COVID-19: Hayne reforms and DDO deferred six months

5 minute read + PDF download  10.05.2020 Kate Hilder, Mark Standen, Siobhan Doherty
The government's timeline for implementing Financial Services Royal Commission reforms, and separately ASIC's timeline for enforcing design and distribution obligations and broker reforms have been pushed back six months  because of the impact of COVID-19.

Revised FSRC implementation timeline

Key takeouts

  • The government's Hayne Commission implementation timetable has been pushed back six months because of the disruption caused by COVID-19.
  • ASIC has announced that it will defer enforcing design and distribution obligations (DDO) and mortgage broker reforms for six months because of COVID-19.
  • Revised FSRC implementation timeline to download: We've prepared document giving a high level snapshot of the legislation now set to be introduced by the end of 2020 including revised commencement dates, and identifying the recommendations now to be introduced by June 2021.  

Hayne reforms deferred six months

On the 8 May, Treasurer Josh Frydenberg announced that the government's Financial Services Royal Commission (FSRC) implementation timetable has been pushed back six months to 'enable the financial services industry to focus their efforts on planning for the recovery and supporting their customers and their staff during this unprecedented time'.

Under the updated timetable

  • Measures that the Government had planned to introduce into the parliament by 30 June 2020 (ie the package of draft legislation released on 31 January for consultation), will now be introduced by December 2020.  
  • The commencement dates in that package of exposure draft legislation have also been pushed back six months.
  • Measures originally scheduled for introduction by December 2020 will now be introduced by 30 June 2021.   

Summary – revised FSRC implementation timeline 

We have prepared a table providing a high level snapshot of the legislation now set to be introduced by the end of 2020 including revised commencement dates, and identifying the recommendations now to be introduced by June 2021.  You can download the table in PDF by clicking the button at the top of this article.

Recap of progress towards implementing the Commission's recommendations

Mr Frydenberg said that since the release of the FSRC final report, the government has implemented 24 commitments and has 'substantially progressed a further 35 through consultation and the preparation of draft legislation'. 

Government's announcement welcomed by CHOICE

In a short statement, consumer group CHOICE welcomed the government's announcement.  CHOICE CEO Alan Kirkland said that 'a six-month deferral strikes a sensible balance between recognising the reality of these unprecedented circumstances and the need to legislate reforms to protect consumers, who will need this even more in the coming months.  We look forward to working with the government to finalise the remaining reforms as soon as possible.'

DDO and broker reforms deferred for six months

To enable industry participants to 'focus on immediate priorities and the needs of their customers', the Australian Securities and Investments Commission (ASIC) has decided to defer the commencement dates for:

  • the mortgage broker reforms until 1 January 2021 (these obligations were to commence on 1 July 2020)
  • the design and distribution obligations until 5 October 2021 (these obligations were originally to commence on 5 April 2021)

ASIC says that the decision 'follows, and is consistent with, the government’s decision to defer implementation of the Hayne reforms for six months.  

Details

Mortgage broker reforms

Schedule 3 of the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Act 2020 implements the government’s response to recommendations 1.2 (mortgage broker best interests duty) and 1.3 (mortgage broker remuneration).  These changes were to commence on 1 July 2020 and have now been deferred to 1 January 2021.   

ASIC was due to release guidance on meeting the obligations in May 2020, following consultation. 

[Note:  On 20 February ASIC released a consultation paper, CP 327: Implementing the Royal Commission recommendations: Mortgage brokers and the best interests duty (CP 327) — and draft guidance on the new obligations for consultation. Broadly, the draft guidance explains ASIC's: a) interpretation of the best interests obligations; b) expectations for meeting the obligations; and c) general approach to administering the obligations. For a summary of CP 327 see: Governance News 26/02/2020 at p15]

ASIC has said that it expects preparation for the commencement of the reforms to continue.  ASIC adds that it will continue to work on finalising the guidance and plans to release it in 'mid-2020'. 

Design and Distribution Obligations 

Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 amends the: Corporations Act 2001 to introduce design and distribution obligations in relation to financial products.  ASIC was due to release guidance in 2020.

[Note: On 19 December, ASIC released ASIC Consultation Paper 325 Design and Distribution Obligations (CP 325) and draft guidance for consultation.  The consultation paper sets out ASIC's interpretation of the new obligations, the regulator's expectations for meeting them, and ASIC's general approach to administering them.  Consultation closed on 11 March.  For a summary of CP 325 see: Governance News 15/01/2020

ASIC has said that it expects preparation for the commencement of the reforms to continue.  ASIC adds that it will continue to work on finalising the guidance and plans to release it in 'mid-2020'.

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https://www.minterellison.com/articles/covid-19-revised-fsrc-implementation-schedule-deferral-of-fsrc-reforms-broker-reforms-and-ddo