Explanatory Memorandum
(Circulated by authority of the Minister for Financial Services & Regulation the Hon Joe Hockey, MP)Consequential amendments to other Commonwealth legislation
Repeal of existing regulatory frameworks
5.1 The Bill will repeal provisions currently contained in the existing regulatory framework that will be replaced by the new licensing, conduct and disclosure regime in the proposed FSR Act.
5.2 These provisions are contained in the SIS Act, the RSA Act, IABA, the Insurance Act 1973 and the Insurance Contracts Act 1984 .
Superannuation (Supervision) Act 1993
5.3 The Bill repeals Parts 18 and 20 as well as most of Part 19 (other than sections 151, 152, 154 and 155) of the SIS Act. These provisions will be replaced by Parts 7.9 and 7.10 of the proposed Corporations Act (as inserted by the proposed FSR Act ) . The Bill will also repeal or make consequential amendments to definitions and other provisions in the SIS Act that refer to those provisions that will be repealed by this Bill.
5.4 The replacement of misconduct and disclosure provisions currently contained in Parts 18 to 20 of the SIS Actwith those proposed in Chapter 7 of the proposed Corporations Act requires consequential amendments to the provisions of Part 5 of the SIS Act, which deals with complying fund status.
5.5 Under the current arrangements, superannuation entities may be granted complying fund status if the relevant trustee did not contravene the SIS Act or the SIS Regulations in relation to the entity in respect of the year of income (or the trustee contravened the Act or the Regulations but did not fail the relevant culpability test).
5.6 The Bill will amend Part 5 so that superannuation entities may be granted complying fund status if the relevant trustee does not contravene a regulatory provision (or contravenes a regulatory provision but does not fail the relevant culpability test). The term regulatory provision in relation to a superannuation entity will be defined in proposed new section 38A of the SIS Act as a provision of the SIS Act or the SIS Regulations, a provision of the proposed Financial Sector (Collection of Data) Act 2001 , and specified offence provisions that will be contained in Parts 7.9 and 7.10 of the proposed Corporations Act.
5.7 The proposed Superannuation Legislation Amendment (Choice of Superannuation Funds) Ac 2001 will make a number of amendments to provisions of the SIS Act that will be replaced by the new arrangements in the proposed FSR Act. For this reason the Bill will include provisions to repeal those provisions of the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2001 that will no longer be required following enactment of the proposed FSR Act.
Retirement Savings Accounts Act 1997
5.8 The Bill will repeal sections 45 and 51 as well as Divisions 4, 5, 6 and 7 of Part 5 of the RSA Act. It will also repeal Part 7 (apart from sections 74 and 78, which relate to improper conduct in the provision of RSAs). The repealed provisions will be replaced by Parts 7.9 and 7.10 of the proposed Corporations Act. The Bill will also repeal or amend other provisions in the RSA Act that refer to those provisions that will be repealed by this Bill.
5.9 Section 182 of the RSA Act enables the Regulator to provide a written direction to an RSA institution not to accept any contributions made to RSAs by a specified employer. The Regulator must not give such a direction unless the RSA institution has contravened the RSA Act or the RSA Regulations on one or more occasions and the Regulator is also satisfied that the seriousness or frequency of the contraventions warrants the giving of the direction.
5.10 In line with proposed amendments to Part 5 of the SIS Act, the Bill will amend paragraph 182(2)(a) and subsection 182(4) of the RSA Act to insert references to the contravention of a regulatory provision. The concept of a regulatory provision in relation to an RSA institution will be defined in proposed subsection 182(1A) as a provision of the RSA Act or RSA Regulations, a provision of the proposed Financial Sector (Collection of Data) Act 2001 and specific offence provisions that will be contained in Parts 7.9 or 7.10 of the proposed Corporations Act.
Insurance (Agents & Brokers) Act 1984
5.11 The Bill will repeal the Insurance (Agents and Brokers) Act 1984 in its entirety. Following the enactment of the proposed FSR Act, insurance agents and brokers will each be subject to regulation under the licensing, conduct and disclosure regime that will be contained in Chapter 7 of the proposed Corporations Act.
5.12 The Bill will repeal section 113 of the Insurance Act 1973 , which requires insurers to comply with any relevant codes of practice that have been approved by ASIC. Following enactment of the proposed FSR Act, all financial services licensees, as well as product issuers that are not licensees, will be required to provide retail clients with access to internal and external dispute resolution schemes that are approved by ASIC.
5.13 In addition, section 1101A of the proposed CorporationsAct will enable ASIC to approve codes of conduct relating to financial services licensees and issuers of financial products that are not licensees.
5.14 The Bill will repeal sections 64, 64A and 64B of the Insurance Contracts Act 1984 , which deal with the provision of cooling-off periods in relation to consumer credit insurance and certain contracts of life insurance. Following the proposed FSR Acts enactment, these provisions will be replaced by Division 5 of Part 7.9 of the proposed Corporations Act.
5.15 The Bill will also repeal section 71A, which contains requirements governing disclosure in relation to consumer credit insurance and other contracts of insurance of a kind prescribed in the relevant regulations. These provisions will be replaced by the disclosure requirements that will be contained in Part 7.9 of the proposed CorporationsAct.
5.16 Finally, the Bill will repeal section 73, which imposes disclosure obligations on suppliers in relation to contracts of insurance arranged in connection with the supply of goods and services.
5.17 Following the enactment of the proposed FSR Act, the activity of arranging contracts of insurance will fall within the definition of a financial service contained in Division 4 of Part 7.1 of the proposed Corporations Act. This is because proposed section 766C provides that the definition of dealing in relation to a contract of insurance that is a financial product includes arranging for a person to apply for or acquire the contract of insurance that is a financial product.
5.18 As a consequence, the activity of arranging contracts of insurance in connection with the supply of goods and services will become subject to regulation under Chapter 7 of the proposed Corporations Act.
5.19 With the repeal of IABA and the coverage of marine insurance brokers by regulatory regime in the proposed FSR Act, it is necessary to repeal sections 59 and 60 of the Marine Insurance Act 1909 to avoid unnecessary duplication of regulation.
Administrative Decisions (Judicial Review) Act 1977
5.20 Amendments to the Administrative Decisions (Judicial Review) Act 1977 will ensure that:
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- decisions of the Securities Exchanges Guarantee Corporation under Part 7.5 (compensation arrangements); and
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- decisions by the Minister under Division 1 of Part 7.4 (the 15 per cent voting power limitation on prescribed market and clearing and settlement facility licensees)
are not subject to review under that Act.
Other consequential amendments
5.21 The enactment of the new regulatory regime in the proposed FSR Act will have important implications for other Commonwealth legislation that contains references to current Corporations Law concepts and definitions that will replaced under the new framework (such as securities dealer or exempt special stock market).
5.22 The Bill therefore inserts new definitions in a number of Commonwealth statutes where current definitions and concepts will become redundant following the enactment of the proposed FSR Act. It also replaces current cross-references in other Commonwealth legislation to provisions in existing regulatory frameworks governing the superannuation, RSA and insurance industries that will be repealed following the proposed FSR Acts enactment with new cross-references to replacement regulatory provisions. The objective of these consequential amendments is to maintain the current effect of the existing provisions.