Federal Register of Legislation - Australian Government

Primary content

A Bill for an Act relating to the conduct of, and the disclosure of information by, life companies, life brokers and life insurance advisers, and for related purposes
For authoritative information on the progress of bills and on amendments proposed to them, please see the House of Representatives Votes and Proceedings, and the Journals of the Senate as available on the Parliament House website.
Introduced HR 23 Sep 1999

Choice of Superannuation Funds (Consumer Protection) Bill 1999
First Reading

1998-99

The Parliament of the

Commonwealth of Australia

HOUSE OF REPRESENTATIVES

Presented and read a first time

Choice of Superannuation Funds (Consumer Protection) Bill 1999

No. , 1999

(Treasury)

A Bill for an Act relating to the conduct of, and the disclosure of information by, life companies, life brokers and life insurance advisers, and for related purposes

ISBN: 0642 407665

Contents

Australian Securities and Investments Commission Act 1989 45

Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 45

A Bill for an Act relating to the conduct of, and the disclosure of information by, life companies, life brokers and life insurance advisers, and for related purposes

The Parliament of Australia enacts:

Part 1--Preliminary

1 Short title This Act may be cited as the Choice of Superannuation Funds (Consumer Protection) Act 1999.

2 Commencement (1) Sections 1, 2 and 16 of this Act commence on the day on which this Act receives the Royal Assent.

(2) Items 2 and 3 of Schedule 1 are taken to have commenced immediately after the commencement of section 1 of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999.

(3) Subject to subsection (4), the remaining provisions of this Act commence on a day to be fixed by Proclamation.

(4) If the remaining provisions of this Act do not commence under subsection (3) within the period of 6 months beginning on the day on which this Act receives the Royal Assent, they commence on the first day after the end of that period.

3 Object of the Act (1) The main object of this Act is to ensure that, as far as possible, owners, and prospective owners, of life insurance policies, and beneficiaries and prospective beneficiaries of certain group policies, receive sufficient relevant and accurate information to enable them to make informed choices relating to life insurance.

(2) The means adopted to achieve this object include the following:

(a) imposing on life companies and life brokers obligations relating to their conduct, and the conduct of their respective life insurance advisers, in relation to the giving of life insurance advice;

(b) imposing on life companies obligations relating to the production and provision of information about their life policies;

(c) imposing on life insurance advisers obligations relating to the provision of information, and the form in which life insurance advice must be given.

4 Definitions (1) In this Act, unless the contrary intention appears:

agent has the meaning given in section 5.

ASIC means the Australian Securities and Investments Commission.

associate, in relation to a life insurance adviser, means:

(a) a person who is in partnership with the adviser in the conduct of life insurance business; or

(b) an agent of a life company, or of a life broker, being an agent who employs the adviser; or

(c) an agent of a life company, or of a life broker, being an agent of whom the adviser is an agent; or

(d) a person with whom the adviser is acting, or proposes to act, in concert in relation to the giving of life insurance advice in the conduct of life insurance business; or

(e) a trustee of a trust in relation to which the adviser benefits, or is capable of benefiting; or


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(f) a director of a life company, or of a life broker, of which the adviser is also a director.

Code means the Code of Practice for the Life Insurance Industry.

disclosure rules means regulations containing provisions of the kind mentioned in section 19.

disclosure statement means a statement that is in accordance with section 28 or 37, as the case requires.

group member means a member of a group scheme.

group policy means a life policy under a group scheme.

group scheme means:

(a) a group superannuation scheme whose members are beneficiaries of a group policy under the scheme; or

(b) a group insurance scheme whose members are beneficiaries of a group policy under the scheme.

life broker means a person registered under Part III of the Insurance (Agents and Brokers) Act 1984 in respect of life insurance business.

life insurance advice means a recommendation, whether expressed or implied:

(a) that a person should enter into, vary, continue or discontinue, a life policy; or

(b) that a person become, remain or stop being, a group member; or

(c) that a person vary the benefits to which that person is entitled as a beneficiary under a group policy.

