Referral of the inquiry
1.1
On Thursday, 24 June 2021, the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021 (the bill) was introduced into the House of Representatives.
1.2
On the same day, the Senate referred the provisions of the bill to the Senate Economics Legislation Committee (the committee) for inquiry and report by 28 July 2021.
Background
1.3
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry ('the Hayne Royal Commission') was headed by Commissioner, the Honourable Kenneth Madison Hayne AC QC.
1.4
The Commission was established on 14 December 2017 by the
Governor-General of the Commonwealth of Australia, His Excellency General the Honourable Sir Peter Cosgrove AK MC (Retd).
1.5
The Royal Commission's terms of reference were extensive covering the following key areas: banking; financial advice; superannuation; insurance; culture, governance and remuneration; and the regulators in the banking sector.
1.6
Commissioner Hayne published an interim report on 28 September 2018 followed by his final report which was submitted to the Governor-General on 1 February 2019 and tabled in the Parliament on 4 February 2019.
1.7
The Royal Commission's findings were that greed has been a major factor in banking practices far beyond what might be expected. A culture existed in which profit was rewarded above all else with incentives and rewards offered irrespective of the sale being conducted according to law or policy.
1.8
Commissioner Hayne put forward 76 recommendations, 27 of which have already been implemented, many of which could present significant changes for the banking, superannuation and insurance sector, including:
(a)
a legal duty by mortgage brokers to act in the best interests of the borrower, punishable by civil penalties;
(b)
a requirement that borrowers, rather than lenders, pay the mortgage brokers’ services, with Lenders barred from providing a trailing commission to mortgage brokers on all new loans;
(c)
grandfathering commissions to financial advisors to be banned;
(d)
creation of a disciplinary body and disciplinary system for financial advisers;
(e)
banks to be barred from charging dishonour fees on basic accounts;
(f)
banks to be barred from charging default interest on loans to farmers in areas affected by drought or other natural disasters;
(g)
motor dealers providing finance no longer to be exempt from national consumer credit laws;
(h)
a cap on commissions to motor dealers for add-on insurance products;
(i)
commissions on life insurance products reduced to zero;
(j)
a single default superannuation fund for all workers to be carried over or 'stapled' to members as they move jobs;
(k)
no advice fees to be deducted from MySuper accounts;
(l)
unsolicited selling of superannuation and insurance products banned;
(m)
funeral expense insurance policies no longer to be exempt from being a 'financial product' and therefore coming under ASIC regulation;
(n)
creation of a new authority independent of Government to oversee ASIC and APRA; and
(o)
establishment of a Government funded compensation scheme of last resort for victims of financial misconduct.
Purpose of the bill
1.9
According to the Explanatory Memorandum (EM), the bill implements the Government's response to Recommendation 2.10 of the Financial Services Royal Commission Final Report by:
expanding the role of the Financial Services and Credit Panel within Australian Securities and Investments Commission (ASIC) to operate as the single disciplinary body for financial advisers to ensure that less serious misconduct does not go unaddressed;
creating new penalties and sanctions for financial advisers who have breached their obligations under the Corporations Act 2001;
introducing a new registration system for financial advisers to improve the accountability and transparency of the financial services sector; and
transferring functions from Financial Adviser Standards and Ethics Authority (FASEA) to the Minister responsible for administering the Corporations Act 2001 and to ASIC to streamline the regulation of financial advisers.
1.10
The bill also implements the Government’s response to Recommendation 7.1 of the Tax Practitioners Board Review by introducing a single registration and disciplinary system under the Corporations Act 2001 for financial advisers who provide tax (financial) advice services and removing duplicate regulation.
