Treasury Laws Amendment (Putting Consumers First-Establishment of the Australian Financial Complaints Authority) Bill 2017 - Commentary on Ministerial Responses [2017] AUSStaCSBSD 398 (15 November 2017)

• Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017
• Delegated legislation not subject to disallowance96
• Strict liability98
• Exclusion of judicial review101
• Privacy105
• Significant matters in delegated legislation107

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Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017

Purpose	This bill seeks to amend Corporations Act 2001 and other related legislation to introduce a new external dispute resolution framework and an internal dispute resolution framework for the financial system
Portfolio	Treasury
Introduced	Senate on 14 September 2017
Bill status	Before the Senate
Scrutiny principles	Standing Order 24(1)(a)(i), (iii) and (iv)

2.208 The committee dealt with this bill in Scrutiny Digest No. 12 of 2017. The Minister responded to the committee's comments in a letter dated 6 November 2017. Set out below are extracts from the committee's initial scrutiny of the bill and the Minister's response followed by the committee's comments on the response. A copy of the letter is available on the committee's website.^[95]

Delegated legislation not subject to disallowance^[96]

Initial scrutiny – extract

2.209 Proposed subsection 1050(1) provides that the Minister may authorise an external dispute resolution (EDR) scheme, by notifiable instrument, if the Minister is satisfied that the scheme will meet certain mandatory requirements under proposed section 1051. Once an EDR scheme has been authorised, the operator of the authorised EDR scheme will be known as the Australian Financial Complaints Authority (AFCA) and the authorised EDR scheme will be known as the AFCA scheme. Proposed paragraph 1050(5)(b) provides that the Minister may specify, vary or revoke conditions relating to the authorisation. In addition, proposed subparagraph 1051(5)(a)(i) provides that the operator of the EDR scheme (i.e. AFCA) must ensure that any conditions specified under proposed paragraph 1050(5)(b) are complied with.

2.210 The committee notes that unlike legislative instruments, notifiable instruments are not subject to parliamentary disallowance or scrutiny by the Senate Standing Committee on Regulations and Ordinances, nor are they subject to sunsetting after 10 years.^[97] There is no detail in the explanatory memorandum as to why it is proposed that the authorisation of the scheme, and the specification of conditions relating to the authorisation, is to be done by notifiable instrument, rather than legislative instrument. There is also no detail as to the type of conditions it is envisaged may be specified under this provision.

2.211 The committee therefore requests the Minister's advice as to why it is proposed that the authorisation of the external dispute resolution scheme, and the specification of conditions relating to the authorisation, will not be subject to parliamentary disallowance. The committee also requests advice as to the type of conditions it is envisaged may be specified under this provision.

Minister's response

2.212 The Minister advised:

The Committee has sought further information about why the authorisation of the EDR scheme is not disallowable. The Ministerial power to authorise an EDR scheme does not involve the exercise of a power that is legislative in character because it does not determine or alter the content of a law (rather, the authorisation will merely determine the circumstances in which the relevant law will apply). Accordingly, the exercise of that power should not be disallowable.
We note that the authorisation is a notifiable instrument which will be listed on the Federal Register of Legislation and provide members of the public with appropriate access to a copy of the instrument.
The Committee also seeks further information about the types of conditions that it is envisaged may be specified under the authorisation. The ability to set conditions will allow the Government to ensure that AFCA is accountable to both consumers and member firms, for example by specifying the frequency of independent reviews of the scheme' s operations and procedures, or by requiring AFCA to report to the Government about changes AFCA makes to its membership fees.

Committee comment

2.213 The committee thanks the Minister for this response. The committee notes the Minister's advice that the ministerial power to authorise the external dispute resolution (EDR) scheme should not be disallowable because it does not involve the exercise of a power that is legislative in character—that is, it determines the circumstances in which the relevant law will apply but does not determine or alter the content of the law. The committee also notes the Minister's advice that the power to specify conditions in relation to the authorisation of an EDR may be used to set the frequency of independent reviews of the scheme or require AFCA to report on changes to its membership fees.