Note: See section 8 in relation to implied recommendations.

life insurance adviser means:

(a) a life insurance adviser of a life company within the meaning of Part 3; or

(b) a life insurance adviser of a life broker within the meaning of Part 4.

life policy includes a sinking fund policy, but otherwise has the same meaning as it has in the Life Insurance Act 1995: it does not, however, include a life policy or a sinking fund policy of a prescribed kind.

promotional material means any document or advertisement (whether or not produced or provided in accordance with the disclosure rules) that contains statements that might affect a person's decision to engage in a life insurance activity.

risk insurance policy means a life policy of a prescribed kind.

staff member has the same meaning as in the Australian Securities and Investments Commission Act 1989.

sub-agent, in relation to a life company or a life broker, means an agent of a person (whether a natural person or a body corporate) who is an agent of the company or broker.

this Act includes the regulations.

(2) Unless the contrary intention appears, a word or expression used in this Act has the same meaning as it has in the Life Insurance Act 1995.

5 Agents For the purposes of this Act, a person is taken to be an agent of another person if a written or oral agency agreement is in force between the person and the other person.

6 Issuing promotional material For the purposes of this Act, a life company issues promotional material if the company, or a person acting for it or on its behalf:

(a) publishes the material by any means (including by the use of the internet, or by radio or television, or by the use of other electronic equipment), or causes it to be so published; or

(b) gives or transmits the material to another person by any means (including by the use of the internet or of facsimile or other electronic equipment), or causes it to be so given or transmitted, for the purpose of inviting or encouraging the person to make a decision to engage in a life insurance activity.

7 Engaging in a life insurance activity (1) For the purposes of this Act, a person is taken to engage in a life insurance activity if the person:

(a) enters into, varies, continues or discontinues, a life policy; or

(b) becomes, remains or stops being, a group member; or

(c) varies the benefits to which the person is entitled as a beneficiary under a group policy.

(2) For the purposes of this Act, a person who becomes, remains or stops being, a group member is taken to engage in a life insurance activity relating to the group policy under the scheme.

8 General information does not constitute an implied recommendation For the purposes of this Act, a person is not taken to make an implied

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recommendation that another person engage in a life insurance activity merely because the person gives the other person an analysis of, or a report on, a life policy or life policies in general, without an analysis of the other person's particular needs and financial situation.

9 Additional operation of the Act Without prejudicing its effect apart from this section, this Act also has the effect it would have if each reference to a company were, by express provision, confined to a company that is a corporation to which paragraph 51(xx) of the Constitution applies.

10 Exclusion of certain State insurance This Act does not apply with respect to State insurance that does not extend beyond the limits of the State concerned.

11 Exclusion of life companies that are friendly societies This Act does not apply to a life company that is a friendly society (within the meaning of the Life Insurance Act 1995).

12 Extension to Norfolk Island This Act extends to Norfolk Island.

13 General administration ASIC has the general administration of this Act.

14 Application of the Criminal Code Chapter 2 of the Criminal Code applies to all offences against this Act.

15 Act not to affect operation of other Acts This Act does not affect the operation of the Life Insurance Act 1995, the Insurance (Agents and Brokers) Act 1984 or the Trade Practices Act 1974.

16 Schedule(s) Subject to section 2, each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Part 2--Duties of life companies

17 Effect of Part This Part contains provisions:

(a) requiring life companies to provide owners and prospective owners of life policies, and group members and prospective group members of certain group schemes, with the information they reasonably require to enable them to make properly informed decisions whether to engage in certain life insurance activities; and

(b) providing appropriate redress for people who suffer loss or damage as a result of relying on information that is false or misleading, or from which there are material omissions.

18 Duty of life companies to provide information (1) Subject to subsection (2), a life company must ensure that, as far as reasonably practicable:

(a) owners and prospective owners of life policies issued by the company receive the information they reasonably require to enable them to make informed decisions whether to engage in a life insurance activity relating to any of those life policies; and

(b) group members and prospective group members receive the information they reasonably require to enable them to make informed decisions whether to engage in a life insurance activity relating to a group policy issued by the company; and

(c) there are no material omissions from the information, and it is not false or misleading in a material particular.