Provisions of the bill
1.11
The bill contains two schedules:
Schedule 1—Initial amendments
Part 1—Main amendments
Australian Securities and Investments Commission Act 2001
Corporations Act 2001
Part 2—Other amendments
Division 1—Amendments
Freedom of Information Act 1982
National Consumer Credit Protection Act 2009
Tax Agent Services Act 2009
Division 2—Application of amendments to the Tax Agent Services Act 2009
Part 3—Contingent amendments
Corporations Act 2001
Schedule 2—Later amendments
Corporations Act 2001
1.12
In his second reading speech, the Assistant Treasurer, the Hon. Michael Sukkar MP, provided an overview of the above schedules noting that:
This bill will empower the Financial Services and Credit Panel within ASIC as the single disciplinary body for financial advisers. The panel will be provided with new sanction powers to enable it to fully perform its disciplinary functions, including being able to issue an infringement notice, require that the financial adviser undertake additional training and recommend to ASIC that it seek a civil penalty. The bill will also require all financial advisers who provide personal financial advice to retail clients to be registered.
This fulfils the government's commitment to implement Recommendation 2.10 of the financial services royal commission. The royal commission highlighted that the financial advice industry lacked an effective system of professional discipline, as a result of there being too many different pathways for consumer complaints and ineffective sanctions to deal with misconduct appropriately. In addition, while sanctions are available to ASIC, the lack of less serious sanctions means that ASIC generally only focuses on the most serious incidents.
The bill will also provide that tax (financial) advisers will no longer be regulated by the Tax Practitioners Board but instead be regulated only under the Corporations Act 2001. This implements Recommendation 7.1 of the Tax Practitioners Board review, which recommended that a new model be developed for regulating tax (financial) advisers in alignment with implementing Recommendation 2.10 of the royal commission.
Importantly, the bill also winds up the Financial Adviser Standards and Ethics Authority and transfers its functions to the minister responsible for the Corporations Act 2001 and ASIC.
These reforms will further streamline the number of bodies involved in the oversight of financial advisers, resulting in continuous improvements to the regulatory framework for the financial advice sector and enhanced access for Australians to affordable and quality financial advice.
Finally, the Legislative and Governance Forum for Corporations was consulted in relation to the bill and has approved it as required under the Corporations Agreement 2002.
The bill in more detail
Single disciplinary body for financial advisers
1.13
The bill implements Recommendation 2.10 of the Financial Services Royal Commission Final Report by establishing a single disciplinary body for relevant providers.
1.14
A 'relevant provider' is defined as an individual who is authorised to provide personal advice to retail clients in relation to relevant financial products, as the holder of an Australian financial services licence or on behalf of the licensee. In this explanatory memorandum, the term 'financial adviser' is used instead of 'relevant provider'.
1.15
The bill expands the role of the Financial Services and Credit Panel within ASIC to take on the functions of the single disciplinary body for financial advisers.
1.16
In prescribed circumstances, ASIC must convene a Financial Services and Credit Panel. A Financial Services and Credit Panel must comprise a minimum of at least two industry participants, which ASIC must select from a list of eligible persons appointed by the Minister. The Chair of the panel will always be an ASIC staff member.
1.17
The list of eligible persons appointed by the Minister could include representatives from the financial services industry, such as financial advisers and financial services licensees, as well as people with experience in other fields, such as law, economics, accounting and tax.
1.18
Once convened, a Financial Services and Credit Panel may take administrative action against a financial adviser. The types of administrative actions that a panel can take against a financial adviser are warnings or reprimands, directions to undertake specified training, supervision, counselling or reporting, and orders suspending or cancelling an adviser’s registration. For certain types of breaches, a Financial Services and Credit Panel may give the adviser an infringement notice or recommend that ASIC apply to the court for a civil penalty.
1.19
Except in cases where a warning or reprimand is to be given to a financial adviser, before a Financial Services and Credit Panel can issue an infringement notice or make an instrument taking other administrative action, the panel must give the financial adviser a notice with:
details of the relevant circumstances;
the proposed sanction; and
the adviser’s right to request a hearing or make a submission to the panel.
1.20
If ASIC reasonably believes that a person has contravened a restricted civil penalty provision or that a specified circumstance exists or has occurred and does not take alternate enforcement action or convene a Financial Services and Credit Panel, ASIC must give the financial adviser a written warning or reprimand.
1.21
ASIC must include details of the sanction on the Register of Relevant Providers (Financial Advisers Register) if the sanction is of a kind prescribed by regulations.
