES 110 code of ethics. It discusses the importance of ethical conduct in financial services, the role of mortgage brokers, and the need for safeguards to protect consumers. The report concludes by emphasizing the significance of ethical decision-making and the implications of the commission's findings for the financial sector. The report highlights the importance of the ethical theory of deontology in the business operations of banking and financial services. It also discusses the various recommendations made by the Royal Commission, including the best interest duty, changes in mortgage broking models, the establishment of treasury-led working groups, and the role of financial advisors. The report also emphasizes the need for ethical conduct and the application of the APES 110 code of ethics in the Freedom Insurance case study, which involved aggressive sales tactics and the targeting of vulnerable individuals.

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Executive summary
Royal commission is into the misconduct in the banking, superannuation as well as the financial
service industry that is commonly known as the Hayne Royal Commission. The commission has
recently published final report that is majorly compelling reading for any of the person with an
interest in the ethical as well as fair business conduct. The report findings include the ethical
theory with the reading that shows the unethical practices that are conducted by royal
commission. In addition, it includes the case related to the freedom insurance and its issues that
are linked with the APES 110.

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Contents
Introduction......................................................................................................................................3
Royal commission...........................................................................................................................4
Evaluation of Recommendations in the report................................................................................4
Ethical theory application................................................................................................................6
Application of theory...................................................................................................................6
Freedom insurance case study.........................................................................................................7
APES 110 code of ethics.............................................................................................................8
Applicability on case...................................................................................................................9
Safeguards that are available.........................................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
The aim of the report is to read the parts of the final report presented by the royal commission
and its evaluation with the effective use of the knowledge related to the business ethics that has
been attained in this particular unit. The reading related to the recommendations that have been
presented in the report. In addition, it is linked with the one of the ethical issues that will show its
applicability on the reading. This report also includes the insurance related case and brings the
attention to the problems witnessed in the practices conducted by the mortgage brokers. Being
the CPA member of the Australia, the APES 110 applies which will help in explaining the
ethical issues that has been witnessed with the freedom expectations to its agents in order to
make use of the aggressive as well as inappropriate sale tactics. In the end of the report, it
includes the safeguards that are present in order to make use of the APES 110.

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Royal commission
Hayne’s final report of the royal commission into the misconduct in the industry that deals in the
banking superannuation as well as the financial service industry represents the culmination,
which is one of the most essential public inquiries in the history of the Australia. The royal
commission has already brought the fundamental influences as well as it has altered bank as well
as the corporate culture in order to continue the same (Remeikis, 2019). The key theme that has
been witnessed in the final report include simplification of laws, regulator’s enforcements
culture, role of the remuneration in the governance as well as in culture, management of the
conflicts of interest as well as the non-financial risks, power and leadership with the
responsibility.
In the volume 2 of the report, there is discussion related to the Freedom sales and retention
practices both generally and in relation with the individual consumers. This case shows the
aggressive sales applied by the personnel of the insurance company when they try to sell the
accidental death policies to person dealing with the Down syndrome.
Evaluation of Recommendations in the report
In the section 1 reading, this has been found that direct lending is core business operations of the
banks that can be done under the NCCP act. The issues that majorly arise during the commission
in relation to direct lending majorly include two types; one is compliance with the existing norms
of conduct as well as the issues about whether these norms are required to be changed or not.
Thus, the NCCP act is not required to implement in order to alter the obligations in order to
access the unsuitability (Final Report, 2019).

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The report presented by the royal commission talks about the number of recommendation that
would lead to the significant as well as the immediate effect to the financial services entities as
well as the industry if they will be implemented. Some of the major recommendations are
evaluated below -
 Best interest duty is one of the major concerns and the law should be amended in order to
amend while acting in linkage with the home lending, mortgage brokers that must act in
the best interest of intending borrowers. This has been found that the responsibility needs
to be civil penalty provision.
 The changes in the mortgage broking model which majorly include the payment of the
broker’s fees by the borrowers instead of the lenders. In addition, it includes the
imposition of the financial advice-style responsibility majorly on the brokers (Gilbert,
2019).
 Another recommendation is related to the treasury-led working group are required to be
established as they can monitor and if it is required then the remuneration can be
adjusted. In addition, considering the response to the market change the fee that lenders
should be necessary to charge to accomplish a level of playing field.
 It is recommended that mortgage brokers work as the financial advisers. Mortgage should
be subject to and monitor by the law that is implemented to entities while offering the
financial product suggestion to retail clients (Final Report, 2019).
 It is essential to take the same steps in order to response for detecting the misconduct of a
mortgage broker. ALC is bound in order to share the information and to report all the
obligations in respect to the brokers.