(2) Paragraph (1)(b) does not apply in relation to a group scheme included in a prescribed class of group schemes.


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19 Disclosure rules
(1) The regulations may make provision relating to the production and provision of information by life companies about life policies issued by them.

Note: Regulations of the kind mentioned in subsection (1) are called disclosure rules (see subsection 4(1)).

(2) Without limiting subsection (1), disclosure rules may include provisions:

(a) requiring a life company to produce specified kinds of information about some or all of the life policies issued by it; and

(b) specifying the form in which, and the times or stages at which, a life company must provide the information to the owners or prospective owners of those life policies; and

(c) requiring a life company to keep such records relating to the production or provision of the information, or both, as are prescribed by the rules; and

(d) requiring a life company to lodge with ASIC documents used in particular cases for the purposes of the rules.

(3) The requirements of the disclosure rules are in addition to, and do not limit, section 18.

20 ASIC may give directions (1) If it appears to ASIC that a life company has, by an act or omission, contravened section 18, or a provision of the disclosure rules, ASIC may give the company a written notice:

(a) informing the company that ASIC is considering giving the company a direction under this section; and

(b) setting out particulars of the act or omission, and the provision alleged to have been contravened; and

(c) inviting the company to make submissions to ASIC on the question whether a direction under this section should be given; and

(d) specifying the period within which the submissions must be given to ASIC.

(2) The specified period must be a period of at least 14 days, starting on the day when the notice is given.

(3) ASIC may give a written direction to the life company if:

(a) the period specified in the notice has expired; and

(b) after considering the submissions (if any) made by the company, ASIC is satisfied that the company has contravened section 18, or the provision of the disclosure rules, as the case may be, by the act or omission specified in the notice.

(4) The direction may:

(a) require the company not to do a specified act; or

(b) require the company to do a specified act.

(5) The direction takes effect:

(a) on the day specified in the direction; or

(b) if no day is so specified--on the day on which the direction is given to the company.

(6) A life company is guilty of an offence punishable, on conviction, by a fine not exceeding 300 penalty units if:

(a) it does, or fails to do, an act; and

(b) doing, or failing to do, the act results in a contravention of a direction (including a direction as varied) given to it under this section.

Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

21 Revocation or variation of directions (1) If ASIC thinks that a direction given to a life company under section 20 is no longer required or should be varied, ASIC must, by written notice given to the life company, revoke or vary the direction.

(2) If a life company to which a direction has been given asks ASIC, in writing, to revoke or vary the direction, ASIC must:

(a) if ASIC thinks that the direction is no longer necessary or should be varied--revoke or vary the direction; or

(b) in any other case--refuse to revoke or vary the direction.

(3) ASIC must give to the life company written notice of a decision made under subsection (2).

22 ASIC may issue stop orders (1) If it appears to ASIC that:

(a) promotional material issued by a life company contains information that is false or misleading in a material particular; or

(b) there is a material omission from any such promotional material;

ASIC may, by written order (a stop order) given to the company, direct the company not to issue the promotional material while the stop order is in force.

(2) A stop order:

(a) comes into force when it is made, or, if a later time is specified in the order as the time when the order comes into force, at that later time; and


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(b) remains in force until it is revoked.

(3) A life company is guilty of an offence punishable, on conviction, by a fine not exceeding 300 penalty units if:

(a) it issues promotional material; and

(b) the issuing of the material results in a contravention of a stop order that is in force.

Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

23 False or misleading information: civil liability (1) If:

(a) a person engages in a life insurance activity relating to a life policy issued by a life company; and

(b) the person engages in that activity in reliance on information:

(i) provided to the person by the company; or

(ii) contained in promotional material issued by the company; and

(c) the information is false or misleading in a material particular, or there is a material omission from the information; and

(d) the person suffers loss or damage as a result of engaging in that activity in reliance on the information;

the person may recover the amount of the loss or damage by action in a court of competent jurisdiction against a person or persons liable in respect of the loss or damage.