2.214 The committee notes that the distinction between legislative and administrative decisions is not always clear and can be difficult to draw. However, the committee notes that the authorisation decision, in combination with the decision to specify conditions, appears to have consequences for how the scheme, which has legislative backing, will work in practice. To the extent that conditions will establish accountability requirements for a scheme for external dispute resolution, which is part of a broader framework of public regulation, such conditions appear to be accountability requirements which may be considered to have a legislative character. The committee therefore remains concerned that the Parliament will have insufficient oversight of important policy considerations relating to the operation of the EDR scheme, given that its authorisation and the specification of conditions will not be subject to disallowance.

2.215 The committee draws its scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of allowing the authorisation of, and specification of conditions relating to, the external dispute resolution scheme to occur by notifiable instrument (which is not subject to disallowance).

Strict liability^[98]

Initial scrutiny – extract

2.216 Proposed section 1054A provides the Australian Financial Complaints Authority (AFCA) with the ability to obtain certain information and documents that are relevant to a superannuation complaint. Proposed subsection 1054A(4) makes it an offence of strict liability if a person fails to comply with a requirement in the written notice given by AFCA. The offence is subject to a penalty of 30 penalty units.

2.217 As it is proposed that AFCA will have a number of statutory powers that can be used to compulsorily obtain information in the case of a superannuation complaint, secrecy provisions in proposed section 1058 make it an offence to disclose or make records of information, or produce or permit access to documents, acquired by an AFCA staff member under AFCA's statutory powers in connection with a superannuation complaint. Proposed subsection 1058(2) makes it an offence of strict liability if an AFCA staff member fails to comply with the secrecy provisions and is subject to a penalty of 30 penalty units.

2.218 In both instances, the explanatory memorandum provides no justification as to why the offences are subject to strict liability.

2.219 Under general principles of the criminal law, fault is required to be proved before a person can be found guilty of a criminal offence (ensuring that criminal liability is imposed only on persons who are sufficiently aware of what they are doing and the consequences it may have). When a bill states that an offence is one of strict liability, this removes the requirement for the prosecution to prove the defendant's fault. In such cases, an offence will be made out if it can be proven that the defendant engaged in certain conduct, without the prosecution having to prove that the defendant intended this, or was reckless or negligent. As the imposition of strict liability undermines fundamental criminal law principles, the committee expects the explanatory memorandum to provide a clear justification for any imposition of strict liability, including outlining whether the approach is consistent with the Guide to Framing Commonwealth Offences.^[99]

2.220 The committee requests a detailed justification from the Minister for each proposed strict liability offence with reference to the principles set out in the Guide to Framing Commonwealth Offences.^[100]

Minister's response

2.221 The Minister advised:

The Committee has sought further information about the strict liability offences contained in the Bill.
General comments
The Bill has two strict liability offences. Under proposed section 1054A, AFCA may give written notice to a person which requires that person to give information or documents to AFCA. A person who fails to comply with AFCA's direction will commit a strict liability offence. In addition, under proposed section 1058, AFCA staff members will be required to comply with secrecy obligations. An AFCA staff member who fails to comply with these obligations will commit a strict liability offence. Both offences attract a maximum penalty of up to 30 penalty units for an individual and up to 150 penalty units for a body corporate.
We note that the penalties comply with the requirements of the Guide because:

• the offences are not punishable by imprisonment;

• the maximum penalties are below the maximum allowable for strict liability offences (the Guide provides that a strict liability offence should be punishable by a maximum of 60 penalty units for individuals and 300 penalty units for body corporates); and

• the offences are likely to significantly enhance the effectiveness of the enforcement regime by supporting AFCA's ability to effectively obtain information required to resolve a superannuation complaint, as well as deter conduct involving the inappropriate disclosure of confidential or personal information.

