February 19, 2019
ASIC has has released an update on its intentions to implement the recommendations of the Banking Royal Commission, which includes its approach to grandfathered investment and superannuation product commissions and to life insurance commissions.
Inside a 14-page response document, the regulator noted there are twelve recommendations in Commissioner Hayne’s final report that are directed at ASIC, or where the Government’s response requires action now by ASIC, without the need for legislative change. ASIC notes it is committed to fully implementing each of these recommendations.
While there were an additional 34 recommendations requiring legislative change that would extend ASIC’s remit, the reglator’s focus in its statement was on the twelve recommendations for which no legislative action was needed. These twelve actions included the Royal Commission’s recommendations on FoFA’s grandfathered commissions and on the future of life insurance commissions.
ASIC notes that with regard to addressing grandfathered commissions, and consistent with the Government’s response to this recommendation, “…ASIC will monitor and report on the extent to which product issuers are acting to end the grandfathering of conflicted remuneration for the period 1 July 2019 to 1 January 2021. This will include consideration of the passing through of benefits to clients, whether through direct rebates or otherwise.”
Riskinfo notes the Federal Opposition is calling for grandfathered commissions to be dealt with one year earlier (1 January 2020) than the present Coalition Government has targeted.
Life Insurance Commissions
In a potentially ambiguous response, ASIC has made the following statement in relation to carrying out the Banking Royal Commission’s recommendations in relation to the future of life insurance commissions, which the Royal Commission has recommended be capped at zero unless ASIC’s 2021 review of the impact of the Life Insurance Framework reforms finds no clear justification for retention:
ASIC will implement this recommendation. ASIC will consider this recommendation and factors identified by the Royal Commission in undertaking its post implementation review of the impact of the ASIC Corporations Life Insurance Commissions Instrument 2017/510, which set commission caps and clawback amounts, and which commenced on 1 January 2018 (ASIC media release 17-168 MR refers). As noted by the Royal Commission, and consistent with the Government’s timetable, ASIC’s review will take place in 2021.
Riskinfo will provide an update when (if) further clarity on the meaning of this statement is released by ASIC.
Click here to access ASIC’s complete update on the implementation of the Royal Commission recommendations.