The Government has introduced legislation into Parliament to establish the financial accountability regime (FAR) and the compensation scheme of last resort (CSLR), the final legislative recommendations from the Royal Commission.
This legislation implemented six recommendations of the Hayne Royal Commission: the FAR (recommendations 3.9, 4.12, 6.6, 6.7 and 6.8) and CSLR (recommendation 7.1).
To allow CSLR to commence as soon as possible, the Government would fund its establishment and contribute to scheme costs in the first year.
This would allow the scheme to start paying claims from 1 July, 2022, but after that the scheme would be industry funded through a levy on “relevant financial service and credit licensees”.
The minister for financial services, superannuation and the digital economy, Senator Jane Hume, said: “The establishment of the CSLR would support ongoing confidence in the financial system’s dispute resolution framework by facilitating the payment of up to $150,000 in compensation for personal advice, credit intermediation, securities dealing and credit provision to eligible consumers who have received a relevant determination for compensation from the Australian Financial Complaints Authority (AFCA) which remains unpaid.
“To ensure that the CSLR truly operates as a scheme of last resort, the Government will also consult on proposals to enhance the effectiveness of professional indemnity insurance in responding to compensation claims.”
The FAR would extend the banking executive accountability regime to all Australian Prudential Regulation Authority (APRA) regulated entities and provided for joint administration between APRA and the Australian Securities Investment Commission (ASIC).
The FAR would apply to the banking sector after 1 July, 2022, or six months after the commencement of the legislation, but for the insurance and superannuation sectors, the FAR would apply from after 1 July, 2023, or 18 months after commencement of the legislation.
“The FAR imposes a strengthened responsibility and accountability framework that will ensure directors and senior executives will be held accountable for their decisions and conduct,” Hume said.
“The Government’s FAR increases accountability across the banking, insurance and superannuation sector and will improve the governance of these entities.
“In doing so, the FAR gives Australians greater confidence that where misconduct occurs those responsible will be held accountable.”
