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The legislation is aiming to establish the compensation scheme of last resort (recommendation 7.1 from commissioner Kenneth Hayne’s final report) as well as the Financial Accountability Regime (recommendations 3.9, 4.12 6.6, 6.7 and 6.8).
The Financial Accountability Regime (FAR) will extend the existing Banking Executive Accountability Regime to all APRA-regulated entities and will be jointly administered by ASIC and APRA.
The scheme imposes a tighter responsibility and accountability framework within institutions, aiming to hold directors and executives accountable for their decisions.
The compensation scheme of last resort (CSLR) aims to allow consumers to receive compensation, in cases where complaints agency AFCA rules in their favour and where the financial firm has not paid them in line with the determination.
The draft CSLR would create a pool of funds from which eligible claimants who suffer losses or damages as the result of financial firms’ inappropriate conduct can access compensation, even if the firm becomes insolvent.
Under the draft law, complainants could access up to $150,000.
Industry consultations for both the FAR and CLSR bills are open until 13 August.
The government has also released ASIC’s report into conflicted remuneration for financial advisers.
It had introduced legislation to remove grandfathering arrangements for conflicted remuneration from the start of this year, and to require product issuers to rebate the amounts paid to customers.
Following an investigation, ASIC found financial product issuers fully terminated 96 per cent of conflicted remuneration arrangements by the end of 2020 and around $266.7 million had been rebated to customers from 1 July 2019 to 31 December 2020.
A further $24.4 million is estimated to be rebated to consumers during 2021.
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