What do I need to know about the Royal Commission into the Banking, Superannuation and Financial Services Industry?

Commercial Law
Matthew Peckham Portrait

On 30 November 2017, the Australian Government announced the establishment of a Royal Commission into the Banking, Superannuation and Financial Services Industry, publishing draft terms of reference.  On 1 December 2017, it appointed Justice Kenneth Hayne, a member of the High Court from 1997 to 2015, as Royal Commissioner.  

It is important that practitioners, institutions and authorities who are preparing for the Royal Commission gain an understanding of its context, by examining what has come before.  Since about 2006, scarcely a year has gone by without one or more substantial public inquiries having reported on the issue of financial misconduct or the integrity of the banking, financial services and superannuation sectors more generally. 

What is the scope of the Royal Commission?

The proposed Terms of Reference, published on 30 November 2017, can be found here.  In summary, the key issues which the Royal Commission has been appointed to investigate include:

  • misconduct by financial services entities;
  • conduct by financial services entities which falls below community standards and expectations, including specifically in relation to the use of superannuation members’ retirement savings;
  • the extent to which any adverse findings are attributable to culture and governance practices;
  • the effectiveness of mechanisms for redress for consumers who have suffered detriment as a result of any relevant misconduct;
  • the adequacy of existing laws, financial services entities’ internal systems and controls, and industry self-regulation in the financial services sector;
  •  the effectiveness and ability of the relevant regulatory authorities.

Significantly, the draft terms of reference provide that the Commission is not required to inquire into, and may not make recommendations in relation to, macro-prudential policy, regulation or oversight.  That is, policy and regulation that is concerned with containing systemic risk, which can have widespread implications for the financial system as a whole, beyond simply the banking system.

Finally, the Royal Commission has been tasked to report on whether any changes to the law, or changes to practices within financial services entities or the financial regulators, is necessary to minimise the likelihood of future misconduct.

Under its draft terms of reference, the Royal Commission is required to produce a final report within 12 months of commencing operations, and may submit an interim report no later than September 2018. 

How did we get here? 

In 2006, the Parliamentary Joint Committee reported on the collapse of Westpoint, a property developer which collapsed owing approximately $388 million to over 4,300 investors, largely in unsecured promissory notes. 

Since the Westpoint report, the financial services sector has experienced on average one or more substantial inquiry per year, in relation to problems concerning either financial misconduct or sources of systemic instability.  The Royal Commission is merely the latest, and possibly the largest, in this series of successive inquiries. 

The present Royal Commission was called in the context of public concerns regarding the ‘Big Four’ Australian banks, particularly in relation to financial advice, the management of insurance claims, anti-money laundering compliance, and the alleged rigging of the Bank Bill Swap Rate (BBSW).  Those concerns are likely to form a key focus of the present Royal Commission.  However, there are recurring themes raised repeatedly in the previous inquiries, which are likely to re-emerge.  These include:

  • corporate governance and culture;
  • the role and powers of the Australian Securities and Investments Commission, and other financial regulators or dispute resolution bodies; and
  • the need to regulate for Australia’s $2.3 trillion pool of superannuation assets. 

A timeline of the various inquiries, with links to the reports themselves, is set out as an appendix to this article.  The number and variety of those reports highlights both the range of issues that may arise in the course of the Royal Commission, and the frequency with which they have arisen in the past as matters for public inquiry. 

How is a Royal Commission different from the previous inquiries? 

The Royal Commission is distinguished from the previous inquiries by being the largest independent inquiry to date dealing specifically with the issue of financial misconduct. 

Scope and subject matter 

The independent 2014 Financial System Inquiry, for example, is notable as the most substantial and wide-ranging inquiry into the financial sector in recent years, with very broad terms of reference including ‘to refresh the philosophy, principles and objectives underpinning the development of a well-functioning financial system’.  However, the Financial System Inquiry can be distinguished from the present Royal Commission by its focus on the stability and future of the financial system more generally, and not on the problem of financial misconduct. 

Further, although the issue of financial misconduct has been addressed squarely by several previous Parliamentary inquiries regarding specific areas of concern, the Royal Commission marks the first wide-ranging inquiry that tackles the issue more broadly.  Among other things, previous inquiries have focused on:

  • the regulation of financial products and services;
  • agricultural managed investment schemes;
  • ‘land banking’ scams; and
  • the appropriateness of the current criminal and civil penalties for white collar crime and financial misconduct.  

Most significantly, the 2009 Ripoll Inquiry, conducted by the Parliamentary Joint Committee on Corporations and Financial Services, was motivated by the high-profile collapses of financial advisory group Storm Financial and stockbroker Opes Primes.  That inquiry’s recommendations led to the subsequent passing of the Future of Financial Advice laws – a substantial law reform package aimed at improving standards and removing conflicts of interest in the financial advice sector. 

Powers, resources and independence 

In terms of their investigative power, both a Royal Commission and the Parliamentary committees that have conducted the previous such inquiries are capable of compelling the attendance of witnesses and the production of documents. 

However, the Royal Commission is distinguished by the fact it is undertaken by a former High Court judge, independent of political allegiances or other commitments, whose sole task is to conduct the inquiry.  As such, the Royal Commission is likely to command greater resources, and to report with greater clarity and independence, than any of the inquiries before it. 

As with the previous inquiries, the Royal Commission is almost certain to result in recommendations both for law reform and for the governance and practices of Australia’s financial institutions and financial regulators.  For the interested parties, it would be wise to keep this in mind and develop a strategy accordingly. 

Appendix:  Timeline of previous inquiries from 2006 to the present 












Matthew Peckham has acted in litigation concerning the collapse of the Westpoint group, the winding up of major forestry managed investment schemes, high profile ‘land banking’ scams, and the UK’s largest ever successful insider trading prosecution.  Before coming to the Bar, he acted for financial institutions, insolvency practitioners and public authorities as a Special Counsel at Maddocks, and worked in the Enforcement divisions of both ASIC and the Financial Services Authority (UK).  Since coming to the Bar, Matthew has acted as junior counsel for the defendant in the first ever civil penalty proceeding brought by ASIC under the Future of Financial Advice laws. 

Matthew has previously written on the subject of public inquiries into the financial services sector in the Company and Securities Law Journal: Matthew Peckham, ‘From the Wallis report to the Murray report: a critical analysis of the financial services regime between two financial system inquiries’ (2015) 33 C&SLJ 478.

Matthew Peckham Portrait

Matthew specialises in commercial, corporate and regulatory litigation

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