RegTracker 16 Nov 2020 – Spotlight on Hayne Royal Commission Response Bill

Print Friendly, PDF & Email

By Mark Bland, Partner and Geoffrey McCarthy, Special Counsel 

This fortnightly update is designed to help superannuation trustees track and manage regulatory change. We look ahead to forthcoming developments, look back at recent changes and then consider the impact on trustees. This edition’s spotlight is on the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020.

Key developments

Looking ahead

17 November – Comments due to Treasury on miscellaneous amendments to legislation including the Corporations and SIS Act, including to enable different investment fees being charged in a life cycle MySuper product and continuation of elections for life insurance after a successor fund transfer.

20 November – Public Hearing of Standing Economics Committee – Superannuation sector. Attending are (in order of appearance) Diversa Trustees (Future Super and Verve Super), ACSI, HESTA, Rest, One Path, REI Super and TWU Super

29 November –  Comments due on issues paper on Review of the Privacy Act

30 November – Parliament starts sitting for two weeks

Also expected shortly:

  • ASIC guidance on Design and Distributions Obligations
  • ASIC consultation on updating of Regulatory Guide 256 Client review and remediation and extension beyond financial advice
  • ASIC undertaking the second phase of  targeted consultation on IDR data collection and reporting building on the feedback that industry and consumer stakeholders provided in response to Consultation Paper 311 Internal dispute resolution: Update to RG 165.

Looking back

16 November – APRA issues weekly data on COVID-19 Early release of super collected under the COVID-19 Pandemic Data Collection Request program. $35.0bn in payments have now been made.

12 November – APRA releases  Response Paper – Strengthening prudential requirements for remuneration with proposed new draft CPS 511 – Remuneration for further consultation ending 12 February 2021

12 November Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 introduced into the House of Representatives, consolidating previous draft bills and dealing with areas such as:  No hawking of superannuation products, Super Regulator Roles, reference checking, trustees to have no other role, strengthening breach reporting, regulatory co-operation, insurer avoidance of life insurance contracts and duty not to mislead.

11 November – House of Representatives amends the ITAA and SUMLM Act to facilitate payment of lost and unclaimed superannuation money held by ATO directly to KiwiSaver schemes.  See Treasury Laws Amendment (2020 Measures No. 5) Bill 2020

11 November – House of Representatives passed Anti-Money Laundering and Counter-Terrorism Financing and other Legislation Amendment Bill which includes provisions to clarify the circumstances in which reporting entities may rely on customer identification and verification procedures undertaken by a third party.  Introduced to Senate on 12 November.

11 November – APRA published Outcomes assessment under s. 52(9) of the Superannuation Industry (Supervision) Act 1993 – frequently asked questions supporting Strategic Planning and Member Outcomes – APRA Standard.  APRA states they expect trustees to undertake the annual outcomes assessment by the end of February 2021 and should not place this work on hold due to announced but yet-to-be-enacted changes arising from “Your Future, Your Super” and are expected to compare their MySuper product against all MySuper products.

11 November Family Law Amendment (Western Australia De Facto Superannuation Splitting and Bankruptcy) Bill 2019 introduced to the Senate having passed the House of Representatives. The Bill will address anomalies that prevent de facto couples in WA from splitting superannuation as a part property settlement and that require bankruptcy and family proceedings to be dealt with in separate courts.

10 November – Jane Eccleston discusses ASIC’s priorities in super for 2020-21 in article in Superfunds magazine.

9 November – Department of Home Affairs published Exposure Draft of the Security Legislation Amendment (Critical Infrastructure) Bill 2020 and associated consultation materials.  Obligations will apply to operating critical superannuation infrastructure.  Comments are sought by 27 November.

9 November – Senate Select Committee on Financial Technology and Regulatory Technology issued a second  Issues Paper. Again, the application of consumer data rights to super is discussed.

6 November – Public Hearing of House Standing Economics Committee – Superannuation sector. In attendance were AustralianSuper, BT Super, IFM Investors, Suncorp and Mercer. House Standing Committee on Economics – Superannuation Sector. Questions for the superannuation funds included the REST settlement and Climate Risk, “Your Future, Your Super” and non-disclosure agreements.  See transcript.

4 November – AFCA announces they will proceed to propose rules amendments to transfer unfinished complaints from SCT.

On the horizon spotlight – Hayne Royal Commission Response Bill

Fast Facts

  • Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 was introduced into the House of Representatives on 12 November 2020.
  • The Bill deals with enforceable code provisions, insurer avoidance of life insurance contracts and duty to take reasonable care to avoid misrepresentation, hawking of financial products, claims handling and settling services, trustees to have no other role, adjustment of APRA and ASIC’s roles in superannuation, reference checking and information sharing protocols, breach reporting and remediation, investigating and remediating misconduct and regulatory co-operation and other matters.
  • The commencement dates vary from 1 January 2021 to 5 October 2021

Overview of Hayne Royal Commission Response Bill


Breach reporting and remediation

These reforms introduce new concepts of a “reportable situation”:

  • Reporting obligations would be triggered if the AFS licensee commences an investigation into a significant breach of core obligations
  • Core obligations include AFS licensee obligations or obligations under the SIS Act
  • The AFS licensee would be required to report within 30 days of when the licensee should be aware of reasonable grounds to believe a reportable situation has arisen
  • ASIC is required to publish annual reports about breaches naming the relevant AFS licensees

A reportable situation in relation to personal advice to retail clients also triggers client notification and remediation obligations.

