Regulatory Update: Stronger Regulators Bill / Protecting Consumers Bill
Stronger Regulators Bill / Protecting Consumers Bill
On 6 February 2020, the Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators (2019 Measures)) Bill 2019 (Stronger Regulators Bill) and the Financial Sector Reform (Hayne Royal Commission Response – Protecting Consumers (2019 Measures)) Bill 2019 (Protecting Consumers Bill) passed both Houses of Parliament and now await Royal Assent.
Stronger Regulators Bill
The Stronger Regulators Bill implements certain recommendations of the Australian Securities & Investments Commission (ASIC) Enforcement Review Taskforce which was established in October 2016 to review the enforcement regime available to ASIC. A summary of the recommendations implemented by the Stronger Regulators Bill is set out below.
Harmonising ASIC’s search warrant powers
Effectively, the Stronger Regulators Bill harmonises ASIC’s search warrant powers by:
- referring the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and the National Consumer Credit Protection Act 2009 (Cth) to the search warrant powers in the Crimes Act 1914 (Cth) (Referred Search Warrant Powers); and
- referring the Retirement Savings Accounts Act 1997 (Cth) and the Superannuation Industry (Supervision) Act 1993 (Cth) to the Referred Search Warrant Powers in the ASIC Act.
Under these enhanced provisions, ASIC can apply for a search warrant for certain indictable offences as well as search, seize and use evidential material to perform its functions and duties and exercise its powers.
Improving ASIC’s ability to access certain telecommunications information
The Stronger Regulators Bill allows interception agencies to provide ASIC with information about interception warrants or lawfully intercepted material for the investigation of serious offences. ASIC members or staff members are also empowered to use, record or provide another person with this information for a permitted purpose.
Strengthening ASIC’s licensing powers
ASIC’s licensing powers and the offences for false and misleading documents are also strengthened by the Stronger Regulators Bill. This is facilitated through an update to the Australian financial services (AFS) licensing regime by replacing the requirement that a person be of “good fame and character” with the requirement that they be a “fit and proper person” when granting an AFS licence. ASIC is also empowered to refuse to grant an AFS licence when an application is false or misleading.
Extending ASIC’s banning powers
ASIC’s banning powers are extended by the Stronger Regulators Bill with ASIC authorised to consider a broader range of activities related to non-compliance with financial services law and the management or oversight of the conduct of a financial services or credit business when making banning orders. In certain circumstances, ASIC is also empowered to make additional banning orders prohibiting a person from certain functions in a financial services or credit business.
Protecting Consumers Bill
The Protecting Consumers Bill gives effect to certain recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Hayne Royal Commission) by addressing concerns around unfair contract terms (recommendation 4.7), consumer protection provisions (recommendation 4.2) and the conduct of mortgage brokers (recommendations 1.2 and 1.3).
The Protecting Consumers Bill implements these recommendations by:
- amending and extending the unfair contract terms regime under the ASIC Act to insurance contracts covered by the Insurance Contracts Act 1984 (Cth)
- making it clear that the consumer protection provisions of the ASIC Act apply to funeral expense policies
- requiring mortgage brokers to act in the best interests of consumers in relation to credit assistance in credit contracts and give priority to consumers in providing credit assistance where there is a conflict of interest
- banning conflicted remuneration for mortgage brokers and mortgage intermediaries (to be set out in the regulations).
Accordingly, these two Bills aim to respond to the concerns raised by the Hayne Royal Commission by strengthening ASIC’s enforcement practices and implementing better protections for consumers.
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