Recommendation 1.15: Enforceable code provisions
The Coalition Government has today released a consultation paper on making provisions of financial services industry codes of conduct more enforceable and providing both the regulator and consumers with more powers to hold financial services firms to account for misconduct.
This is another step forward as part of the Government’s continued action on all 76 recommendations contained in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Industry codes are vitally important in promoting best practice and raising standards.
In his Final Report, Commissioner Hayne noted, “…there must be adequate means to identify, correct and prevent systemic failures in applying the code… in order to do that, some provisions of the codes should be picked up and applied as law.”
In our response, the Government agreed to take action on recommendation 1.15, enhancing the current approved codes framework in the Corporations Act 2001.
This includes amending the law to allow:
- the Australian Securities and Investments Commission (ASIC) to approve codes for a wider range of entities than currently possible;
- ASIC-approved codes to include ‘enforceable code provisions’, contravention of which constitutes a breach of the law and with remedies modelled on those in the Competition and Consumer Act 2010; and
- ASIC to take into account whether particular provisions of an industry code have been designated as enforceable code provisions in determining whether to approve a code.
Through these changes, it will also be made clear that certain promises made in codes are enforceable against financial services firms by consumers.
As further recommended by Commissioner Hayne, to deal with the case where an industry does not put forward its proposed enforceable code provisions in a timely manner, mandatory financial services industry codes will be able to be imposed by the Government.
Establishing the new regime will also allow industry and ASIC to complete their implementation of recommendations 1.16 and 4.9 which relate to codes in the banking and insurance industries.
In his report, Commissioner Hayne also noted the benefits of voluntary codes in harnessing the views and collective will of industry. The Government continues to support and encourage industry to develop voluntary codes that go beyond the requirements in the law.
The Coalition Government has agreed to take action on all 76 recommendations contained in the Royal Commission’s Final Report and, in a number of important areas, is going further. Restoring trust in Australia’s financial system is part of our plan for a stronger economy.
The consultation paper is available on the Treasury website.