Further comment - section 1054A (offence relating to AFCA's information gathering power)
A strict liability offence removes the requirement for a fault element to be proven before a person can be found guilty of an offence. This is considered appropriate in this instance as failure to comply with AFCA's requests for information would undermine the integrity of the regulatory regime by impacting AFCA's ability to effectively obtain information required to resolve a superannuation complaint.
We note that the offence supports the efficacy of AFCA's powers. Professor Ian Ramsay considered these powers in his 'Review of the Financial System External Dispute Resolution Framework' and determined that the powers were critical to support the investigation and resolution of superannuation complaints. We also note that the Superannuation (Resolution of Complaints) Act 1993 (which will be repealed by this Bill) contains a comparable strict liability offence in relation to non-compliance with the Superannuation Complaint Tribunal's information gathering powers.
In addition to having access to the defence of honest and reasonable mistake, the offence will not apply to a person who has a reasonable excuse (see subsection 1054A(5)).
Further comment - section 1058 (offence relating to secrecy obligations of AFCA staff members)
A strict liability offence removes the requirement for a fault element to be proved before a person can be found guilty of an offence. This is considered appropriate in this instance as an AFCA staff member's failure to comply with secrecy obligations would undermine the integrity of the regulatory regime. People who are asked to provide information to resolve a superannuation complaint need to have confidence that confidential or personal information that they provide will be adequately protected by AFCA. If this kind of assurance cannot be provided, it would undermine AFCA's ability to effectively investigate and resolve superannuation complaints.
It is expected that AFCA will have appropriate safeguards in place to ensure that its staff members are aware of their secrecy obligations.
In addition to having access to the defence of honest and reasonable mistake, the offence will not apply in various circumstances where disclosures are appropriate (for example, see subsections 1058(3) to (5)).

Committee comment

2.222 The committee thanks the Minister for this response. The committee notes the Minister's advice that strict liability is appropriate in both instances, as the offences are likely to significantly enhance the effectiveness of the enforcement regime by supporting AFCA's ability to effectively obtain information and to deter conduct involving the inappropriate disclosure of confidential or personal information. In relation to proposed section 1054A the committee notes the Minister's advice that the imposition of strict liability is considered appropriate as a failure to comply with AFCA's requests for information will impact on its ability to effectively obtain information required to resolve a superannuation complaint. In relation to proposed section 1058 the committee notes the Minister's advice that failure to comply with secrecy obligations by AFCA staff members would undermine the confidence needed to effectively investigate and resolve superannuation complaints, and that it is expected that AFCA will have appropriate safeguards in place to ensure that its staff members are aware of their secrecy obligations.

2.223 The committee requests that the key information provided by the Minister be included in the explanatory memorandum, noting the importance of this document as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation (see section 15AB of the Acts Interpretation Act 1901).

2.224 In light of the information provided, the committee makes no further comment on this matter.

Exclusion of judicial review^[101]

Initial scrutiny – extract

2.225 Item 11 of the bill seeks to ensure that the Administrative Decisions (Judicial Review) Act 1977 (the ADJR Act) does not apply to decisions or determinations made by AFCA in relation to superannuation disputes.

2.226 The committee notes that the explanatory memorandum only provides a brief justification for the exclusion of the ADJR Act review and therefore a number of scrutiny issues arise in relation to this provision.

2.227 First, the explanatory memorandum states that the approach to review rights for superannuation disputes is consistent with the existing practice for disputes handled by the Superannuation Complaints Tribunal (the SCT).^[102] However, the committee notes it appears that at least some decisions of the SCT are subject to ADJR Act review.^[103]

2.228 Secondly, the explanatory memorandum suggests that ADJR Act review for superannuation disputes may be inappropriate because a statutory right to appeal on questions of law to the Federal Court is provided for. The committee notes that although a statutory appeal on a question of law is sometimes a functional equivalent of an ADJR Act review, this is not necessarily so. This is because the type of errors that can constitute questions of law (and thus whether the court has jurisdiction to hear an appeal) is a question of statutory interpretation. The courts interpret the meaning of 'question of law' in the context of the particular statute in which it appears. It is therefore not clear that an appeal on a question of law would enable an aggrieved consumer to raise all of the errors that would give them a ground of review in a judicial review application brought under the ADJR Act.

