A Parliamentary Committee has questioned why financial advisers should face the risk of five years’ jail for record-keeping failures under legislation flowing from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services due to be debated by the Parliament today.
The largely bipartisan Scrutiny of Bills Committee has expressed serious reservations about the Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020 and, in particular, questioned why a five-year jail penalty is relevant.
It points out that the explanatory memorandum to the legislation “does not provide any justification as to why it is necessary and appropriate to impose a significant maximum penalty of five years imprisonment for failure to comply with the record-keeping obligation”.
“Nor does it include any reference to whether this level of penalty is comparable to similar offences in other Commonwealth legislation,” the committee report said.
More importantly, the committee has raised questions about the penalty being imposed by way of regulation with the powers being effectively delegated to the Australian Securities and Investments Commission (ASIC).
“It is the committee's view is that significant matters such as recordkeeping obligations which are subject to significant penalties, as in proposed section 962X, should be included in primary legislation unless a sound justification for the use of delegated legislation is provided,” the committee report said.
“In this instance, the explanatory memorandum contains no justification regarding why it is necessary to allow such significant matters to be set out in delegated legislation.”
The committee report asked:
- The justification for the significant maximum penalty that may be imposed for failing to comply with proposed subsection 962X(1), including whether this level of penalty is comparable to similar offences in other Commonwealth legislation;
- Why it is considered necessary and appropriate to leave the scope of record-keeping obligations which are subject to significant penalties to delegated legislation; and
- Whether the bill can be amended to include at least high-level guidance regard.