The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (established by the Federal Government on 14 December 2017) will investigate alleged misconduct in the Australian financial services industry. This includes misconduct by Australian banks (big and small), wealth managers, superannuation providers and insurance companies.
The Commission has been touted by the Federal Government as ensuring a comprehensive investigation into how the financial services industry has dealt with cases of misconduct in the past, and whether there are cultural and governance issues in terms of the regulation and supervision of the industry.
Former High Court of Australia judge, the Hon Kenneth Hayne AC QC will head the Commission, with the initial public hearing on 12 January 2018 in Melbourne. An interim report is expected from the Commissioner by 30 September 2018, with a final report due by 1 February 2019.
What is considered misconduct in the financial services industry?
The kind of misconduct that the Commission will look into includes conduct that
- constitutes an offence under Commonwealth, State or Territory law;
- is misleading, deceptive, or both;
- is a breach of trust, breach of duty or unconscionable conduct; or
- breaches a professional standard or widely recognised and adopted standards of conduct in the financial services industry.
Examples of alleged bad bank behaviour have included some of Australia’s biggest banks, in matters such as breaches of anti-money laundering and terrorism financing laws, rate rigging, insurance fraud, and alleged misuse of superannuation members’ financial savings.
What will the Commission investigate?
Under the Commission’s terms of reference, the Commissioner is authorised to enquire into matters including:
- whether any conduct by financial services entities (including by directors, officers or employees, or anyone acting on behalf of those entities) might have amounted to misconduct, and whether criminal or legal proceedings should be referred to the relevant Commonwealth, State or Territory agency;
- whether any conduct, practices, behaviour or business activities by financial services entities fall below community standards and expectations;
- whether the use by financial services entities of superannuation members’ retirement savings, for any purpose, does not meet community standards and expectations or is not other wise in the best interests of those members;
- whether any findings:
- are attributable to the particular culture and governance practices of a financial services entity or broader cultural or governance practices in the relevant industry or industry subsector; or
- result from other practices, including risk management, recruitment and remuneration practices, of a financial services entity, or in the relevant industry or industry subsector; and
- the effectiveness of mechanisms for redress for consumers of financial services who suffer detriment as a result of misconduct by financial services entities.
What powers does the Commission have?
The Commission is an inquiry body, established to make recommendations to the Federal Government. It does not have the power to resolve disputes or award compensation to consumers affected by the bank misconduct.
The Commission can recommend to the Federal Government that changes are necessary to:
- the legal framework of the financial services industry;
- the practices within banks and other financial services entities; and
- financial industry regulators.
The Commission can also refer instances of misconduct by the banks and its officers or employees to relevant Commonwealth, State or Territory agencies who may pursue criminal or other legal proceedings.
The Royal Commission also has the power to summon witnesses to give evidence and authorise police to apply for search warrants.
Members of the public have the ability to make submissions in relation to instances of misconduct to the Commission (access the Commission’s online public submissions portal here).
The Commission advises that all public submissions will be reviewed in forming its final report.
Obligations of financial services providers
Financial services providers and their employees should familiarise themselves with their legal obligations and rights if summoned to give evidence in person or required to produce documents by the Commission.
Under the Royal Commissions Act 1902 (Cth) (Act), intentionally preventing a person from appearing as a witness or producing requested documents to the Commission is an imprisonable offence. Dismissal of employees on account of appearing as a witness or producing documentary evidence to the Commission is also an offence under the Act, carrying a fine or prison term.
How we can help
HHG Legal Group can assist you in understanding and complying with your legal obligations if you are required to give evidence to the Commission.
For more information, contact HHG Legal Group on 1800 609 945
This is general information only, and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters please contact our office at firstname.lastname@example.org or call us on 1800 609 945.