On 18 December 2017 the Governor-General issued Letters Patent to the Honourable Ken Hayne AC QC formally establishing the Banking and Financial Services Royal Commission.
As anticipated, the Letters Patent generally follow the draft terms of reference released a few weeks ago, which we initially reported on here. However, in addition to clarifying the wording of the draft terms, the Letters Patent contain some key departures from the draft terms of reference.
In addition to covering misconduct by banks, insurers, AFSL-holders and superannuation funds, the terms of reference now extend to intermediaries between borrowers and lenders, including mortgage brokers. As noted in the Government’s media statement accompanying the publication of the Letters Patent, intermediaries were expressly added to the terms of reference following consultation with the Commissioner.
The draft terms had stipulated that the Commission not inquire into particular matters to the extent that to do so might prejudice, compromise or duplicate another inquiry or investigation, or a criminal or civil proceeding. The uncertainty that this wording created in respect of the Commission’s scope of inquiry has been addressed, to some degree, by the Letters Patent, which now do not require the Commission to inquire into a matter to the extent that the Commission is ‘satisfied’ that the matter has been, is being, or will be, ‘sufficiently and appropriately dealt with’ by another inquiry or investigation or a criminal or civil proceeding. While this reserves significant discretion to the Commission, the touchstone of the Commission’s ‘satisfaction’ – and the inherently subjective nature of the terms ‘sufficient’ and ‘appropriate’ – will significantly limit the scope for disputes to arise as to whether particular conduct that has been considered in previous or ongoing inquiries or litigation falls within the terms of reference.
While the draft terms already permitted the Commission to have regard to international experience, practices and reforms, the Letters Patent extend the scope of the Commission’s inquiry to ‘any matter that has occurred or is occurring overseas, to the extent the matter is relevant’ to the balance of the terms of reference.
Commissioner Hayne is required to submit an interim report by 30 September 2018. The Commission’s final report is due on 1 February 2019. It remains to be seen whether the Commission will ultimately request, or be granted, an extension of its reporting date, as has occurred in previous Royal Commissions.
All ‘financial services entities’, as well as current and former directors and officers of those entities, which come within the broad scope of this Royal Commission should already be carefully considering whether, and for what reasons, they may be drawn into the Royal Commission, and be taking active steps to prepare for receipt of Notices to Produce or witness summonses to appear before the Commission.