2.229 Finally, while parties may appeal to the Federal Court on questions of law in relation to superannuation disputes, the AFCA also has jurisdiction over non-superannuation financial disputes. The explanatory memorandum states that the ADJR Act will not apply to determinations by AFCA in relation to non-superannuation financial disputes because those determinations would not be made under an enactment.^[104] While the proposed AFCA will be a private industry body, it will play an important role in a mandatory scheme of public regulation which is set up in part through the exercise of statutory power. It is therefore unclear why it would not be appropriate for a court to have the jurisdiction to judicially review the legality of AFCA's non-superannuation decisions and determinations.

2.230 The committee therefore requests the Minister's advice:

• as to the decisions or conduct of the SCT that is currently reviewable under the ADJR Act and the rationale for proposing to exclude ADJR Act review of these types of decisions made by AFCA;

• in relation to superannuation disputes, whether the grounds for bringing an appeal on a 'question of law' will be narrower or more limited than those that would be available under the ADJR Act; and

• in relation to non-superannuation financial disputes:

• whether, in the absence of ADJR Act review and a statutory right to appeal, any court would have jurisdiction to judicially review the legality of AFCA's non-superannuation decisions and determinations; and

• the appropriateness of providing that a court of general jurisdiction have the jurisdiction, by way of appeal on a question of law or judicial review, to hear disputes about the legality of AFCA's non-superannuation decisions and determinations.

Minister's response

2.231 The Minister advised:

The exclusion of determinations made bv AFCA from, judicial review under the ADJR Act
The Committee has sought further information about the exclusion of judicial review.
Specifically, the Committee sought further information about the type of decisions that are currently reviewable under the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act) and the rationale for proposing to exclude ADJR Act review of decisions made by AFCA.
Currently, decisions of the Superannuation Complaints Tribunal made under the Superannuation (Resolution of Complaints) Act 1993 are subject to review under the ADJR Act. In practice, the most common examples of appeals under the ADJR Act are appeals of decisions by the Superannuation Complaints Tribunal to withdraw a complaint or that a complaint is outside the Superannuation Complaint Tribunal's jurisdiction.
This Bill inserts a new provision in the ADJR Act which excludes decisions relating to the making of a determination under the AFCA scheme.
Judicial review in the federal jurisdiction is generally available to administrative decisions made by officers of the Commonwealth (such as public servants), Ministers and their delegates. As the Superannuation Complaints Tribunal is a statutory authority established under the Superannuation (Resolution of Complaints) Act 1993, and as its decision-makers are considered 'officers of the Commonwealth', it is appropriate that these decisions are subject to judicial review.
By contrast, AFCA is a private review mechanism arising from private rights. Its decision-makers will not be 'officers of the Commonwealth', and as a result it is not appropriate for its decisions and conduct to be subject to judicial review. This is consistent with administrative law principles.
AFCA will have internal review mechanisms and an independent assessor to manage disputes relating to the processes and operations of AFCA. Further, a determination of AFCA in relation to superannuation complaint can be appealed to the Federal Court on a question of law.
Appeals on questions of law
The Committee sought further information about whether the grounds for bringing an appeal on a 'question of law' will be narrower than those that would currently be available in relation to a superannuation dispute under the ADJR Act.
Appeals on questions of law are generally limited to questions going to the legal correctness of a decision, whereas judicial review generally provides an opportunity to test the lawfulness of an administrative decision.
The types of questions of law that may be appealed in any particular situation would depend on the particular legal context in which the decision is made, which may be broader than reviews provided by the ADJR Act as the grounds of review under the ADJR Act are expressly prescribed. Further, not all grounds of ADJR Act review would necessarily apply in the context of a particular AFCA determination which could be appealed on a question of law.
The exclusion of review under the ADJR Act is appropriate because AFCA is a private industry body, rather than a government body, and it would not be usual to allow judicial review under the ADJR Act in relation to an industry body.
The Bill recognises the importance of the judicial oversight of decision-making bodies by allowing the Federal Court to hear appeals on questions of law from determinations of AFCA in relation to superannuation complaints. This will ensure that an appropriate review process by the Federal Court will be available to parties to a superannuation complaint.
Non-superannuation financial disputes
The Committee sought further information about the appropriateness of providing a court of general jurisdiction with the jurisdiction to hear appeals in relation to non-superannuation complaints.
Currently, decisions in relation to a non-superannuation financial dispute cannot be appealed to a court (other than as a civil action for breach of contract). This position is the same under the AFCA scheme.
The Bill does not provide a mechanism for appeals in relation to non-superannuation complaints to be heard by a court. Currently, decisions in relation to a non-superannuation financial dispute cannot be appealed to a court (other than as a civil action for breach of contract). This position is the same under the AFCA scheme.
However, a member of the AFCA scheme (a financial services provider) may challenge a determination made by AFCA in court through a civil action for breach of contract if the determination is inconsistent with AFCA's terms of reference.
A consumer can challenge a decision of a financial services provider in a court through a civil action for breach of contract. Consumers are not required to comply with a determination of AFCA and may commence a civil action independent of any determination that is made by AFCA.
Currently, decisions in relation to a non-superannuation financial dispute cannot be appealed to a court (other than as a civil action for breach of contract). This position is the same under the AFCA scheme.

