Explanatory Statement
ASIC Corporations (AFCA Regulatory Requirement) Instrument 2024/60
This is the Explanatory Statement for ASIC Corporations (AFCA Regulatory Requirement) Instrument 2024/60 (the Instrument).
The Explanatory Statement is approved by the Australian Securities and Investments Commission (ASIC).
Summary
1. The Instrument requires the operator of the AFCA scheme, being Australian Financial Complaints Authority Limited ACN 620 494 340 (AFCA), to amend the Australian Financial Complaints Authority Complaint Resolution Scheme Rules (scheme rules), without consultation, to include provisions consistent with subsections 9A(1), (2) and (3) of the AFCA Scheme Authorisation 2018 (AFCA Authorisation).
Note: The AFCA Scheme Authorisation 2018 is registered as a notifiable instrument on the Federal Register of Legislation. The Register may be accessed at www.legislation.gov.au.
2. Subsections 9A(1), (2) and (3) of the AFCA Authorisation are conditions imposed by the Minister on 31 January 2024 by the AFCA Scheme Amendment (2024 Measures No. 1) Authorisation 2024. Section 9A of the AFCA Authorisation, in summary:
a. intends to ensure that the financial services compensation scheme of last resort (CSLR) operator will provide compensation to consumers with unpaid AFCA determinations where the misconduct is by a financial services firm that was licensed to provide the relevant product or service stated in paragraph 9A(1)(b) of the AFCA Authorisation;
b. applies to complaints made but not decided before section 9A of the AFCA Authorisation commences (1 February 2024) and to complaints made after the section commences;
c. requires AFCA and the AFCA Decision Makers not to determine certain kinds of complaints (unless exceptional circumstances apply) as set out in section 9A of the AFCA Authorisation;
d. requires that where amendments to the scheme rules are needed as a result of section 9A of the AFCA Authorisation, the amendments will need to be applied from the date the section commences.
3. Section 9A of the AFCA Authorisation is an interim measure. ASIC understands that the Government intends to introduce laws to Parliament to amend the primary legislation to reflect the operation of section 9A of the AFCA Authorisation (as detailed in a media release issued by the Assistant Treasurer on 26 February 2024). If the amendments are passed, ASIC understands the Minister intends to repeal the AFCA Scheme Amendment (2024 Measures No. 1) Authorisation 2024. If so, ASIC will repeal the Instrument. Any consequential amendments to the scheme rules will also be repealed.
4. Under subparagraph 1051(5)(a)(i) of the Corporations Act 2001 (the Act), the operator of the AFCA scheme must ensure the conditions of the AFCA Authorisation are complied with.
Purpose of the instrument
5. The AFCA constitution and scheme rules require AFCA to consult with stakeholders including financial firms, key consumer, community and industry organisations and ASIC, before making an amendment to the scheme rules. This does not apply if the amendment is to comply with an ASIC regulatory requirement or direction under the Act.
6. The Instrument is an ASIC regulatory requirement issued under the Act, and accordingly the provisions of the scheme rules and AFCA constitution requiring consultation do not apply to the amendments to the scheme rules specified in the Instrument.
7. The Instrument does not affect the requirement that ASIC approve material changes to the AFCA scheme under paragraph 1051(5)(b) of the Act.
Consultation
8. Section 9A of the AFCA Authorisation, as an interim measure in advance of primary law amendments, is to ensure the Government’s policy intent of the CSLR is maintained to the extent possible (as detailed in a media release issued by the Assistant Treasurer on 26 February 2024). Therefore, the Instrument has not been the subject of public consultation.
9. Relevantly, in 2021, the Government consulted on establishing the CSLR. The proposal paper stated: ‘The financial products and services that are in-scope for the CSLR are those that are authorised to be provided by AFSL and ACL holders that are required by legislation to be an AFCA member.’
10. ASIC consulted the operator of the AFCA scheme before making the instrument.
Operation of the instrument
11. Section 2 of the Instrument specifies that the Instrument commences on the day after the Instrument is registered on the Federal Register of Legislation.
12. Section 5 of the Instrument requires the AFCA operator to ensure it complies with section 9A of the AFCA Authorisation by amending the scheme rules, without consultation, to include provisions consistent with section 9A of the AFCA Authorisation.
Legislative instrument and primary legislation
13. ASIC understands that the Government intends to introduce laws to Parliament to amend the primary legislation to reflect the operation of section 9A of the AFCA Authorisation.
Duration of the instrument
14. If the laws introduced to Parliament are passed, ASIC understands the Minister intends to repeal the AFCA Scheme Amendment (2024 Measures No. 1) Authorisation 2024. If so, ASIC will repeal the Instrument. Any consequential amendments to the scheme rules will also be repealed.
Legislative authority
15. The Instrument is made under paragraph 1052A(a) of the Act.
16. The Instrument is a disallowable legislative instrument.
Statement of Compatibility with Human Rights
17. The Explanatory Statement for a disallowable legislative instrument must contain a Statement of Compatibility with Human Rights under subsection 9(1) of the Human Rights (Parliamentary Scrutiny) Act 2011. A Statement of Compatibility with Human Rights is in the Attachment.
Attachment
Statement of Compatibility with Human Rights
This Statement of Compatibility with Human Rights is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
ASIC Corporations (AFCA Regulatory Requirement) Instrument 2024/60 (the Instrument).
Overview
1. The Instrument requires the operator of the AFCA scheme to ensure it complies with section 9A of the AFCA Scheme Authorisation 2018 (AFCA Authorisation) by amending the scheme rules, without consultation, to include provisions consistent with subsections 9A(1), (2) and (3) of the AFCA Authorisation.
Note: The AFCA Scheme Authorisation 2018 is registered as a notifiable instrument on the Federal Register of Legislation. The Register may be accessed at www.legislation.gov.au.
2. Subsections 9A(1), (2) and (3) of the AFCA Scheme Authorisation 2018 are conditions imposed by the Minister on 31 January 2024 by the AFCA Scheme Amendment (2024 Measures No. 1) Authorisation 2024. Section 9A of the AFCA Authorisation in summary:
a. intends to ensure that the financial services compensation scheme of last resort operator will provide compensation to consumers with unpaid AFCA determinations where the misconduct is by a financial services firm that was licensed to provide the relevant product or service stated in paragraph 9A(1)(b) of the AFCA Authorisation;
b. apply to complaints made but not decided before section 9A of the AFCA Authorisation commences (1 February 2024) and to complaints made after the section commences;
c. require AFCA and the AFCA Decision Makers not to determine certain kinds of complaints (unless exceptional circumstances apply) as set out in section 9A of the AFCA Authorisation;
d. require that where amendments to the scheme rules are needed as a result of section 9A of the AFCA Authorisation, the amendments will need to be applied from the time the section commences.
Assessment of human rights implications
3. The Instrument does engage any of the applicable rights or freedoms.
Conclusion
4. This Instrument 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.