ASIC seeking to enhance banning power

The ASIC Enforcement Review Taskforce (Taskforce) is seeking to enhance ASIC’s banning powers, to ensure ASIC can take action to ban senior managers from managing financial services business. The Taskforce has made two key recommendations to increase the banning powers. 1. Whilst ASIC currently has the power to ban a person from providing financial services, the Taskforce has recommended the powers be broadened to allow ASIC to ban a person from: Performing a specific function in a financial services business, including being a senior manager or controller of a financial services business; and/or Performing any function in a financial services …

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ASIC consults on add-on insurance reforms

ASIC is seeking feedback on proposals to reform the sale of add-on insurance through car dealerships. Consultation Paper 294 sets out ASIC’s approach and proposed reforms in detail. The reforms would see the introduction of: A deferred sales model ASIC proposes to introduce a deferred sales model which would insert a pause in the sales process for add-on insurance products. The proposal is that a period of between 4 to 30 days must elapse before dealers could sell an add-on insurance product to a customer. ASIC has suggested 3 points in time from which the deferral period could commence: a. When …

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Enforcement report confirms ASIC’s focus for remainder of 2017

On 22 August 2017, ASIC released a report regarding its enforcement outcomes from the first half of 2017. The report also flags what the focus of ASIC’s enforcement activity will be over the next six months (1 July to 31 December 2017). Consumer credit continues to be a key focus for ASIC, as do obligations of Australian financial services (AFS) licensees. In the first half of 2017 the majority (59%) of ASIC enforcement in relation to financial services related to credit and 8% of ASIC’s enforcement relating to financial services was connected with dishonest conduct and misleading statements. For the …

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CCI sales process to be overhauled

ASIC has recently announced the establishment of a Consumer Credit Insurance (CCI) Working Group, who have been tasked with improving outcomes for CCI customers. The CCI Working Group will progress a range of reforms. A key reform will be the introduction of a deferred-sales model for CCI sold with credit cards over the phone and in branches. This means that banks will be prohibited from selling a CCI policy until at least four days after the customer has applied for their credit card. The intention of this reform is to reduce the risk that the customer will feel pressured to …

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Policy interpretation comes down to the “natural and ordinary meaning”

A recent judgment from the Victorian Supreme Court’s Insurance List, Guastalegname v Australian Associated Motor Insurers Ltd [2017] VSC 420, provides a succinct summary (and helpful refresher) of the principles to be applied when interpreting a policy of insurance. The case concerned the interpretation of a soil movement exclusion in a Home Building Insurance policy providing cover for a range of insured events including storm. A storm caused heave of the clay soil beneath the foundation slab of a building. This resulted in lifting of the home’s slab, walls and roof frame, which in turn resulted in cracking and other …

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CFMEU says thousands of Australian buildings are clad in non-conforming cladding

The CFMEU has made explosive comments at a recent hearing of the senate inquiry into non-conforming building products. In his testimony earlier this month, Travis Wacey of the CFMEU alleged that thousands of Australian buildings may be clad in non-conforming cladding, which may pose a fire risk. The contentious use of cladding, which is alleged to be flammable, continues to unfold on the national stage, with the Queensland government on 30 June announcing a wide ranging audit of buildings built between 1994 and 2004. Meanwhile, the Victorian government has launched a taskforce, led by Ted Baillieu and John Thwaites to …

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Section 6 – farewell (and good riddance!)

In December 2016 we posted on the NSW Law Reform Commission’s recommendation to replace section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).  Six months later, we can now confirm that section 6 is (finally) dead and herald the new era of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (Act).  The new Act is now live (from 1 June 2017) and is a welcome clarification of the confusion and ambiguity caused by section 6. The Act permits (at the Court’s discretion) a claimant (ie a liquidator) to sue an insurer of a proposed defendant …

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Breach reporting obligation repealed for group purchasing bodies

Group purchasing bodies (GPBs) are no longer required to report breaches of the conditions of relief provided by ASIC Class Order 08/1 (Class Order). The obligation to comply with the breach reporting condition in the Class Order was due to commence from 30 June 2017 but has been repealed. GPBs are persons who arrange or hold cover under risk management products for others but neither issue risk management products (except for interests in a risk management scheme) nor provide any financial product advice (except as a result of providing certain general information). The Class Order provides conditional relief to a …

