Last week Malcolm Turnbull announced: “Cabinet has met this morning and has determined the only way we can give all Australians a greater degree of assurance is a royal commission into misconduct into the financial services industry.”
For those interested, we have set out below a short summary of the nature of a Royal Commission.
A royal commission is an independent inquiry commissioned by the executive branch of government. The power and limitations of a Royal Commission are set out in the Royal Commission Act 1902.
A commission has coercive powers and therefore has the ability to compel witnesses to appear, order the production documents and initiate search warrants. A commission has disciplinary powers in relation to failures to comply with the requests of the commission. The commission’s forum is generally public and the legislation places limitations on the rules of evidence.
The conduct and manner of the inquiry is largely at the discretion of the appointed commissioner. The ultimate findings are not legally binding and have no direct legal impact. However, negative recommendations by the commission can lead to serious social and legal ramifications for those involved. Where the commission sees fit it may pass on its findings and recommendations to the Director of Public Prosecutions for review. An example of this is the Royal Commission into the New South Wales Police Service, known as the Wood Royal Commission, which took place from 1995 to 1997. The Wood Royal Commission resulted in 284 adverse findings and ultimately 7 former police officers were sentenced.
The Royal Commission into Banking and Finance will review financial institutions of all sizes including banks, wealth managers, superannuation providers and insurance companies.
Matters for investigation include the nature, extent and effect of misconduct by financial services entities and whether any conduct, practices, behaviour or business activity by financial services entities fall below community expectations.
Further points of inquiry include whether any shortfalls may be attributable to a particular culture and governance practices of a financial services entities or broader cultural or governance practices. This includes the adequacy of current laws, self-regulation and internal policies such as risk management, recruitment and remuneration practices.