Committee comment

2.232 The committee thanks the Minister for this response. The committee notes the Minister's advice that decisions of the Superannuation Complaints Tribunal are currently subject to review under the ADJR Act because its decision-makers are officers of the Commonwealth, but that it is not appropriate to subject the decisions and conduct of the AFCA to judicial review because it will be a private review mechanism arising from private rights and its decision-makers will not be officers of the Commonwealth.

2.233 The committee also notes the Minister's advice that a determination of AFCA in relation to a superannuation complaint can be appealed to the Federal Court on a question of law, and the grounds for bringing such an appeal would depend on the particular legal context. The committee notes the Minister's advice that not all of the grounds of review specified under the ADJR Act would necessarily apply in the context of a particular AFCA determination which could be appealed on a question of law. The committee notes the Minister's view that the exclusion of review under the ADJR Act is appropriate because AFCA is a private industry body, rather than a government body.

2.234 The committee also notes the Minister's advice that currently decisions in relation to non-superannuation financial disputes cannot be appealed to a court, and that this situation would not change under the AFCA scheme.

2.235 With respect to the exclusion of decisions made by AFCA from judicial review under the ADJR Act, the committee remains concerned as to whether the right to appeal on a question of law will provide an adequate substitute to judicial review under the ADJR Act. The committee notes the Minister's advice that not all grounds of ADJR Act review would necessarily apply in the context of a particular AFCA determination which could be appealed on a question of law. As such, it is not clear to the committee whether errors relating, for example, to a denial of a fair hearing (i.e those which give rise to the procedural fairness ground of review) would give rise to a question of law.

2.236 The committee also remains concerned that the bill does not provide any mechanism for appeals on a question of law (or ADJR Act judicial review) in relation to non-superannuation complaints. The committee notes the Minister's justification for this exclusion rests on the fact that AFCA will be a private body. However, the committee emphasises that AFCA, despite being a private body, will nevertheless form an important part of a broader scheme of public regulation of financial disputes and complaints as set up by legislation. In circumstances where a dispute resolution scheme is part of a broader legislative design to serve the public interest (noting the inadequacies of contractual remedies) the committee does not view the private status of AFCA as a sufficient ground for not making available appeals on questions of law. Indeed, the committee notes that in its view the private status of ACFA has, rightly, not prevented the availability of an appeal of questions of law in relation to superannuation disputes. The committee also does not view the fact that such appeals are currently not available for non-superannuation complaints as sufficient justification for not allowing them under the provisions of this bill. In the committee's view the lack of either judicial review, or a means to appeal on questions of law, means there is a risk that any legal errors made by AFCA cannot be corrected.

