You are here

FSR consultation package – the 2020 vision

11 February 2020 | Australia
Legal Briefings – By Michael Vrisakis and Tony Damian

Share

One year on from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the Federal Government has released its most significant reform package for the financial services industry. 

On 31 January 2020, Treasury released exposure draft legislation to implement 22 of the 76 recommendations from the Royal Commission. Many of these reforms are proposed to come into effect on 1 July 2020, giving industry less than 6 months to implement far-reaching changes spanning product sales processes, distribution channels and governance structures, while grappling with an evolving relationship with ASIC and APRA.

The reforms will add another layer of complexity for the financial services industry on top of the existing complexity and density of financial services law. However, in the currently political and regulatory climate, this trend is unlikely to change in the short to medium term. There is significant pressure on the Government to demonstrate its commitment and ability to deliver on Commissioner Hayne’s recommendations, and with a compressed legislative timetable, we expect that the Government and regulators will press industry to meet new legislative and regulatory requirements with no leniency.

As with all reform, there is opportunity for the financial services industry to develop and transform in line with the new regulatory zeitgeist. We look forward to working with you in maximising these opportunities.

Regulator reforms

Misconduct and reporting

Treasury has proposed significant reforms to the breach reporting framework, including a new obligation on licensees to lodge a report with ASIC where there are reasonable grounds to believe that a “reportable situation” has arisen.

Please click here to view a summary table

Enforceable codes provisions

ASIC will be able to designate enforceable provisions in industry codes, and the Minister will be able to introduce regulations to declare that a code will be mandatory.

Please click here to view a summary table

Financial Regulator Assessment Authority

The new three-member authority will regularly assess APRA and ASIC’s effectiveness and report directly to the Minister. The Secretary of the Treasury be an ex-officio member.

Please click here to view a summary table

ASIC directions power

ASIC will have a broad range of directions powers to address a contravention where it has reason to suspect that a financial services licensee has engaged, is engaging or will engage in conduct that constitutes a contravention of a financial services law.

Please click here to view a summary table

Superannuation reforms

No other role or office for RSE trustees

Body corporate RSE licensees must not have a duty to act in the interests of another person, other than a duty that arises in the course of performing duties or exercising powers as a trustee of a RSE, or providing personal advice.

Please click here to view a summary table

Superannuation Regulator roles

APRA and ASIC will jointly administer provisions of the Superannuation Industry (Supervision) Act 1993 (Cth) that trigger penalty provisions or relate to member outcomes. Superannuation trustee services will be incorporated into ASIC’s Australian financial services licensing regime.

Please click here to view a summary table

Advice fees in superannuation

The ability to charge advice fees in respect of MySuper products will be significantly curtailed. Advice fees in respect of choice products must comply with the annual renewal requirements for ongoing fee arrangements (where applicable) or with any consent requirements determined by ASIC.

Please click here to view a summary table

Hawking prohibitions

The hawking prohibition in ss 992A and 992AA of the Corporations Act 2001 (Cth) (Corporations Act) will be expanded, with new provisions including a definition of ‘unsolicited contact’.

Please click here to view a summary table

Financial advice reforms

Ongoing fee arrangements

Ongoing fee arrangements must be renewed annually and financial disclosure statements must be given both prospectively and retrospectively.

Please click here to view a summary table

Disclosure of lack of independence

In instances where a financial adviser would otherwise contravene s 923A of the Corporations Act, the financial adviser must give clients a written statement in a form prescribed by ASIC disclosing their lack of independence before providing personal advice, and they must include equivalent information in their Financial Services Guide.

Please click here to view a summary table

Insurance reforms

Restricting use of the term “Insurance” and “Insurer”

Penalties will apply if the word “insurance” or “insurer” is used in the course or proposed course of business when the product or person is not that thing, and it is likely that the product or person could be mistakenly believed to be that thing.

Please click here to view a summary table

Deferred sales model for add-on insurance

Under these reforms, add-on insurance can only be sold to retail consumers 4 days after and within 6 weeks of the later of:

  • the customer purchasing or entering into a commitment to purchase the principal product; or
  • when the required information is given to them. 

 

Please click here to view a summary table

Cap on vehicle dealer commissions

ASIC may, by legislative instrument, determine caps on commissions for add-on risk products supplied in connection with motor vehicles.

Please click here to view a summary table

Duty to take reasonable care not to make a misrepresentation to an insurer

The current disclosure regime for eligible contracts of insurance will be expanded to all general and life policies (including group life policies) that are sold to consumers for their personal use.  

Please click here to view a summary table

Limiting avoidance in life insurance contracts

The circumstances in which a life insurer can avoid a contract will be limited. 

Please click here to view a summary table

See how we help our clients in

Financial Services Regulatory

Learn More

Key Contacts