The Financial Sector Reform (Haynes Royal Commission Response) Bill 2020 was introduced on 12 November 2020 to implement several recommendations made in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
The Bill includes the following measures:
- hawking of financial products (recommendations 3.4 and 4.1). Schedule 5 of the Bill amends the Corporations Act 2001 to ban the hawking of financial products, to take effect the day after Royal Assent or 5 October 2021, whichever is later.
- trustees of registerable superannuation entities should have no other duty (recommendation 3.1). Schedule 8 of the Bill amends the Superannuation Industry (Supervision) Act 1993. It imposes a new condition of licences held by a body corporate trustee of a registrable superannuation entity, prohibiting these trustees from having a duty to act in the interest of another person, to take effect from the day after Royal Assent or 1 July 2021, whichever is later.
- adjustment of APRA and ASIC roles in superannuation (recommendations 3.8, 6.3, 6.4 and 6.5). Schedule 9 of the Bill extends ASIC’s role in superannuation regulation to cover consumer protection and market integrity regulation. It also extends the Australian financial services licensing (AFSL) regime so that each RSE licensee must hold an AFSL authorising it to provide a superannuation trustee service, capturing all activities involved in operating a superannuation fund. It will also prevent superannuation trustees and directors from using trust assets to pay criminal, civil or administrative penalties. Schedule 9 will take effect the day after Royal Assent or 1 January 2021, whichever is later.
The Bill also includes measures regarding financial adviser reference checking and information sharing between licensees, breach reporting and remediation and several insurance related changes.
The Bill was passed by both houses on 10 December and now awaits royal assent.
The Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020 was introduced on 9 December 2020 and is focused on improving consumer protections. In particular:
- annual renewal and payment (recommendation 2.1). Schedule 1 of the Bill amends the Corporations Act 2001 to require financial service providers to provide clients with a single document each year, which outlines the fees that will be charged, the services to which the client will be entitled and seeks annual renewal from clients for all ongoing fee arrangements. They must also obtain written consent before fees under an ongoing fee arrangement can be deducted from a client’s account.
- disclosure of lack of independence (recommendation 2.2). Schedule 2 of the Bill also amends the Corporations Act 2001 to require a providing entity (ie a financial services licensee or authorised representative) to give a written disclosure of lack of independence where they are authorised to provide personal advice to a retail client.
- advice fees in superannuation (recommendations 3.2 and 3.3). Schedule 3 of the Bill amends the Superannuation Industry (Supervision) Act 1993 to provide greater protection for superannuation members against paying fees for no service. As a result, fees under an ongoing fee arrangement will not be able to be deducted from MySuper products. In addition, trustees will be prohibited from charging a member fees for advice provided to that member (other than intra-fund advice) unless:
- the fee is charged in accordance with an arrangement that the member has entered into
- the member has consented to the fee, and
- the trustee has the consent, or a copy of the consent from the member.
Date of effect for Schedules 1 and 2 is 1 July 2021. Schedule 3 also applies from 1 July 2021 with a 12 month transitional period commencing 1 July 2021 for arrangements entered into before 1 July 2021.