Parliament Passes Royal Commission Legislation

AFA News 16 December 2020. Both the House of Representatives and the Senate passed the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 last week. This Bill includes the claims handling licensing requirement, reference checking and new breach reporting obligations.  Despite what we feel are key and complex elements to this Bill, it was quickly passed in both the House of Representatives on Tuesday 8 December 2020, and then more quickly in the Senate on Thursday 10 December 2020, which was the last sitting day for the year.

Claims handling licencing

As previously communicated to members, the claims handling licensing legislation has been a point of concern, in wanting to ensure that financial advisers who only support clients in the claims process, would be exempt from needing to apply to vary their licence. We expect that this will be the case, however, this will need to be delivered by a regulation. We are awaiting news of this.

Reference checking

Reference checking will become mandatory for financial advisers and mortgage brokers on the change of licensee and subject to an ASIC protocol from 1 October 2021. There will be an obligation on recruiting licensees in seeking a reference. It will also be a mandatory requirement for any licensee who receives a request for a reference, to provide one in writing.  ASIC are currently consulting on the reference checking protocol.

Breach reporting obligation

This new legislation also includes a significant upgrade to the breach reporting obligation.  This is a complex piece of legislation and the obligation to report a breach to ASIC will apply for all matters that are either an offence or a civil penalty provision. Given that breaches of the Best Interests Duty and the obligation to provide an FDS are civil penalty provisions, this is likely to result in a significant increase in the number of breaches reported to ASIC. There is provision for the Government to introduce regulations to reduce the number of civil penalty provisions that need to be reported to ASIC. We will advocate for a sensible outcome on this front.

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Issued 16.12.2020. AFA Policy & Education Update