The roadmap committed the government to consult on/introduce legislation to implement six recommendations (1.2, 1.3, 2.4, 4.2, 4.7 and 4.8) by the end of 2019. As yet, of this list, only recommendation 2.4 has been passed into law.
[Note: Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Act 2019 implements the government's response to Hayne Commission recommendation 2.4. Under the legislation, grandfathered conflicted remuneration will be banned from 1 January 2021 and product issuers will be required to rebate the amounts to consumers. For a summary see: Governance News 7/08/2019]
Legislation to implement recommendations 1.2,1.3, 4.2 and 4.7 was introduced into the House of Representatives on 28 November.
Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019 was introduced into the House of Representatives on 28 November.
The Bill proposes to implement the government's response to four Financial Services Royal Commission Recommendations:
- Extend Unfair Contract Terms (UCT) protections to insurance contracts (FSRC recommendation 4.7)
- Extend consumer protection provisions of the ASIC Act to funeral expenses policies (FSRC recommendation 4.2)
- Legislate a best interests duty for mortgage brokers (FSRC recommendation 1.2)
- Address conflicted remuneration for mortgage brokers (FSRC recommendation 1.3)
- The unfair contract terms regime will apply to new or renewed insurance contracts from 5 April 2021. Contracts which are renewed or varied after this date will also be covered by the UCT regime.
- The explanatory memorandum observes that the application of the unfair contract terms regime to insurance will coincide with the new Design and Distribution Obligations set out in Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019.
- Consumer protection provisions (of the ASIC Act) will apply to funeral expenses policies from the day after the Bill receives Royal Assent.
- Broker reforms will apply from 1 July 2020
Announcing the changes, the Treasurer said that 'consumers and small businesses will be further protected under legislation introduced into the Parliament today by the Morrison Government'.
Implementing certain ASIC Enforcement Taskforce Review Recommendations
In addition to implementing the recommendations described above, the government's roadmap flagged the government's plans to implement a number of additional commitments requiring a legislative response, by the end of 2019.
Namely: harmonising ASIC's search warrants powers, improving ASIC's ability to access certain telecommunications information; strengthening ASIC's licensing powers; and strengthening ASIC's power to ban people in the financial sector in line with the ASIC Enforcement Taskforce Review Recommendations.
On 28 November, Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators (2019 Measures)) Bill 2019 was introduced into the House of Representatives.
The Bill proposes to:
- Bring ASIC's current range of search warrant powers into line with those in the Crimes Act (Recommendations 11-16 in Chapter 2 of the Enforcement Taskforce Report).
- Improve ASIC’s ability to access telecommunications intercept material for the investigation and prosecution of serious corporate law offences: Chapter 3 of the ASIC Enforcement Review Taskforce Report recommended that the Australian Securities and Investments Commission (ASIC) should be able to receive telecommunications intercept material to investigate and prosecute serious offences (as currently ASIC is not currently an interception agency or recipient agency under the Telecommunications Act 1997 (TIA Act)). Schedule 2 of the Bill proposes to give effect to the government's response to this recommendation by amending the TIA Act to allow ASIC to receive and use intercepted information for its own investigations and prosecutions of serious offences. The explanatory memorandum emphasises that the Bill does not allow ASIC to intercept information itself but rather allows ASIC to receive and use information already intercepted by other agencies.
- Strengthen ASIC’s licencing powers (Recommendations in Chapter 5 of the Enforcement Taskforce Report): Schedule 3 to the Bill amends the Corporations Act 2001 and the National Consumer Credit Protection Act 2009 (Credit Act) to strengthen ASIC’s licensing powers and the offences for false and misleading documents (by aligning the consequences under the Corporations Act for making a false and misleading statement to ASIC with those in the National Consumer Credit Protection Act). In his second reading speech, Treasurer Josh Frydenberg said that 'Strengthening ASIC's licensing powers will ensure that credit and financial service licensees, and the people who control them, are fit and proper to be carrying on a financial services business. Ensuring that controllers such as significant shareholders are fit and proper is essential in deciding whether a licence should be granted or retained'.
- Extend ASIC’s banning powers to ban individuals from managing financial services businesses (Recommendations in Chapter 6 of the Enforcement Taskforce Report): The amendments in Schedule 4 to the Bill propose to expand the scope of ASIC’s powers to ban a person from performing functions in a financial services or credit business where they are not a fit and proper person and provides new grounds for ASIC to ban a person, for example where they have twice been linked to a refusal or failure to give effect to a determination of the Australian Financial Complaints Authority. These changes ensure that ASIC is appropriately empowered to remove individuals from continued involvement in the financial sector, particularly those in senior positions of control and influence, and expand the grounds on which ASIC can issue banning orders.
Timing? The proposed commencement date is generally the day after Royal Assent.
Commenting on the Bill, Treasurer Josh Frydenberg said that it will 'ensure that ASIC can effectively enforce existing laws'.
Still outstanding? Legislation to implement Recommendation 4.8 – Removal of claims handling exemption for insurance
The government released a consultation paper seeking views on the removal orf the exemption of insurance claims handling from the definition of 'financial service' under the Corporations Act 2001 (Cth) on 1 March 2019. Consultation closed on 29 March. As yet the legislation has not been introduced into Parliament.
A one page summary of submissions received in response to the Consultation is available on the Treasury website here. Submissions have also been published on the Treasury website. MinterEllison's submission to the consultation is here.