1.22
Where it is appropriate to do so, a Financial Services and Credit Panel can accept an enforceable undertaking from a financial adviser, as an alternative to administrative or civil sanctions.
Registration of financial advisers
1.23
The bill introduces a two-stage registration process for financial advisers:
Stage 1 registration commences after 1 January 2022 and involves a one-off registration process administered by ASIC using the existing Register of Relevant Providers (Financial Advisers Register). This stage requires financial services licensees to apply to ASIC to register their financial advisers; and
Stage 2 registration commences on a day set by proclamation (or if no such proclamation is made within the specified period, four years after the day this Act receives Royal Assent). The commencement of Stage 2 registration coincides with the delivery of the new Australian Business Registry Service administered by the Australian Taxation Office. This stage requires eligible individuals to apply to the Registrar to register themselves and renew their registration annually.
Wind up of FASEA and transfer of its standards functions to the Minister and ASIC
1.24
On 1 January 2022, FASEA will be wound up and its functions transferred to the Minister responsible for administering the Corporations Act 2001 and to ASIC.
1.25
The Minister will be responsible for making education and training standards for financial advisers, including approving principles for the financial adviser exam, and a Code of Ethics. The Minister will also be responsible for approving foreign qualifications.
1.26
ASIC will be responsible for administering the financial adviser examination in accordance with the principles approved by the Minister.
Regulation of tax (financial) advisers
1.27
The bill also implements recommendation 7.1 of the Tax Practitioners Board Review by introducing a single registration and disciplinary system for tax (financial) advisers.
1.28
The Minister may make additional education and training standards for the provision of tax (financial) advice services.
1.29
From 1 January 2022, financial advisers who meet the additional education and training requirements to provide tax (financial) advice services may do so without being registered under the Tax Agent Services Act 2009.
1.30
A person or entity who provides tax agent services or business activity statement services (BAS services) must continue to be a registered tax agent or registered business activity statement agent (BAS agent) under the Tax Agent Services Act 2009.
Summary of new law
1.31
The following table provides a summary of the new law:
Table 1.1: Summary of new law
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Single disciplinary body for financial advisors
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ASIC may be required to convene a Financial Services and Credit Panel if it reasonably believes that a financial adviser has breached their Corporations Act obligations.
Once convened, a panel can:
give a warning or reprimand;
make an instrument taking other administrative action; or
in certain circumstances – issue an infringement notice or recommend that ASIC apply to the court for a civil penalty.
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ASIC may make banning orders for serious breaches of the Corporations Act 2001.
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Registration of financial advisors
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Stage 1 registration (commences no later than 1 January 2023) – financial services licensees are required to apply to ASIC to register their financial advisers.
Stage 2 registration (commences by proclamation) – financial advisers are required to apply to the Registrar to register themselves annually.
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A financial services licensee is required to authorise a person to provide financial advice on their behalf.
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Wind up of FASEA and transfer of its standard functions to the
Minister and ASIC
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The Minister is responsible for performing all of the standards setting functions.
ASIC must administer an exam for financial advisers in accordance with the principles approved by the Minister.
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The Minister may establish a standards body by legislative instrument.
The standards body is responsible for performing all of the standards setting functions, including determining who will administer the financial adviser exam.
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Regulation of tax (financial) advisors
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To provide tax (financial) advice services, a person must either be a registered tax agent, or be a financial adviser who has met the additional education and training standard to provide tax (financial) advice services under the Corporations Act.
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Financial advisers who provide tax (financial) advice services must:
be registered as a tax (financial) adviser under the Tax Agent Services Act 2009, which includes meeting the Tax Agent Services Act 2009 education and experience requirements;
comply with the Code of Professional Conduct under the Tax Agent Services Act 2009;
be authorised as a financial adviser under the Corporations Act, which includes meeting Corporations Act education and training standards; and
comply with the Code of Ethics under the Corporations Act.
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Source: Explanatory Memorandum, pp. 13-14.
