A slew of regulation recommended by the Hayne Royal Commission to tighten the reigns in the superannuation industry will come into force with the introduction of a new bill.
Introduced in Parliament on November 12, the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 addresses 20 recommendations from the 2018 inquiry.
The new law will prevent the hawking of all financial products - insurance products, superannuation, shares and other managed investment schemes - via an unsolicited telephone call or any form of "real-time interaction in the nature of a discussion or conversation".
Case studies such as ClearView from the Royal Commission found that the existing anti-hawking provisions do not effectively protect consumers from harm, and exposed the widespread practice of selling super and insurance products that do not meet their needs.
Tighter controls over superannuation trustees' ability to "wear two hats" will be in force. Trustees will be prohibited from acting in the best interests of another person, except when performing its duties and exercising its powers as a trustee or when providing personal advice.
Failure to comply with the new condition can lead to APRA issuing directions and even cancelling licences in exceptional circumstances.
The new law comes off the back of Commissioner Kenneth Hayne examining complex frameworks riddled with conflicts of interest. IOOF's complicated structure and poor governance over it, which has been under the watchful eye of APRA since 2016, was laid bare at the hearings.
Under the new law, insurance-claims handling will now be under the umbrella of "financial service", meaning insurers must hold an AFSL to be involved in the claims process. They must also handle claims efficiently, honestly and fairly, and must have an internal despite resolution process and be a member of AFCA.
APRA and ASIC will now have new powers. ASIC's role in superannuation will include protecting consumers from harm and market misconduct.
APRA and ASIC will share the general administration of SIS Act provisions which has consumer protection and member outcomes as their touchstone. These co-regulated provisions are either civil penalty provisions or provisions that are otherwise enforceable.
ASIC will be given the power to approve and revoke voluntary codes of conduct. This includes certain provisions in the Life Insurance Code of Practice and the Insurance in Superannuation Voluntary Code. It is recommended that they are made enforceable by 30 June 2021.
Any breaches of the codes may be subject to a penalty of up to 300 penalty units, the bill shows.
Commenting on the new legislation, director of Super Consumers Australia Xavier O'Halloran said the cost of being sold into a poor quality super fund can mean the difference between a comfortable retirement and struggling to pay the heating bill.
"We're especially pleased that the new legislation makes it crystal clear that it's illegal to hawk a member of a MySuper product into a choice product offered by the same fund. The complementary reforms announced in the Federal Budget to end the creation of duplicate accounts make it even more important that people end up in a single quality fund and are not sold a lemon," he said.