The government has introduced legislation to give ASIC power to designate enforceable code provisions in industry codes of conduct, with a breach of an enforceable code subject to enforcement action and civil penalties.
The bill also establishes a mandatory code of conduct framework for the financial services and consumer credit industry, with the ability to designate certain provisions as civil penalty provisions.
Under the current law, ASIC can approve industry codes, which is a signal to consumers that they can have confidence in the code.
The Hayne royal commission said ASIC’s powers in this area should have greater force and wider scope. Under the new law, ASIC will have the power to vary or revoke an approved code of conduct. Codes must be reviewed every five years.
The reform is included in Financial Sector Reform (Hayne Royal Commission Response) Bill 2020, which was introduced into the House of Representatives yesterday and which includes a number of other measures in response to Hayne recommendations. These include:
• amendment to the Insurance Contracts Act to limit the circumstances in which an insurer can avoid a life insurance contract on the basis of non-disclosure by an insured;
• the introduction of a deferred sales model for the sale of add-on insurance products;
• caps on commissions for a range of insurance products;
• a ban on the hawking of financial products;
• restrictions on the use of the terms “insurer” and “insurance”;
• designating claims handling as a financial service under the Corporations Act; and
• a new licensing condition for superannuation entities that prohibits them from having a duty to act in the interests of another person.