Financial impact
1.32
The EM states funding for this measure was provided to the Department of Treasury in the 2021–22 Budget as part of an omnibus treasury measure—Treasury Portfolio—resourcing for Government priorities. This included $2.5 million in 2021–22 to fund the ongoing operational costs of FASEA and its wind-up costs after its industry funding agreement ceases on 30 June 2021.
Regulation Impact Statement
1.33
The EM argued that the Financial Services Royal Commission Final Report has been certified as being informed by a process and analysis equivalent to a Regulation Impact Statement for the purposes of the Government decision to implement this reform. The Financial Services Royal Commission Final Report and the Regulation Impact Statement certification is available from the Department of Prime Minister and Cabinet website.
1.34
Similarly, the EM argued that the Tax Practitioners Board Review Final Report has been certified as being informed by a process and analysis equivalent to a Regulation Impact Statement for the purposes of the Government decision to implement this reform. The Tax Practitioners Board Review Final Report and Regulation Impact Statement certification is available from the Department of Prime Minister and Cabinet website.
Commencement
1.35
The provisions of the bill take effect in accordance with the table below:
Table 1.2: Commencement information
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Provisions
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Commencement
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Date/ Details
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1. Sections 1 to 3 and anything in this Act not elsewhere covered by this table.
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The day this Act received the Royal Assent.
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Schedule 1, Parts 1 and 2
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1 January 2022
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1 January 2022
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Schedule 1, Part 3
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At the same time as item 1150 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures)Act 2020 commences.
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Schedule 2
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A single day to be fixed by Proclamation. However, if the provisions do not commence within the period of 4 years beginning on the day this Act receives the Royal Assent, they commence on the day after the end of that period.
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Source: Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021, p. 2.
Compatibility with human rights
1.36
The EM explained that the bill engages the following rights:
Article 14 of the International Covenant on Civil and Political Rights (ICCPR);
Article 19 of the ICCPR; and
Article 6 of the International Convention on Economic, Social and Cultural Rights (ICESR).
Strict liability offences
1.37
The strict liability offences in this bill may engage the right to a fair trial, as well as the presumption of innocence in Article 14 of the ICCPR. Article 14 of the ICCPR provides that everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law.
1.38
The EM argued that given the need to deter misconduct, and the potential harm that could arise from non-compliance with these obligations, these new strict liability offences are considered a reasonable and proportionate means of achieving the legitimate objective of strengthening the regulation of the financial advice industry.
Civil penalties
1.39
The bill introduces new civil penalty provisions, which may engage the right to a fair trial, as well as the presumption of innocence in Articles 14 and 15 of the ICCPR. Article 14(2) of the ICCPR recognises that all people have the right to be presumed innocent until proven guilty according to the law.
1.40
The EM argued that the civil penalty provisions contained in this bill are not 'criminal' for the purposes of human rights law. While a criminal penalty is deterrent or punitive, these provisions are regulatory and disciplinary, and they do not, according to the EM, result in the same stigma or condemnation as criminal offences. Further, the provisions do not apply to the general public, but to a sector or class of regulated people (financial advisers and financial services licensees) who should be aware of their obligations under the Corporations Act 2001. These civil penalty provisions apply prospectively for conduct that occurs on or after commencement of the legislation on 1 January 2022 and therefore, according to the EM, uphold Article 15 of the ICCPR.
Infringement notices
1.41
The bill may engage the right to a fair and public hearing in Article 14 of the ICCPR by extending the existing infringement notice regime in Part 9.4AB of the Corporations Act 2001 to provide for the Financial Services and Credit Panel to be able to issue infringement notices where a financial adviser is alleged to have contravened a restricted civil penalty provision.
1.42
The EM argued that the new infringement notice scheme in this bill is considered a reasonable and proportionate means of achieving the legitimate objective of introducing a new disciplinary system for financial advisers.
The right against self-incrimination
1.43
The new information-gathering powers in the bill may engage the right against self-incrimination under Article 14(3)(g) of the ICCPR because they provide that a Financial Services and Credit Panel may require:
a person to appear before the panel at a hearing to give evidence or produce specified documents, or both; and
a person appearing at the hearing to answer a question put to the person or produce a document.