2.237 The committee requests that the key information provided by the Minister be included in the explanatory memorandum, noting the importance of this document as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation (see section 15AB of the Acts Interpretation Act 1901).

2.238 The committee seeks the Minister's further advice as to whether it is intended that errors related to a denial of a fair hearing (that is, errors which give rise to a procedural fairness ground of review) would give rise to a question of law (and so be subject to appeal).

2.239 The committee draws its remaining scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of not providing a mechanism for appeals and excluding judicial review under the ADJR Act in relation to non-superannuation financial disputes.

Privacy^[105]

Initial scrutiny – extract

2.240 The proposed amendments in items 13, 14 and 29 of the bill would allow officers and other staff members of APRA, ASIC and the ATO to disclose protected information to AFCA to assist it to perform its functions. The explanatory memorandum does not provide any information in relation to the type of information that may be disclosed to AFCA and whether this information is likely to include personal or confidential information. There are also no details about the safeguards that will be in place to ensure that AFCA will protect the confidentiality of any information disclosed to it under these provisions.

2.241 In the absence of this explanatory information, the committee considers that enabling protected information to be disclosed to a non-government body such as AFCA raises privacy scrutiny concerns.

2.242 The committee therefore requests the Minister's advice as to the type of information that it is envisaged may be disclosed to AFCA under these provisions, whether this information is likely to include personal or confidential information, and details as to the safeguards that will be in place to ensure that AFCA will protect the confidentiality of any information disclosed to it.

Minister's response

2.243 The Minister advised:

The protected information envisaged to be shared with AFCA and the safeguards put in place
The Committee has sought further information about the type of information that it is envisaged may be disclosed to AFCA.
The Bill allows officers and other staff members of APRA, the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO) to disclose confidential and protected information to AFCA to assist it to perform its functions.
The type of information that may be disclosed by the ATO to AFCA is limited to information that was obtained under or in relation to the Superannuation (Unclaimed Money and Lost Members) Act 1999. This is consistent with the type of information that the ATO is permitted to disclose to the Superannuation Complaints Tribunal under the current law, which may include personal or confidential information.
The legislation enables ASIC to share information, at ASIC's discretion, that will assist AFCA to perform its functions or powers. This may potentially include information that relates to an individual complaint, a systemic issue or membership of AFCA. The information may be personal or confidential information. Under the current law, ASIC is permitted to disclose this type of information to the Superannuation Complaints Tribunal.
It is intended that AFCA's terms of reference will include an obligation for AFCA to keep confidential all information pertaining to a dispute that is provided to AFCA except to the extent reasonably necessary to carry out AFCA's responsibilities. This is a matter that will be considered as part of the EDR authorisation decision.
In addition, each of the relevant legislative frameworks authorising the disclosure of protected information contains mechanisms for safeguarding the confidentiality of information once disclosed by ASIC, APRA and the ATO. For example, subsection 127(4A) of the Australian Securities and Investments Commission Act 2001 allows ASIC to impose conditions that AFCA must comply with in relation to information disclosed. Subsection 56(9) of the Australian Prudential Regulation Authority Act 1998 provides a similar rule in relation to disclosures made by APRA. Section 355-155 of Schedule 1 of the Tax Administration Act 1953 provides that it is an offence (punishable by up to two years' imprisonment) for an entity to on-disclose or record protected information acquired by the entity from taxation officers, except in certain limited circumstances.