(2) The following persons are jointly and severally liable in respect of the loss or damage referred to in subsection (1):

(a) the life company;

(b) the persons who were directors of the life company when the information was provided to the person, or the promotional material was issued, as the case may be.

(3) In addition to other relief granted in an action under subsection (1), the court, if it thinks it necessary in order to do justice between the parties, may:

(a) make an order declaring a life policy (other than a group policy) to be void; and

(b) if it makes an order under paragraph (a), make a further order directing the defendant or defendants to pay to the plaintiff an amount equal to the amount paid by the plaintiff to the company in connection with the policy, including interest on that money.

(4) A person is not liable in an action referred to in subsection (1) if the person proves that:

(a) the false or misleading statement or the omission was due to reasonable reliance on information or advice given by another person; or

(b) the omission was due to a mistake; or

(c) the information was provided, or the promotional material was issued, without the person's knowledge;

and the person took reasonable steps and exercised due diligence to ensure that all information provided by the company, or contained in promotional material issued by it, was true and not misleading and that there were no material omissions from the information.

(5) In paragraph (4)(a):

another person does not include a person who was a director, employee or agent of the defendant when the information was provided.

(6) A person is not liable in an action referred to in subsection (1) to a person who suffered loss or damage as a result of engaging in a life insurance activity in reliance on information that was false or misleading, or from which there was an omission, if it is proved that, when the last-mentioned person engaged in the activity, that person knew that the information was false or misleading, or was aware of the omitted matter.

24 Order to disclose information or publish advertisement etc. (1) If the Court is satisfied that a life company has issued promotional material in or in connection with any of the company's life policies, and that:

(a) the material contains information that is false or misleading in a material particular; or

(b) there is a material omission from the material;

the Court may make an order or orders under this section.

(2) The Court may only make an order under subsection (1) on the application of ASIC.

(3) The Court may make either or both of the following orders:

(a) an order requiring the life company to disclose, at the company's expense and in the manner specified in the order, specified information to the public, or to a specified person or persons;

(b) an order requiring the company to issue, at the company's expense and in the manner specified in the order, promotional material whose terms are specified in, or are to be determined in accordance with, the order.

(4) An order referred to in paragraph (3)(a) must specify:

(a) the information or kind of information required to be disclosed by the

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order, being information that is:

(i) in the possession of the company; or

(ii) to which the company has access; and

(b) in the case of information required to be disclosed to specified persons--the persons or the particular class of persons to whom the information must be disclosed.

(5) This section does not limit section 60.

25 False or misleading information: criminal liability A person who, in any information produced under section 18:

(a) makes any statement that to the person's knowledge is false or misleading in a material particular; or

(b) omits a material particular without which the information is, to the person's knowledge, false or misleading in a material respect;

is guilty of an offence punishable, on conviction, by imprisonment for not more than 12 months.

Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

Part 3--Conduct of life companies and their life insurance advisers

26 Effect of Part This Part contains provisions governing the conduct of life companies and their life insurance advisers in relation to the giving of certain insurance services, including in particular the giving of life insurance advice.

27 Definitions In this Part:

exempt person means a person included in a class of persons declared by the regulations to be exempt from this Part.

life insurance adviser, in relation to a life company, means:

(a) a natural person (other than an exempt person or a life broker referred to in paragraph (b)) who is an agent or a sub-agent of the life company, whether or not the person is authorised to give life insurance advice by or under the terms of his or her agency agreement; or

(b) a natural person (other than an exempt person) who is a life broker, but who does anything to which this Part applies in the course of acting as an agent or a sub-agent of the life company, whether or not the person is authorised to give life insurance advice by or under the terms of his or her agency agreement; or

(c) a natural person (other than an exempt person) who is an employee of the life company, whether or not the person is authorised to give life insurance advice by or under the terms of his or her employment; or

(d) any other natural person (other than an exempt person) who is authorised to give life insurance advice by the life company, or by or under the terms of his or her employment by an agent or sub-agent of the life company, or who gives such advice while ostensibly acting within the scope of such an authorisation.

