Ethics and financial services

Document Type:Thesis

Subject Area:Finance

Document 1

This section of the discussion presents how the cases provided within Royal commission interim report showed elements of greed as a result of incentives misappropriation. In other parts of the paper, unethical behavior in listed firms results from the principles that the Australian Securities Commission operationalize as a guide to firms. These principle yield alternatives which allow managers and directors to mishandle the activities of the firm. Additionally, the global financial crisis came with enormous policy adjustments for both the American and Australian financial system. Indeed, the differences between these countries point to the ethical, and operational standards that both regulators and firms must pursue. During September and October 2015, two witnesses informed the bank of the alleged bribery and unusual practices within its Western Sydney branches (Royal Commission, 2018, p.

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The in-depth assurance review conducted showed that the company indicated several disparities within the introducer files and the sales incentives recorded. All in all, the introducer program and the employees' remuneration program provided a channel for remuneration misincentives. According to the KPMG report, many issues were identified concerning the NAB introducer program and internal measures put in place by the bank to control the level of fraud within the banking sector (Royal Commission, 2018, p. Also, NAB introduced a forensic team which found unapproved introducers directing the customers to the lending managers. This act is a representation of corrupt practice to the authority and a wrong testimony to the commission that the company’s decision to continue charging fees as a result of a business process is a fraudulently gain from its customers (Royal commission 2018).

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On April 2018, ASIC stated in confirmation that it had investigated the company’s fees for no service. It further acknowledged that AMP had been cooperating in the investigation, and as a result, several documents of the company were accessed to determine the extent of damage to the customers. AMP Fees for no service case also reaffirms the greed of financial institutions for accepting fees from their clients even in situations that no single service was provided. Here, the management abused the system by greedily gaining from their customers without honoring the business agreement. Failure to comply with the regulations always make the firms listed with the commission to be responsible for their action. However, most firms listed with the regulatory body have not adequately complied with the standards, hence, the precipitation of the current unethical behavior in the Australian Financial sector (ASX 2009).

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The Australian financial system has a common financial regulatory mechanism which to some extent creates gaps in the principles governing the behavior of firms. Unethical behavior within the industry can be discussed by analyzing the weaknesses within the ASX principles. These gaps include: 1. Changes within the financial system have mostly affected the individual financial players as well as the financial markets, where the primary focus of modifying the structure of the institution. Both Australian and the United States financial system were severely affected by the credit crisis of 2008 (Mahabadi and Yang 2015). Indeed, the credit crisis initiated a high-level financial failure within these two regions. In the United States, most of the financial players blamed the government’s regulatory authorities for failing to provide the appropriate measures to control the crisis.

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The financial system in Australia is regulated by Australian Securities and Investment Commission (ASIC) and Australian Prudential Regulatory Authority (APRA). In spite of this, both countries apply different credit score to fixed appropriate rates for their finances. The American system utilizes the FICO model which records the payment history of the institutions and financial instruments that are frequently traded within the U. S system. Mostly, FICO model records scores between 300 and 850 while scores above 740 ensure stability within the financial markets (Henry, 2010, p. Conversely, the Australian system uses the Vedascore system that has a scale of 0 to 120. Lastly, the Australian Prudential Regulation Authority (APRA) which is an independent organization tasked with supervising the financial institutions including banking and insurance firms must also come up with strict procedures to ensure compliance with the existing laws.

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For example, most of the inquiry cases filled with the Royal Commission indicated that the regulators lacked evidence on the cost and benefits to support the issues they have identified. Again, the Australian Bankers Association (ABA) estimated that four financial institutions including Foreign Account Tax Compliance Act (FATCA), Future of Financial Advice (FOFA) law reform and Financial Claims Scheme spend approximately $ 1. 67 billion on the security systems (Donovan and Gorajek 2011). The benefit of these expenditures can only be seen when the financial institutions deploy systems that make the employees comply with the existing laws. Donovan, B. and Gorajek, A. Developments in the structure of the Australian financial system. RBA Bulletin, pp. Henry, K. In LISS 2014 (pp. Springer, Berlin, Heidelberg. MinterEllison. Financial Services Royal Commission: Financial Services Royal Commission: Fee for no service case studies.

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