Committee comment

2.244 The committee thanks the Minister for this response. The committee notes the Minister's advice that the information that may be shared with the AFCA will include confidential and personal information to assist it to perform its functions, which may include personal information, of the type currently permitted to be disclosed to the Superannuation Complaints Tribunal. The committee notes the Minister's advice that it is intended that AFCA's terms of reference will include an obligation to keep confidential all information pertaining to a dispute, except to the extent reasonably necessary to carry out its responsibilities, and that this obligation will be considered as part of the EDR authorisation decision. The committee further notes the Minister's advice that legislative frameworks relevant to ASIC, APRA and the ATO contain mechanisms for safeguarding the confidentiality of such information once disclosed.

2.245 The committee notes the Minister's earlier advice that AFCA is to be a private review mechanism arising from private rights and its decision-makers will not be Commonwealth officers.^[106] The committee therefore remains concerned about enabling protected information to be disclosed to a non-government body such as AFCA, particularly in circumstances where this information may include personal and confidential information. It is not clear to the committee that the Privacy Act 1988 would apply to such a private body and while the committee notes the Minister's advice that the Acts under which ASIC, APRA and the ATO are each authorised to disclose protected information also contain provisions to safeguard confidentiality, those Acts merely impose the ability for ASIC and APRA to impose conditions regarding confidentiality, and not an obligation requiring confidentiality. The committee notes that including obligations in AFCA's terms of reference is not equivalent to making it a legislative requirement that AFCA have an obligation to maintain confidentiality. The committee notes the advice that including these matters in AFCA's terms of reference is intended to be considered as part of the EDR authorisation decision. However, the committee notes that, as discussed above, the EDR authorisation decision and the specification of any conditions on such authorisation, is to occur by notifiable instrument, and will therefore not be disallowable by Parliament.

2.246 The committee draws its scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of enabling protected personal and confidential information to be disclosed to AFCA, a non-government body, without any specific safeguards in the bill to ensure that AFCA will protect the confidentiality of any information disclosed to it.

Significant matters in delegated legislation^[107]

Initial scrutiny – extract

2.247 Under current section 101 of the Superannuation Industry (Supervision) Act 1993 trustees of regulated superannuation funds and approved deposit funds are required to have an internal dispute resolution (IDR) system and to provide written reasons for decisions about complaints made by beneficiaries, former beneficiaries or other interested parties. Current section 47 of the Retirement Savings Accounts Act 1997 specifies similar requirements for an IDR system for complaints relating to the operation or management of a Retirement Savings Account (RSA). A person who intentionally or recklessly contravenes these requirements commits an offence punishable by a fine of up to 100 penalty units.^[108]

2.248 Items 7 and 9 of Schedule 2 seek to repeal the current requirements in the primary legislation and allow ASIC to set requirements about providing written reasons for IDR decisions in a legislative instrument.^[109] Contravening these requirements will remain an offence, subject to up to 100 penalty units (or $21,000). The committee's view is that significant matters, such as requirements the breach of which will constitute an offence, should be included in primary legislation unless a sound justification for the use of delegated legislation is provided. In this case, the explanatory memorandum states that the amendments will 'provide ASIC with the flexibility to align the requirements around giving reasons for IDR decisions made by these trustees to those that apply for other IDR firms'.^[110] While the committee notes this brief explanation, the committee does not consider that this adequately explains why the use of delegated legislation is appropriate in this instance.

2.249 The committee requests the Minister's more detailed justification as to the appropriateness of setting out requirements in delegated legislation where breach of those requirements will constitute an offence.

