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Accountability, compensation scheme draft laws released

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The Federal Government plans to introduce wider ranging conduct laws for financial firm executives into the spring session of Parliament, along with legislation to set up a last resort disputes settlement compensation scheme.

Draft documents for both the Financial Accountability Regime (FAR) and a Compensation Scheme of Last Resort were released for consultation last week following recommendations from the Hayne royal commission.

FAR will apply to firms licensed by the Australian Prudential Regulation Authority (APRA), their directors and senior executives, extending exiting accountability laws applying to banks to companies including insurers.

Treasurer Josh Frydenberg and Financial Services Minister Jane Hume say the strengthened framework recognises “that decisions taken by directors and the most senior executives of financial institutions are significant for millions of Australians” and the economy.

The new conduct laws are expected to apply to insurers from the latter of July 2023 or 18 months after the FAR starts.

The Compensation Scheme of Last Resort, to be funded by industry levies, aims to ensure consumers receive compensation decided by the Australian Financial Complaints Authority even if a financial firm involved in a dispute has become insolvent.

Submissions on both pieces of draft legislation are due by August 13. More details are available  here.