Likely commencement date is for breaches that the licensee was first aware on or after 1 October 2021.

Superannuation regulator roles

  • ASIC is to have a significantly increased regulatory functions in relation to superannuation from 1 January 2021
  • APRA will continue to be the prudential regulator and ASIC will have an enhanced role as the conduct and disclosure regulator
  • ASIC will be given additional powers of enforcement under the SIS Act including powers that may also be exercised by APRA
  • A new financial service, ‘provide a superannuation trustee service’ will bring all trustee operations under the AFS licensing regime. Existing superannuation trustees who are AFS licensee with authorisation to deal will be taken to have the new authorization.
  • This new financial service will cover such matters as fee charging practices, investment selection, product changes, oversight of service providers, insurance claims handling, and transfer, payment and rollover practices.

Likely commencement date is 1 January 2021 or assent whichever is first.

No hawking

  • Issuing or invitations to issue superannuation produces would generally be prohibited:
    • in the course of or because of an unsolicited contact via telephone or face-to-face meetings
    • in other form of communication creating an expectation of an immediate response
  • The amendments would clarify when a communication was unsolicited
  • The amendments won’t generally affect engagement with existing members except for changes to retirement phase as changes within a fund such as additional contributions will generally not be an issue of a superannuation product
  • In a significant change from the exposure draft, acquiring an interest in a different product in a superannuation fund will be treated as an issue that is subject to the prohibition.  This includes switching from MySuper to Choice or vice versa, or Choice to Choice products.
  • The EM indicates that business development staff attending workplaces would need to avoid handing out application forms unsolicited and creating situations that create an expectation of an immediate response from employees they interact with.

Likely commencement date is 5 October 2021.

Trustee to have no other role

  • A new condition will be imposed on all RSE licensees prohibiting trustees from having any obligations to another person other than those arising in the course of its performance of its duties as a superannuation trustee
  • The prohibition won’t apply to the provision of personal advice
  • A trustee would be banned from acting as a responsible entity of a registered managed investment scheme, operator of an unregistered scheme or otherwise undertake or be subject to fiduciary or other duties to act on behalf of others
  • Failure to comply would not result in the duties to others not applying, but will result in a breach of the new RSE licence condition

The Bill provides for the commencement date to be 1 July 2021, however the EM indicates that trustees who may need to restructure to comply will need to do so by 1 January 2022, creating some ambiguity around the commencement date. APRA will be able to postpone operation of the new condition on a case-by-case basis, which the EM indicates may be appropriate where complex restructuring may be required to comply.

Enforceable code provisions

Schedule 1 of the Bill implements Hayne RC Rec. 1.15 to give ASIC power to make certain code provisions enforceable with infringement notices and civil penalties for breach.  There is also a power for Treasury to create a mandatory code of conduct framework.

ASIC cannot exercise the power to approve a code of conduct without an application which practically will need to come from industry.

The likely commencement date is 1 January 2021.

Insurance – Effect of misrepresentation and non-disclosure

Part 1 of Schedule 2 to the Bill implements Hayne RC Rec. 4.6. It amends the Insurance Contracts Act to limit the circumstances in which an insurer can avoid a life insurance contract on the basis of non-fraudulent misrepresentation or non‑disclosure by an insured.

The likely commencement date is 1 January 2021.

Part 2 of Schedule 2 to the Bill implements Hayne RC Rec 4.5. It amends the Insurance Contracts Act to replace the duty of disclosure for consumer insurance contracts with a duty to take reasonable care not to make a misrepresentation.

The likely commencement date is in respect of contracts entered from 5 October 2021.


Reference checking and information sharing protocols

Schedule 10 of the Bill implements Hayne RC Rec. 2.7 that AFS licensees should be required to give effect to reference checking and information sharing protocols for financial advisers.

The Bill would:

  • create a new ‘general obligation’ for AFS licensees to comply with a reference checking and information sharing protocol
  • empower ASIC to create the protocol after consultation
  • create civil penalties for breaches

The likely commencement date is 1 October 2021.

Investigating and remediating misconduct

Schedule 11 of the Bill implements Hayne RC Rec. 1.6 and 2.9 that AFS licensees and AC licensees be required to make whatever inquiries are reasonably necessary to determine the nature and full extent of the misconduct.

Licensees will be required to investigate potential and actual misconduct engaged in by financial advisers and mortgage brokers, and to inform and remediate affected clients.

The likely commencement date is 1 January 2021.

Advice fees

The Bill does not cover the recommendations to preclude advice fees from MySuper or further regulate deductions from choice products.  These may be in a forthcoming bill.

Previous Editions

You may also be interested in reading some of our other commentary in our previous editions’ spotlights:


For further information, please do not hesitate to contact us.

Get the latest news insights and articles straight to your inbox, simply enter your details.




    *Required Fields

    Financial Services

    RegTracker 24 April 2023