1.44
The EM argued that individual rights against self-incrimination are protected by ensuring that information obtained by the panel using these powers cannot be used against the individual in criminal proceedings or in proceedings where the person may be liable to a criminal penalty.
1.45
According to the EM, the bill also protects the rights of persons by granting the Financial Services and Credit Panel the power to restrict the publication of evidence given before the panel or matters contained in documents lodged with the panel. In determining whether to exercise this power, the panel must have regard to whether the evidence or material concerns the commission, alleged, or suspected commission of an offence against an Australian law. The publication of evidence or material when such a direction is in force is an offence of strict liability, the penalty for which is 120 penalty units ($26 640).
1.46
The bill also protects persons and businesses from possible damage to their reputation by making the unauthorised use or disclosure of information by members, or former members, of a Financial Services and Credit Panel an offence. The penalty for this offence is two years imprisonment.
1.47
Overall, the EM argued that the information gathering powers in the bill are considered to be consistent with the right against self-incrimination under Article 14(3)(g) of the ICCPR.
Right to privacy
1.48
The bill engages the right to protection from unlawful or arbitrary interference with privacy under Article 17 of the ICCPR because it provides for:
ASIC to disclose information to a Financial Services and Credit Panel and the Tax Practitioners Board;
a Financial Services and Credit Panel to disclose information to ASIC, the Tax Practitioners Board and another Financial Services and Credit Panel as required or permitted by a law of the Commonwealth or state or territory, or for the purposes of performing the panel’s functions or exercising its powers; and
the Tax Practitioners Board to disclose information to a Financial Services and Credit Panel for the purposes of the panel performing its functions or exercising its powers.
1.49
Any information that is shared between ASIC, a Financial Services and Credit Panel and the Tax Practitioners Board is, according to the EM, subject to strict protections and requires all reasonable measures to be taken to protect confidential information from unauthorised disclosure. This protection is reinforced by offence provisions, which provide that current or former members of a Financial Services and Credit Panel or the Tax Practitioners Board commit an offence if they use or disclose information other than as authorised. The penalty for these offences is two years imprisonment.
Right to freedom of expression
1.50
The bill engages the right to freedom of expression in Article 19(2) of the ICCPR, which stipulates that all individuals shall have the right to freedom of expression, including the freedom to seek, receive and impart information 'of all kinds'.
1.51
Article 19(3) of the ICCPR provides that interferences with the right to freedom of expression may be permissible if they are provided by law and necessary for respect of the rights or reputations of others, for the protection of national security, public order, or public health or morals. The EM argues that the bill engages these rights by:
providing a Financial Services and Credit Panel the power to restrict the publication of evidence given to, or matters contained in documents lodged with the panel;
making it an offence to publish evidence or information in breach of a direction that is in force; and
making the unauthorised use or disclosure of information an offence where it was obtained in connection with the performance of the panel’s functions or the exercise of its powers by an individual who is or was a member of a Financial Services and Credit Panel.
1.52
These provisions limit freedom of expression in a manner that is, according to the EM, reasonable, necessary and proportionate to a legitimate objective, namely for respect of the rights or reputation of others, as provided for in article 19(3) of the ICCPR.
1.53
The restriction on the publication of specified information or material is according to the EM, essential to the proper functioning of a Financial Services and Credit Panel, noting that the information is provided for the limited purpose of proceedings before the panel. Restrictions on disclosure in this context are intended to protect confidential information given for the purposes of the panel’s examination of a particular issue. In deciding whether to make an order restricting the publication of specified material, the panel must take into account considerations such as public interest and privacy concerns, including protection of the reputation of persons and businesses.
1.54
The EM argued that the bill is thus compatible with the right to freedom of expression in Articles 19(2) and (3) of the ICCPR.
Right to work
1.55
The bill may engage the right to freely choose and accept work under Article 6(1) of the ICESR, which provides that everyone must be able to freely accept or choose their work and not to be unfairly deprived of work. The right to work also requires that state parties provide a system of protection guaranteeing access to employment. This right must be made available in a non-discriminatory manner pursuant to article 2(1) of the ICESCR.