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Ethical theory application
The deontological class of the ethical theories majorly shows that the people need to adhere to
their responsibility as well as duties at the time when they get engage in the decision making
when ethics are in role (Greenwood & Freeman, 2018). This clear means that person is obliged
to individual as well as society due to upholding one’s duty that is ethical right. In simple words,
ethical theory shows that the morality of an action should be based on action itself is correct or
not rather than the based on the consequences or the outcomes of the actions (Liu & Lin, 2016).
Thus, this ethical theory of ethics maintains the major actions that are justified by their own
consequences rather factor other than the good outcomes that majorly determine the rightness of
the actions.
Application of theory
The royal commission need to consider the ethical theory of deontology while performing the
business operations. In the banking and financial services it is essential to ethical perform the
business otherwise it will lead to misconduct which leads to the penalty. This theory of the
deontology is linked with the recommendations that lead to the ethical practice.
Best interest duty is one of the actions that show that the actions of the mortgage brokers need to
be ethical right when it comes to lending money to the customers irrespective of outcome of the
same. The outcomes can be the loss for sales or revenue of the company because best interest
duty generally makes the brokers to offer the low interest to the customers. In addition, the
financial advice is required to be given which is recommended by the royal commission while
the entire transaction. This shows that the actions of the brokers for providing the advice to the
lenders are essential to be done.

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The monitoring of the banking as well as financial transactions is the need of every business due
to which this recommendations is linked to the treasury-led working group who found that it is
essential to monitor as this will bring the adjustment in the remuneration. This will look towards
the duty and the actions of brokers for monitoring the transaction instead of the outcome of the
same. The financial advisors need to perform their duty in the ethical manner by following the
law that is applied to the entities while providing the financial product recommendations to the
retail chains. The recommendations should be given without thinking any results for same as this
supports the theory of ethics. This means that end reasons can leads to the failure as well as the
achievement of the company but the actions which form the way to the outcome needs to be
ethically correct (Meyers, 2018). This recommendation will be given to the customers that will
safeguard their interest in the business operations. In addition to this, the APES 110 approach to
the ethics is to spell out all the responsibilities in order to safeguard the rights of the clients and
the society as the whole.
The royal commission recommendations to the unethical practice shows the proper response in
order to detect the misconduct related to the mortgage broker. This means the process and steps
that has been taken in order to determine the misconduct need to be ethical right irrespective of
the future consequences (Broad, 2014). The outcome may be related to the impact on the
mortgage broker by applying the theory of deontology.
Freedom insurance case study
Freedom insurance group has been marketed as well as distributed life insurance products
directly to the consumers by telephone. This case study of the freedom insurance majorly focuses
on the sales as well as retention practices both in relation to the individual person. The inquiry’s

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freedom insurance revealed shocking details about different people who were pressured to
purchase life insurance (Final Report, 2019). It was found insurance company has fuelled an
aggressive sales culture within the call’s centre of the company which sold cover that majorly
include death, injury and other insurance over the phone. Thus, the investigation about the
freedom insurance brought the evidence that they have targeted the Down syndrome person, who
is 26- years old. One of the employees of company Mr Orr played an extracts of the aggressive
sale in which they made the call for selling their product and services to the Down syndrome
(Janda & Chalmers, 2018). This clear reflects the violation of the different APES 110 code of
ethics that is essential to be managed by every professional while conducting their business
operations.
APES 110 code of ethics
The members in the public practice refer to the members who are majorly working in the
accounting public firms by performing any role as well as task for that firm. It is essential for the
all the companies in the Australian market to perform their duties to high technical, professional
as well as ethical standard. Considering the freedom insurance case study, this has been found
that the company is not ethical correct they are not able to maintain the basic principles of the
APES 110 code of ethics (Mladenovic, Martinov-Bennie & Bell, 2019).
The code contains the five essential principles for all the professional accountants within the
organisation includes integrity, objectivity, professional skills and due care, confidentiality and
professional behaviour. In this case, of the freedom insurance Part C of the APES 110 code of
ethics includes members in business. The part C is for all the members who are in business
except the other professional practice, audit, or other assurance services. This section is essential
due to all stakeholders and community members who can majorly rely on the professional

