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Brokers have been advised to understand what actions they need to take when the “next wave” of regulatory changes comes into effect in October.
Connective has warned brokers to prepare for several new incoming laws that were introduced as part of the federal government’s response to recommendations from the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
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Noting that the pipeline of new regulation has not slowed down in 2021 for the broking industry despite the disruption caused by the COVID-19 crisis, the aggregator has flagged that the laws will require some brokers to make changes to the way they conduct their business.
From October 2021, six new laws will come into effect that will impact brokers and the financial services industry.
These include:
- Reference checking and information-sharing requirements – starting 1 October
- Breach reporting and the “notify, investigate and remediate” obligations – starting 1 October
- Design and distribution obligations – starting 5 October
- Deferred sales model for add-on insurance products – starting 5 October
- Internal dispute resolution – starting 5 October
- Hawking reforms – starting 5 October
As such, Connective has urged brokers to ensure that they understand what actions they will need to take and what tools they will need to remain compliant, particularly for Australian credit licence (ACL) holders.
Connective group legal counsel Daniel Oh commented that the news laws are “diverse”, and the devil can be in the detail.
He said: “Although the changes for brokers are not as significant as what the industry had to adapt to with best interests duty, brokers need to get ready ASAP, because these new laws are on our doorstep.
“Brokers have had to adapt to such a volume of change and disruption in the last 18 months, which has been consuming. So, we want to shine a spotlight on these latest new laws to make it as easy as possible for brokers to ensure they are compliant.”
Mr Oh said that Connective has been working with the Mortgage & Finance Association of Australia (MFAA) through the latest regulatory process “to push for the best outcome for the industry”.
Treasury recently announced that it will change broker obligations under the design and distribution obligations regime following industry feedback.
It said that it will bring in the amendments to “make clear that more streamlined obligations (i.e. only record-keeping and notification obligations) for distributors only apply where the intermediary has a duty to act in the consumer’s best interests, such as where personal advice is provided under the Corporations Act, or where mortgage brokers engage in similar conduct”.
MFAA chief executive Mike Felton provided a video update following Treasury’s announcement of the incoming changes, where he said that the association had been in discussions with Treasury to change the obligations.
In the update, Mr Felton said that the MFAA had felt that the additional obligations for brokers were not appropriate given they are now held to a best interests duty (BID), “which is a far higher duty [and] takes into account personal advice based on needs, objectives, priorities, preferences”.
The Australian Securities and Investments Commission (ASIC) said that it will take a “reasonable approach” when enforcing the incoming financial services laws in their early stages of implementation, given their significant impact and the current COVID-19 environment.
ASIC chair Joe Longo said that the corporate regulator would take into account the scale of the changes, and the challenges of the current operating environment, while noting that the industry will receive the final guidance on two measures relatively close to the commencement date.
The Loan Market Group held a webinar last week to discuss the regulatory changes, during which executive director Sam White said that aggregators should be helping “shape” legislators’ views on how new laws apply for brokers.
He also said that the second role for an aggregator was to “try and create some rules and some structure and some processes” around the regulations, which are often principles-based and “nebulous”.
Connective will host a regulatory update webinar next Tuesday (7 September) as part of its compliance series, where it will cover all of the incoming changes to the financial services laws.
[Related: Association working to ‘fix’ reference checking laws]
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