AFCA Financial Complaints 2021 (5 July 2021)
AFCA released statistics on financial complaints it received for the 2021 Financial Year.
From a total of 70,510 complaints, the superannuation industry received the following:
- delay in claims handling – 856 complaints
- denial in claims – 517 complaints
- service quality – 517 complaints
- account administration error – 487 complaints
- incorrect fees/costs – 417complaints.
The ATO More flexible superannuation (6 July 2021)
The ATO has updated its advice on the bring-forward arrangements, confirming those aged under 67 will be able to bring forward contributions, provided they meet the eligibility requirements.
ASIC draft guidance on hawking reforms (21 July 2021)
ASIC is seeking consultation with trustees regarding its draft updates to ASIC ‘Regulatory Guide 38 The hawking prohibitions’ (RG 38) to reflect new amendments made to the Corporations Act’s anti-hawking provisions. ASIC is seeking comment in respect of the following proposals:
- ASIC proposes to update its guidance to include further information on the forms of communication that are subject to the prohibition. This includes providing guidance on real-time interactions, which are in the form of a conversation or discussion, and guidance on advertising and information-giving practices
- reflecting the reforms, ASIC proposes to revise their guidance on the nature of the consent that is required from a consumer who wishes to be contacted about a financial product, including updating RG 38 to clarify the nature of consent needed from the consumer, including:
- that the consent must be positive, voluntary, and clear
- that a reasonable person would have understood that a consumer consented to the contact
- that the consumer can vary or withdraw the consent and the implications of doing so
- what to expect from an offeror in relation to a contact, including the period following consent within which the contact must be made
- the records that an offeror may need to keep.
- ASIC proposes to revise its guidance to clarify that it expects an offeror to offer, issue or sell to a consumer (or invite or request a consumer to purchase or apply for) only financial products that are reasonably within the scope of what the consumer has consented to, including offers of cross-sold or bundled products
- ASIC proposes to include guidance in RG 38 on:
- the consumer remedy giving a consumer the right to return a product and receive a refund when the hawking prohibition has been breached
- how this remedy will operate for different financial products.
Comments are due on 18 August 2021.
Treasury Laws Amendment (Measures for Consultation) Bill 2021: Compensation Scheme of Last Resort (16 July 2021)
Treasury is seeking comment on its draft legislation proposing to establish the Compensation Scheme of Last Resort (CSLR) which will facilitate the payment of limited compensation to eligible consumers who have received a determination from AFCA.
The main objective of the proposed CSLR is to provide a pathway for eligible consumers to receive compensation, flowing from an AFCA determination in their favour and where the financial firm has not paid the consumer in accordance with the determination.
Comments are due on 13 August 2021.
Financial Accountability Regime Bill 2021 (17 July 2021)
Treasury released draft legislation seeking to extend the Banking Executive Accountability Regime (BEAR) to all APRA-regulated entities with joint administration from APRA and ASIC.
The proposed Financial Accountability Regime (FAR) places several responsibilities on trustees, including:
- the ‘accountable entity’ must ensure its ‘accountable persons’ cover all parts or aspects of the operations of the accountable entity and each responsibility listed in FAR
- that trustees will be considered an accountable entity
- individuals who hold positions by the trustee who:
- have actual or effective senior executive responsibility for management or control of the accountable entity, or
- for management or control of a significant or substantial part or aspect of the operations of the accountable entity or the accountable entity’s relevant group
- has a responsibility or position specified by the Minister rules,
will be considered accountable persons
- ensuring no accountable person of the trustee is a prohibited person as defined by FAR
- complying with regulated directions given under FAR
- taking reasonable steps to ensure its significant related entities complies with regulator directions or are not prohibited persons under FAR
- complying with the enhanced notification threshold (to be set by the Minister) that requires the entity to provide an ‘accountability statement’ and ‘accountability map’.