Minister's response

2.250 The Minister advised:

The appropriateness of putting requirements in delegated legislation that, if breached, constitutes an offence
The Committee has sought further information about the appropriateness of setting out requirements in delegated legislation where breach of those requirements will constitute an offence.
This Bill includes a requirement for Retirement Savings Account providers and trustees of regulated superannuation funds and approved deposit funds to ensure that written reasons are given for decisions relating to complaints. Contravening this requirement will be an offence, subject to a penalty of up to 100 penalty units.
This Bill allows ASIC to set out the detail of this requirement by legislative instrument. The details that ASIC may specify are clearly circumscribed in the Act and the details will be readily obtainable, being available on the Federal Register of Legislation. ASIC will be required to consult, as appropriate, on the content of the legislative instrument.
This approach provides ASIC with the flexibility to develop and consult on the content of its legislative instrument so as to provide for greater consistency between the requirements around giving reasons for internal dispute resolution decisions made by these trustees and the requirements that will apply for other internal dispute resolution firms.
The requirements that apply for other internal dispute resolution firms will be set out under requirements approved by ASIC as mentioned in subparagraph 912A(2)(a)(i) of the Corporations Act 2001. This approach allows ASIC to ensure the new requirements begin for all internal dispute resolution firms from the same start date and that the enhanced internal dispute resolution framework achieves a consistent approach for consumers of financial services and products, including superannuation products. It would also be expected that in the long term, harmonising the rules will result in reduced complexity for internal dispute resolution procedures for financial service providers.

Committee comment

2.251 The committee thanks the Minister for this response. The committee notes the Minister's advice that the bill allows ASIC to set out the details of reasons given for decisions relating to complaints by Retirement Savings Account providers and trustees of regulated superannuation funds and approved deposit funds by legislative instrument. The committee notes the Minister's advice that details that ASIC may specify are clearly circumscribed in the Act and will be readily obtainable on the Federal Register of Legislation, and this approach provides ASIC with the flexibility to develop and consult on the legislative instrument and provide greater consistency between requirements on these trustees and those that will apply for other internal dispute resolution firms.

2.252 The committee's view is that significant matters, such as requirements the breach of which will constitute an offence, should generally be included in primary legislation. The committee does not consider that providing flexibility for ASIC is a sufficient justification for setting out requirements in delegated legislation where breach of those requirements will constitute an offence.

2.253 The committee draws its scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of setting out requirements in delegated legislation where breach of those requirements will constitute an offence.

2.254 The committee also draws this matter to the attention of the Senate Standing Committee on Regulations and Ordinances for information.

2.1

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[95] See correspondence relating to Scrutiny Digest No. 12 of 2017 available at: www.aph.gov.au/senate_scrutiny_digest

[96] Schedule 1, item 2, proposed section 1050. The committee draws Senators’ attention to this provision pursuant to principle 1(a)(iv) of the committee’s terms of reference.

[97] See Legislation Act 2003.

[98] Schedule 1, item 2, proposed subsections 1054A(4) and 1058(2). The committee draws Senators’ attention to this provision pursuant to principle 1(a)(i) of the committee’s terms of reference.

[99] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp 22–25.

[100] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp 22–25.

[101] Schedule 1, item 11, proposed paragraph (hba) of Schedule 1 to the Administrative Decisions (Judicial Review) Act 1977. The committee draws Senators’ attention to this provision pursuant to principle 1(a)(iii) of the committee’s terms of reference.

[102] Explanatory memorandum, p. 44.

[103] See Superannuation Complaints Tribunal, Submission in response to the Consultation Paper: Improving dispute resolution in the financial system, p. 10, available at https://static.treasury.gov.au/uploads/sites/1/2017/09/Superannuation-Complaints-Tribunal.pdf.

[104] Explanatory memorandum, p. 44.

[105] Items 13, 14 and 29 of Schedule 1. The committee draws Senators' attention to these provisions pursuant to principle 1(a)(i) of the committee's terms of reference.

[106] See Minister's response in paragraph [2.243] above.

[107] Schedule 2, items 7 and 9, proposed subsection 47(2A) of the Retirement Savings Accounts Act 1997 and proposed subsection 101(1B) of the Superannuation Industry (Supervision) Act 1993. The committee draws Senators' attention to this provision pursuant to principle 1(a)(iv) of the committee's terms of reference.

[108] Superannuation Industry (Supervision) Act 1993 s 101(2); Retirement Savings Accounts Act 1997 s 47(3).

[109] Proposed subsection 47(2A) of the Retirement Savings Accounts Act 1997 and proposed subsection 101(1B) of the Superannuation Industry (Supervision) Act 1993.

[110] Explanatory memorandum, p. 54.