The Senate Economics Legislation Committee has released the results of its inquiry into two Hayne-related bills, one introducing the Financial Accountability Regime and the other introducing the Compensation Scheme of Last Resort, recommending that the bills be passed without amendment.
Labor senators dissented, releasing additional comments saying that while Labor supports the compensation scheme bill, its scope is too narrow.
It might all be moot, with very few sitting days left in the term of the current Parliament and a strong chance that the bills will lapse.
Financial Services Compensation Scheme of Last Resort Levy Bill 2021 was the more controversial of the two bills. The government has designed a scheme which will provide compensation to consumers where they have an Australian Financial Complaints Authority determination in their favour and where the relevant financial institution has not paid the consumer in accordance with the determination.
Financial products and services within the scheme’s scope will include: personal advice on financial products to retail clients; credit intermediation; securities dealing; credit provision; and insurance product distribution. Managed investment schemes are not included.
Court and tribunal rulings will be outside its scope and the compensation will be capped at A$150,000, compared with AFCA’s compensation limits of more than $2 million for some credit products and $271,000 for claims against insurance brokers.
The majority view of the committee echoed the Treasurer’s argument that the limitations of the scheme balance the provision of compensation to claimants and scheme sustainability for those financial firms that are not responsible for the misconduct but end up paying the compensation.
The Labor senators said they are concerned about the narrow focus of the proposed scheme, particularly the decision to exclude managed investment schemes. They said Labor would encourage the government to make changes.
There were no dissenting views when it came to the recommendation that the Financial Accountability Regime Bill 2021 be passed.
The bill extends the obligations first introduced in the Banking Executive Accountability Regime in 2018 to the superannuation and insurance industries and replaces BEAR for the banking industry. The BEAR legislation will be repealed when FAR is passed.
The bill imposes obligations on directors and senior executives to conduct their business honestly and with care, skill and diligence. Companies must nominate executives to be responsible for areas of business operations. A deferred remuneration obligation is included to ensure remuneration is reduced if accountability obligations are not met.