1.56
Participation in Australia’s financial services sector is not a right; participation is only possible if relevant standards are met and is only granted by the Commonwealth to suitable persons. A person seeking the benefit of participation in this industry will do so in the knowledge that the existence of certain circumstances may result in their registration as a financial adviser being refused, suspended or cancelled, or another administrative action being taken against them. This is appropriate as it remains necessary to protect consumers and the integrity of Australia’s financial services sector against misconduct.
1.57
Including a fit and proper person test in the bill, according to the EM, ensures that the Regulator receives notification of any advisers who pose a potential risk and is intended to allow action to be taken to ensure the integrity of financial services to retail clients is not compromised.
Conclusion
1.58
In conclusion, the EM states that to the extent that the bill engages rights under Articles 14, 15, 17 and 19 of the International Covenant on Civil and Political Rights and Article 6 of the International Convention on Economic, Social and Cultural Rights, it is compatible with human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 as the limitations are appropriate, proportionate and achieve a legitimate objective.
Legislative scrutiny
1.59
The Scrutiny of Bills Committee had reviewed the bill and published a report.
Scrutiny of Bills Committee
1.60
The Scrutiny of Bills Committee reported on the bill on 13 July 2021. They noted the following:
Strict liability offences
1.61
Item 12 of Schedule 1 to the bill seeks to insert proposed section 171A into the Australian Securities and Investments Commission Act 2001 (ASIC Act) which would make it an offence for a person to publish evidence given before a Financial Services and Credit Panel where there is a direction restricting the publication of that evidence. The penalty for the offence is 120 penalty units. Proposed subsection 171A(2) provides that the offence is one of strict liability.
1.62
The Scrutiny of Bills Committee has scrutiny concerns about the application of strict liability to an offence carrying a penalty of 120 penalty units and does not consider that the explanation provided adequately justifies why a penalty that is double the amount recommended in the Guide to Framing Commonwealth Offences is required in this instance. The committee has also generally not accepted consistency with existing legislation to be a sufficient justification for applying strict liability in circumstances in which the penalty is inconsistent with the recommendations of the Guide to Framing Commonwealth Offences.
The Scrutiny of Bills Committee draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of providing that the offence relating to the publication of restricted material in proposed section 171A is an offence of strict liability subject to a maximum penalty of 120 penalty units.
Reversal of the evidential burden of proof
1.63
Item 12 of Schedule 1 to the bill seeks to insert proposed section 171D into the ASIC Act to provide that it is an offence for a member or former member of a Financial Services and Credit Panel to use or disclose information obtained in connection with the performance of the panel's functions or exercise of the panel's powers. Proposed subsection 171D(2) provides an exception (offence-specific defence) to the offence in circumstances where the use or disclosure is for certain purposes, such as where the disclosure is to another entity for the performance of their functions or powers.
1.64
The Scrutiny of Bills Committee observed that is not apparent that matters such as whether the disclosure of information is to another government entity for the performance of that entity's functions, are matters peculiarly within the defendant's knowledge, or that it would be significantly more difficult or costly for the prosecution to establish the matters.
1.65
These matters appear to be matters more appropriate to be included as an element of the offence.
The Scrutiny of Bills Committee requested the minister's detailed justification as to the appropriateness of including the specified matters as offence-specific defences. The committee considers that it may be appropriate if the bill was amended to incorporate the matters in proposed subsection 171D(2) as elements of the offence and seeks the minister's advice regarding this matter.
Significant matters in delegated legislation
1.66
Item 45 of Schedule 1 to the bill seeks to insert proposed section 921E into the Corporations Act 2001 to provide that the minister may, by legislative instrument, make a Code of Ethics. Proposed subsection 921E(3) provides a relevant provider must comply with the Code of Ethics. A provider who fails to comply with the Code of Ethics may be subject to a restricted civil penalty. There is no guidance on the face of the bill as to what matters may be included in the Code of Ethics.