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accountant in order to provide the advice, financial reports, as well as other different services.
This part C of the APES 110 code of ethics include the section that range from the 300-350
(Payne, Corey & Raiborn, 2018).
Applicability on case
Freedom insurance company feel it is required to implement the code of conduct because the
insurance company was not able to maintain professional skills and due care of the customers as
they were very aggressive towards the sales of the products and services due to which they did
not concerned the person who is suffering with the drone syndrome. In addition to this, the
employees of the company are so much engaged in the doing the outbound calls as well as sales
that they have forget their professional behaviour in front of the customers (Chen, 2019). This
leads to the problem for me because I believe that affecting the person who is dealing with the
drone syndrome is not professional accountant. In addition, pressuring the person who is already
in trouble and dealing with the issue of drone syndrome is not ethical right in my opinion. Being
the member, I would not have affected any of the people who are dealing with such things
because neither it will not effective in outcome nor it will be considered as ethical professional
behaviour by the employee.
This clearly shows that the freedom insurance employees have exploited different principles
while working and talking to customers. This means that employees of the company were not
able to maintain the integrity that is clear, as they are not doing the right thing even when they
were aware about the condition of their customers. This code of conduct impresses the
professional accountant to remain honest as well as the fair with the work responsibility that has
been shared with them. Thus, the principles of the APES 110 code of ethics need to be
performed by all the members who are working with the members. The members in business

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need to ensure that their entire activities need to be done effectively and in the ethical manner
(APESB, 2019).
Safeguards that are available
There is presence of the different types of the safeguard will be available as being the business
member using the APES 110 code of ethics. The major safeguards include profession, legislation
or regulations as well as the work environment. In addition to this, the safeguards, this will be
available for using the APES 110, code of ethics.
 Employing the system of corporate oversight or the different structures in the
organisation
 Strong internal control will make the organisation ethical that will help them to perform
their business operations in the ethical manner.
 Policies and procedures that are essential to implement as well as monitor the quality of
the performance related to the employees (APESB, 2019).
 The timely communication will increase with the rise in the organisation policies as well
as procedures that majorly include changes in it. In addition, it includes changes among
the employees with the appropriate training as well as education based on such
procedures as well as policies.

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Conclusion
In the end of the report, this can be said that there is ethical issues discussion with the help of the
ethical theory as well as with the APES 110 code of ethics. The royal commission is into the
misconduct in the banking, superannuation as well as in the financial service industry who has
recently published its final report that reflects the compelling reading for any of the person to
take the keen interest in the ethical as well as the fair business conduct. It has been found that
recommendations for the evaluation analysis which is shared in the volume 1. The
recommendations are supported with the deontology ethical theory that is linked with this
recommendation. The freedom insurance case study has been analysed that include the different
issues that is evaluated and applied with the APES 110 code of ethics. In the end, it includes the
safeguards that are available to you using the APES 110 code of ethics.

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References
APESB. (2019). APES 110 Code of Ethics for Professional Accountants. Retrieved from:
https://www.apesb.org.au/uploads/standards/apesb_standards/standardc1.pdf
Broad, C. D. (2014). Five types of ethical theory. New York: Routledge.
Chen, Y. (2019). Deontology to Judge the Ethical Business Actions: The Case of Takata. Open
Journal of Business and Management, 7(2).
Final Report. (2019). Royal Commission into Misconduct in the Banking, Superannuation and
Financial Services Industry. Volume 1, Commonwealth of Australia 2019.
Final Report. (2019). Royal Commission into Misconduct in the Banking, Superannuation and
Financial Services Industry. Volume 2: Case Studies, Commonwealth of Australia 2019.
Gilbert, T. (2019). Final Report of the Royal Commission into Misconduct in the Banking,
Superannuation and Financial Services Industry. Retrieved from:
https://www.gtlaw.com.au/insights/final-report-royal-commission-misconduct-banking-
superannuation-financial-services-industry
Greenwood, M., & Freeman, R. E. (2018). Deepening ethical analysis in business ethics. Journal
of Business Ethics, 147(1), 1-4.
Janda, M. & Chalmers, S. (2018). Banking royal commission hears commissions, prizes fuelled
aggressive Freedom Insurance sales culture. Retrieved from:
https://www.abc.net.au/news/2018-09-11/royal-commission-hears-of-freedom-insurance-
sales-culture/10234312

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Liu, C. M., & Lin, C. P. (2016). Corporate ethical values and turnover intention. Journal of
Leadership & Organizational Studies, 23(4), 397-409.
Meyers, C. (2018). 8 Deontology. Communication and Media Ethics, 26, 139.
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development of ethical decision-making. Journal of Business Ethics, 155(1), 275-287.
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Remeikis, A. (2019). Key points and recommendations of the banking royal commission report.
Retrieved from: https://www.theguardian.com/australia-news/2019/feb/04/key-points-
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