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Call for extension of conflicted remuneration ban

The ban on conflicted remuneration should extend to the general insurance industry and to all life policies, regardless of whether the policy was obtained through the superannuation system or not, according to Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST). In May this year the Government sought stakeholder submissions on the five measures enacted in 2013 as part of the Future of Finance Advice (FoFA) reforms. One of these reforms was the ban on conflicted remuneration, including up-front and tailing commissions and like payments, for both individual and group risk insurance within superannuation. This reform sought to …

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CPA’s woes worsen – with members’ limited liability at risk

As heads continue to roll at the CPA, there is more bad news afoot for CPA members. On 7 October 2017, all public practitioner members of the CPA will lose the protection of their Professional Standards Scheme. This means that they will no longer have the benefit of liability caps, as provided for under the scheme, and may leave members with uninsured exposure to claims which exceed current levels of insurance. The Professional Standards Council, which approves such schemes, has confirmed that for “reasons of concern about conflicts of interest arising from the establishment and structure of CPA Australia Advice” …

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ASIC industry funding model introduced

Late last year the Government announced it would introduce an industry funding model for ASIC (our previous update on this can be found here). The ASIC Supervisory Cost Recovery Levy Bill 2017 and related bills have now passed. Effective from 1 July 2017, ASIC’s regulatory costs will be recovered through annual levies from all industry sectors regulated by ASIC. The amount of the levy will be worked out in accordance with regulations. Whilst the relevant regulations have not yet been passed, the draft regulations apply either a flat or a graduated levy to entities in each industry subsector regulated by …

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ASIC sets commission caps and clawback amounts for life insurance

In February this year the Corporations Amendment (Life Insurance Remuneration Arrangements) Act 2017 (the Act) was passed by Parliament, followed by the associated regulations. Our updates on these can be found here and here. The Act removed the exemption from the ban on conflicted remuneration for commissions paid in relation to certain life insurance products. The Act also enabled the Australian Securities and Investments Commission (ASIC) to allow commissions to be paid if requirements around commission caps (benefit ratio requirements) and clawbacks are met. ASIC has now made ASIC Corporations (Life Insurance Commissions) Instrument 2017/510 (ASIC Instrument) which allows commissions …

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New laws place real estate agents under the hammer

On 1 May, amendments to the Estate Agents Act 1980 (Vic) took effect in Victoria. The new legislation is designed to address the allegedly widespread practice of underquoting in the Victorian real estate industry. The new laws strengthen existing prohibitions on underquoting, and apply only to residential properties. The legislation requires, amongst other things: The estimated selling price to be reasonable, and within a 10% range, i.e. $500,000 to $550,000 The estimated selling price not to be less than the seller’s asking price, or a price in a written offer which the seller has rejected Agents to change the estimated …

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Life insurance remuneration regulations passed

Following on from our previous update regarding the new life insurance remuneration arrangements, the Corporations Amendment (Life Insurance Remuneration Arrangements) Regulations 2017 (Regulations) have now been passed. The Regulations will take effect from 1 January 2018, the same date as the Corporations Amendment (Life Insurance Remuneration Arrangements) Act 2017 (Act). The Act removed the exemption for life risk insurance products whereby a benefit is not conflicted remuneration if no financial advice in relation to the product has been given to the person in the last 12 months. This was purposely done to allow the Regulations to prescribe circumstances in which benefits …

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ASIC Report into financial advisers

As part of its Wealth Management Project, Australian Securities and Investments Commission (ASIC) has released its report into how effectively Australia’s largest financial institutions oversee their financial advisers. The report is based on a 20-month project instigated by information received by ASIC about non-compliant advice, as well as public concerns about wider problems in large advice firms. The full report is structured in three key phases and can be accessed here. Phase 1: How the Financial Institutions Identified and Dealt with Non-Compliant Conduct by Advisers ASIC found between 1 January 2009 and 30 June 2015: financial institutions relied heavily on …

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