The Senate Select Committee on Lending to Primary Production Customers was the sixth inquiry in the last seven years to examine the conduct of Restructuring and Turnaround practitioners – will the recently announced Royal Commission be the seventh?
Unlike both the Senate Select Committee Inquiry, and the Parliamentary Joint Committee Inquiry into the Impairment of Customer Loans before it, the terms of reference released on 15 December 2017 (available here) do not directly refer to ‘insolvency practitioners’ or ‘insolvency’ at all.
However, the first term of reference directs inquiry into ‘the nature, extent and effect of misconduct by a financial services entity (including by its directors, officers or employees, or by anyone acting on its behalf).’ Whilst there may be technical legal discussion about the extent to which a receiver is acting on behalf of a lender, at a practical level it seems likely that the work of receivers may well be under review.
The definition of ‘financial services entity has been extended to cover ‘a person or entity that acts or holds itself out as acting as an intermediary between borrowers and lenders.’ This has been described as extending the Royal Commission to include the work of finance brokers – but in fact the broadened scope would appear to potentially also include the work of the “Non-mainstream advisers” who concerned the Senate Inquiry.
The terms of reference specifically allow the Commission to choose to not investigate matters where to do so would duplicate the existing work of another inquiry or civil proceeding.
That power to avoid duplication may assist the commission to meet its tight deadline, but it has the potential to frustrate those who see their previous failure in Court as defining a ‘broken’ legal system, and who use each fresh inquiry as an opportunity to re-litigate those failures.
The Commission may submit to the Government an interim report no later than September 2018, and must submit a final report by 1 February 2019.
*Although headlines have referred to a ‘Banking Royal Commission’ in fact the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry specifically extends to non-bank lenders, as well as insurance companies, and Superannuation Funds.
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