Risk Regulatory Update

Final steps of Royal Commission to be legislated

The legislation for the Compensation Scheme of Last Resort and the Financial Accountability Regime has been introduced to Parliament, as part of the final steps to legislate recommendations made by the Banking Royal Commission.

The Compensation Scheme of Last Resort is recommendation 7.1, and involves facilitation of payments of up to $150,000 in compensation for personal advice, credit intermediation, securities dealing and credit provision to eligible consumers who are due compensation but none has been forthcoming. The scheme is government-funded for the first year.

The Financial Accountability Regime is recommendations 3.9, 4.12, 6.6, 6.7 and 6.8, an extension of the Banking Executive Accountability Regime to all Australian Prudential Regulation Authority (APRA) regulated entities, providing for joint administration between APRA and the Australian Securities and Investments Commission (ASIC).

The FAR strengthens responsibility and accountability for directors and senior executives.

CFS to pay $20 million fine for misleading members

The Commonwealth Bank of Australia (CBA) owned Colonial First State Investments is to pay a $20 million fine for misleading almost 13,000 members. The misleading communications was found by the court to encourage members to stay with the FirstChoice Fund rather than move into the MySuper product, a cheaper alternative. Members were told that legislation changes required CFS to get in contact and get directions to stay in the FirstChoice fund, which wasn’t true. Customer losses are estimated at $52 million with all funds to be remediated.

FASEA releases Code of Ethics Standard 3 for consultation

The Financial Adviser Standards and Ethics Authority (FASEA) developed the Financial Planners & Advisers Code of Ethics 2019, requiring all advisers to comply with the code as of 1 January 2020. After receiving feedback, FASEA is considering amendments to the wording of Standard 3 to more closely align with its intent.

The Consultation Paper on proposed options for amendment to Standard 3 of the Financial Planners and Advisers Code of Ethics 2019 can be accessed here.

All feedback and submissions are welcomed on the Consultation Paper and can be submitted through FASEA’s dedicated consultations email consultation@fasea.gov.au until 1 December 2021.