House of Representatives

Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Josh Frydenberg MP)

Chapter 4 - Statement of Compatibility with Human Rights

Schedule 1-Ongoing fee arrangements (recommendation 2.1)

4.1 Schedule 1 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

4.2 Schedule 1 amends the Corporations Act to protect clients with an ongoing fee arrangement from being charged fees for services that they are not using or are not aware that they are entitled to. The Schedule achieves this by providing that financial service providers who receive fees under ongoing fee arrangements must:

seek annual renewal from clients for all ongoing fee arrangements;
require fee recipients to disclose in writing the total fees that will be charged;
set out the services that will be provided during the following 12 month period; and
obtain written consent before fees under an ongoing fee arrangement can be deducted from a client's account.

Human rights implications

4.3 Schedule 1 does not engage any of the applicable rights or freedoms.

4.4 The civil penalty provisions contained in the Schedule are not 'criminal' for the purposes of human rights law. While a criminal penalty is deterrent or punitive, these provisions are regulatory and disciplinary. Further, the provisions do not apply to the general public, but to a sector or class of people who should reasonably be aware of their obligations under the Corporations Act (for example, persons who hold an Australian Financial Services Licence).

4.5 Imposing the civil penalties will enable an effective disciplinary response to non-compliance. Finally, the civil penalties are for small amounts, with no sanction of imprisonment for non-payment of the penalty. Based on the above factors, the cumulative effect and the nature and severity of the civil penalties in the Schedule is not 'criminal' for the purposes of human rights law.

Conclusion

4.6 Schedule 1 is compatible with human rights as it does not raise any human rights issues.

Schedule 2-Disclosure of lack of independence (recommendation 2.2)

4.7 Schedule 2 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

4.8 Schedule 2 amends the Corporations Act to require a providing entity (a financial services licensee or authorised representative) to give a written disclosure of lack of independence where they are authorised to provide personal advice to a retail client.

Human rights implications

4.9 Schedule 2 does not engage any of the applicable rights or freedoms.

Conclusion

4.10 Schedule 2 is compatible with human rights as it does not raise any human rights issues.

Schedule 3-Advice fees in superannuation (recommendations 3.2 and 3.3)

4.11 Schedule 3 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

4.12 Schedule 3 amends the SIS Act to provide greater protection for superannuation members against paying fees for no service. The amendments increase the visibility of advice fees for all superannuation products and prohibit the charging of ongoing advice fees from MySuper products.

Human rights implications

4.13 Schedule 3 does not engage any of the applicable rights or freedoms.

Conclusion

4.14 Schedule 3 is compatible with human rights as it does not raise any human rights issues.


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