The Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 passed on Thursday, implementing 21 of the 76 recommendations that came out of the inquiry.
Commissioner Kenneth Hayne had directed 54 of the recommendations towards the government.
The new bill, due to be signed off on by the Governor-General, has expanded ASIC’s role as a regulator in superannuation, with the aim to protect consumers.
The Australian financial services licensing regime has been expanded to cover all activities undertaken by super trustees, boosting ASIC’s ability to take enforcement action and chase up remediation for members.
But APRA will remain the watchdog responsible for prudential regulation and member outcomes, including licensing and supervision of trustees.
The bill has put in place a statutory obligation for the two regulators to cooperate with each other, share information on request and notify the other when a breach is covered by the other’s enforcement responsibility.
Super Consumers Australia director Xavier O’Halloran applauded the legislation seeking to boost ASIC’s ability to protect fund members from super misconduct.
“Stronger scrutiny of the conduct of superannuation funds and their impact on individual members has been a long time coming,” he said.
Schedule eight of the bill will prohibit super trustees from having a duty to act in the interests of another except those arising from its role as trustee – addressing the royal commission’s concern that such duties could conflict with its duty to act in the best interests of super fund members.
The law will also prohibit the hawking of superannuation and insurance products.
Mr O’Halloran commented the hawking ban will be key for consumers.
“Being sold into a poor quality super fund can have a devastating impact on financial security in retirement,” he said.
“With the proposed introduction of account stapling it becomes more important than ever that people aren’t sold into dud products.”
Changes for insurance, advisers and brokers
Certain provisions of financial services industry codes have been made enforceable, where they relate to specific commitments made to consumers.
AFS and credit licensees will also be required to investigate misconduct by financial advisers and mortgage brokers under schedules of the bill aiming to strengthen the existing breach reporting regime, as well as establishing an equivalent regime for credit.
There will also be a protocol for reference checking and information sharing about advisers and brokers, aiming to ensure past misconduct is not hidden from their new employer.
Insurance claims handling has been defined as a financial service in the legislation, which will make firms that handle and settle claims need to comply with Australian financial services license obligations. ASIC will also be able to take regulatory action to address poor conduct and consumer outcomes.
It also has mandated consumers must be given four days to consider their purchase of add-on insurance products, aiming to prevent pressure-selling tactics.
ASIC will gain the power to impose a cap on the commissions that can be paid for add-on insurance policies sold by vehicle dealers.
It will also prevent life insurers from cancelling life insurance contracts on the basis of non-disclosure or misrepresentation – replacing the existing duty of disclosure, where consumers had to take reasonable care to not make a misrepresentation to an insurer.
Organisations will be barred from calling themselves an insurer unless they are a regulated insurer, and from selling a product as insurance unless it is an insurance product.
A second bill implementing royal commission recommendations was introduced before Parliament on Wednesday. It has included a number of reforms for the advice sector, including a new annual renewal obligation.
