Today, Treasurer Josh Frydenberg explained how the Morrison Government is continuing its implementation of the recommendations made in the final Royal Commission report.
According to Frydenberg, the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 addresses 20 additional recommendations made in the report, along with “one additional commitment”. These changes, he added, form a “critical component of restoring trust and confidence in Australia’s financial system.”
Of particular relevance to financial advisers is that under the new legislation, parts of industry codes of practice will be made “enforceable code provisions” in instances where they “relate to commitments made by a code subscriber to the consumer.”
Explaining this change in a subsequent media release, Frydenberg said relevant code breaches would now attract civil penalties, which will “[ensure] better adherence by industry and certainty for consumers.”
It remains to be seen what enforceable provisions exist (or will come to exist) in the FASEA Code of Ethics, which is currently under fire from industry associations due to a perceived lack of clarity regarding its practical applications. As discussed on Tuesday, there were numerous specific complaints about the standards in the Code as it currently stands – including case studies about the perennial problem of clients not understanding the advice given to them, a subject discussed in the latest season of Secrets of the Money Masters.
But as per Frydenberg’s speech today, adviser code compliance isn’t the only thing on the Government’s agenda. He added that the bill also “[amends] the law to establish a protocol for reference-checking and information sharing about financial advisers and mortgage brokers to ensure they past misconduct is not hidden from their new employer.”
Turning to superannuation, Frydenberg said the changes will “prohibit superannuation trustees from having a duty to act in the interests of another except those arising from its role as trustee.”
He continued: “This will address the Royal Commission’s concern that such duties could conflict with its duty to act in the best interests of their superannuation fund members.”
ASIC’s powers also expanding, as the AFSL regime will now, as Frydenberg explained, “cover all activities undertaken by superannuation trustees.” He said this would “ensure ASIC has access to its full suite of enforcement tools and strengthen [its] ability to take enforcement action and ensure fair remediation of members.”
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