The Royal Commission into Australia's banking, superannuation and financial services industry has finally been established with confirmation that it will indeed cover mortgage brokers.
A joint statement by Treasurer Scott Morrison
and Attorney-General George Brandis noted that the Commission will look into financial misconduct in the financial services sector including “banks, insurers, superannuation trustees, holders of Australian financial services licenses and intermediaries, such as mortgage brokers”.
The government decided to include brokers following consultation with appointed Commissioner Kenneth Madison Hayne on the draft terms of reference.
However, the official terms of reference do not specifically mention mortgage brokers at all with a Letters Patent to Hayne instead noting that the Commission will look into authorised deposit-taking institutions (ADIs), general and life insurers, Australian financial services licence holders, and people or entities that act as intermediaries between borrowers and lenders.
In particular, Hayne has been charged with examining potential misconduct by any financial entities listed above and whether civil or criminal charges should be laid.
The Royal Commission has also been tasked in establishing whether conduct, practices or behaviour of a financial services business or individual falls “below community standards and expectations”.
If any issues are raised, the Commission is expected to determine whether these are a result of particular culture or governance practices or whether they result from other factors such as risk management, recruitment or remuneration.
Finally, the Commission will also examine the effectiveness of consumer compensation mechanisms, existing laws and policies around financial services, and the various forms of industry self-regulation.
When forming conclusions around the findings, the patents letter calls upon the Commission to consider the implications any proposed changes will have on the economy, consumer outcomes, competition and industry stability.
Further limitations imposed in the letters patent include the Commission:
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- Refraining from investigating matters that relate to macro-prudential policy and regulation
- Prioritising matters that have a “greater potential for harm” if not resolved quickly
- Opting not to delve into matters which have been or are being looked into by another inquiry, investigation or court proceeding