Those classified as an accountable person will need to:
- act with honesty and integrity, and with due skill, care and diligence
- deal with the Regulator in an open, constructive and cooperative way
- take reasonable steps in conducting those responsibilities to prevent matters from arising that would (or would be likely to) adversely affect the prudential standing or prudential reputation of the accountable entity
- take reasonable steps in conducting those responsibilities to ensure that the accountable entity complies with any of the following that applies to the accountable entity. Reasonable steps include, but is not limited to:
- having appropriate governance, control and risk management in relation to that matter
- having safeguards against inappropriate delegations of responsibility concerning that matter
- having appropriate procedures for identifying and remediating problems that arise or may arise in relation to that matter
- taking appropriate action to ensure compliance regarding that matter
- taking appropriate action in response to non-compliance, or suspected non-compliance, in relation to that matter.
Comments are due on 13 August 2021.
Treasury Draft Regulation – Deferred Sales Model Exemptions (19 July 2021)
Treasury has released, for consultation, draft regulations on the exemption for the Deferred Sales Model (DFM) introduced by the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth). The DFM will enable consumers to make informed decisions on add-on insurance products purchased by introducing a pause in the sales process between purchasing the primary product and the purchased add-on insurance. This pause, or ‘deferral period’, will enable and encourage consumers to consider the merits of the insurance offered and to compare this insurance with alternative products.
The draft regulations propose to exempt group insurance cover provided via superannuation.
Feedback is due on 6 August 2021.
Retirement Income Covenant (19 July 2021)
Treasury released a position paper on the proposal of a retirement income covenant into SIS. The position paper recommends the new covenant would codify a number of requirements and obligations for trustees to improve retirement outcomes for individuals while enabling choice and competition in the retirement phase. The covenant would include the following obligations on trustees:
- core obligation – formulate, review regularly and give effect to a retirement income strategy. Provide a strategy for their members and assist members in balancing three key retirement income objectives:
- maximising retirement income
- managing risks to stability
- sustainability of income.
- member coverage – ensure all members of the fund in retirement, or approaching retirement, are covered by the strategy
- sources of retirement income – consider, at a minimum, members’ interest in the fund and age pension and tax implications when analysing retirement income
- maximising retirement income – consider how to assist their members in maximising their retirement income as a cumulative concept across the whole of retirement
- managing risk – consider how to assist their members in managing risks to the stability and sustainability of their retirement income. This involves considering longevity and investment risks
- flexible access to savings – consider how they can assist their members in gaining some flexible access to savings during retirement
- balancing strategy objectives – review the strategy.
Comments are due on 6 August 2021.
ASIC v BT Funds Management Limited & Anor (2021) FCA 844 (22 July 2021)
BT Funds Management Limited (Trustee) and Asgard Capital Management (Custodian), each a wholly-owned subsidiary of Westpac Banking Corporation (Westpac), have been ordered by the Federal Court to pay a financial penalty of $3 million ($1.5 million each) and publish an adverse publicity order on their websites for making misleading and deceptive representations related to “fees for no service”.
The Court found that the Trustee and Custodian advised consumers that no ongoing financial advice fees were being deducted from August 2014 to 2017, and on 487 occasions, such representation were:
- false or misleading as to the price of services, in connection with the supply or possible supply of financial services, and is a contravention of section 12DB of the ASIC Act
- misleading and deceptive conduct or conduct that was likely to mislead or deceive, which is a contravention of section 12DA (1) of the ASIC Act and section 1041H of the Corporations Act.
The Court also found that the Custodian breached its obligation to do all things necessary to ensure the financial services covered by its financial services licence, being custodial services provided in respect of the superannuation products, were provided efficiently, honestly and fairly, and thereby contravened section 912A(1)(a) of the Corporations Act.
- The Custodian placed ineffective processes and systems to cease charging adviser fees to affected retail clients. The administrative steps were processed by a third-party provider who did not have access to necessary systems.
- There was an erroneous application of a coding change to the affected products, which caused ongoing adviser fees to continue to be included in accounts (but under the description of administration or account management fees), thereby making it difficult for the affected customers to identify the overcharge.
- There were ineffective controls to chosen ongoing advisor fees.
- There was misleading account information conveying that the ongoing adviser fees were no longer being charged, when in fact amounts for those fees were still being deducted from the affected customers’ accounts.
Authors: Luke Hooper & Michael O’Connor
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.