1.67
The Scrutiny of Bills Committee considers that this provision provides the minister with a broad discretionary power to mandate a Code of Ethics in circumstances where there is no guidance on the face of the bill as to how the power should be exercised.
1.68
Additionally, the Scrutiny of Bills Committee's consistent scrutiny view is that significant matters, such as the contents of an enforceable Code of Ethics, should be contained in primary legislation unless a sound justification for the use of delegated legislation is provided. In this instance the explanatory memorandum contains no justification as to why there is no detail regarding the matters to be included in the Code of Ethics on the face of the primary legislation. It is unclear to the committee why at least high-level guidance regarding the types of matters that may be included in the Code of Ethics cannot be included on the face of the primary legislation.
1.69
The Scrutiny of Bills Committee's concerns are heightened in this instance by the fact that a provider who fails to comply with the Code of Ethics may be subject to a restricted civil penalty of 5,000 penalty units or three times the benefit derived or detriment avoided because of the contravention.
In light of the above, the committee requests the minister's advice as to:
why it is considered necessary and appropriate to provide the minister with a broad discretion to create a Code of Ethics by legislative instrument, without any guidance as to the matters that may be included in the Code on the face of the bill; and
whether the bill can be amended to provide at least high-level guidance on as to the matters that may be included in a Code of Ethics.
No-invalidity clause
1.70
Item 49 of Schedule 1 to the bill seeks to into insert proposed section 921K into the Corporations Act 2001 to provide that a Financial Services and Credit Panel may make instruments of a kind specified in proposed section 921L in relation to a relevant provider in certain circumstances, for example, if the provider becomes insolvent or is convicted of fraud. Proposed section 921L provides that the types of instruments include directions to undertake training or specified counselling as well as written orders suspending or cancelling a provider's registration. Proposed section 921M provides that if an instrument is made under proposed section 921K, the Financial Services and Credit Panel must give a copy of the instrument to the provider, ASIC and any relevant financial services licensee. The instrument must be accompanied by a statement of reasons for the decision to make the instrument. The Financial Services and Credit Panel must also give the provider a notice informing them of their right to apply to have the instrument revoked or varied. Proposed subsection 921M(3) provides that a failure to comply with these requirements does not affect the validity of the instrument.
1.71
A legislative provision that provides that an act done or decision made in breach of a particular statutory requirement or other administrative law norm does not result in the invalidity of that act or decision, may be described as a 'no-invalidity' clause. There are significant scrutiny concerns with
no-invalidity clauses, as these clauses may limit the practical efficacy of judicial review to provide a remedy for legal errors. For example, as the conclusion that a decision is not invalid means that the decision-maker had the power (i.e. jurisdiction) to make it, review of the decision on the grounds of jurisdictional error is unlikely to be available. The result is that some of judicial review's standard remedies will not be available. Consequently, the committee expects a sound justification for the use of a no-invalidity clause to be provided in the explanatory memorandum to the bill. In this instance, the explanatory memorandum does not contain a justification for the inclusion of a no-invalidity clause in proposed section 921M.
The committee therefore requests the minister's advice as to why it is considered necessary and appropriate to include a no-invalidity clause in proposed subsection 921M(3) in relation to requirements for notifying providers about instruments made against them.
1.72
As of Monday, 26 July 2021, the Scrutiny of Bills Committee had received no response to the above questions and requests.
Joint Committee on Human Rights
1.73
As of Monday, 26 July 2021, the Joint Committee on Human Rights had not published any comment on the bill.
Conduct of the inquiry
1.74
The committee advertised the inquiry on its website and wrote to relevant stakeholders and interested parties inviting written submissions by Friday, 9 July 2021.
1.75
The committee received 16 submissions which are listed at Appendix 1.
1.76
The committee held one public hearing for the inquiry on Friday, 16 July 2021 at Parliament House, Canberra. The names of witnesses who appeared at the hearing can be found at Appendix 2.
Acknowledgements
1.77
The committee thanks all individuals and organisations who assisted with the inquiry, especially those who made written submissions and appeared at the public hearing.