28 Disclosure statements (1) A life insurance adviser of a life company who offers, or is asked to give, a person (the client) an insurance service in relation to a life policy or life policies issued by the life company must, as soon as practicable after the adviser's first contact with the client, give or send to the client a written disclosure statement containing the prescribed particulars.

(2) Subsection (1) does not apply in relation to a client who has previously received a disclosure statement from the adviser, unless the particulars set out in that disclosure statement are no longer accurate or complete.

(3) A person is guilty of an offence punishable, on conviction, by a fine not exceeding 200 penalty units if:

(a) the person fails to do an act; and

(b) failing to do the act results in a contravention of subsection (1).

Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

(4) In this section:

insurance service, in relation to a life policy or life policies, means any service or advice about, or connected with, the policy or policies (including life insurance advice within the meaning of this Act), but does not include any service or advice of a kind declared by the regulations to be a service or advice to which this section does not apply.

29 Life insurance advice must contain certain information (1) A life insurance adviser of a life company who gives life insurance advice to a person who may reasonably be expected to rely on it must ensure that the

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advice meets the requirements of this section.

(2) An advice must be in writing.

(3) The document containing the advice must also set out:

(a) the name and business address of the life insurance adviser; and

(b) such other particulars as are prescribed; and

(c) the basis on which the advice is given.

(4) Subject to this section, the document containing the advice must also set out details of:

(a) any benefit or advantage, whether pecuniary or not and whether direct or indirect, that the adviser or an associate of the adviser has received, or will or may receive, in connection with the giving of the advice or the issue of a life policy to the person to whom the advice is given; and

(b) any other pecuniary or other interests, whether direct or indirect, of the adviser or an associate of the adviser that may reasonably be expected to be capable of influencing the adviser in giving the advice.

(5) Subsection (3) does not apply to life insurance advice in respect of a life policy, or a kind of life policy, prescribed for the purposes of this subsection.

(6) Subsection (4) does not apply:

(a) in relation to any fees or commissions that the life insurance adviser has received directly, or will or may receive directly, from the person to whom the advice is given; or

(b) to life insurance advice in respect of a life policy, or a kind of life policy, prescribed for the purposes of this paragraph.

(7) If:

(a) a life insurance adviser of a life company gives life insurance advice to a person in respect of a risk insurance policy; and

(b) the person may reasonably be expected to rely on the advice;

the document containing the advice need not contain the details specified in subsection (4), but, if it does not contain those details, it must include a statement notifying the person that he or she may ask the life insurance adviser to supply the person with those details.

(8) Material included in a document under subsection (3), (4) or (7) must be in writing that is not less legible than the other material in the document.

30 Life insurance advice must have a reasonable basis (1) A life insurance adviser of a life company who gives life insurance advice to a person who may reasonably be expected to rely on it must have a reasonable basis for giving the advice to the person.

(2) For the purposes of subsection (1), a life insurance adviser does not have a reasonable basis for giving life insurance advice to a person unless:

(a) having regard to the person's objectives, financial situation and particular needs, the adviser has given such consideration to, and conducted such investigation of, the subject matter of the advice as is reasonable in all the circumstances; and

(b) the advice is based on that consideration and investigation.

(3) Subsection (1) does not apply to life insurance advice in respect of a prescribed life policy, or kind of life policy.

31 Life company must not issue or vary life policies in certain cases (1) A life company is guilty of an offence punishable, on conviction, by a fine not exceeding 200 penalty units if:

(a) the life company issues a life policy to, or varies a life policy at the request of, a person (the client); and

(b) the client has received life insurance advice in respect of the life policy from a life insurance adviser of the company; and

(c) the advice does not meet the requirements of section 29, or the person who gave the advice contravened section 30 in giving the advice; and

(d) the client has not indicated in writing to the company that he or she does not rely on the advice in entering into, or varying, the policy, as the case may be.

Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

(2) In this section, a reference to life insurance advice in respect of a life policy includes life insurance advice in respect of a class of life policies that includes that policy.

32 Life company's civil liability if section 29 or 30 is contravened (1) Subject to this section, if:

(a) a life insurance adviser of a life company contravenes section 29 or 30 in relation to life insurance advice given to a person by the adviser; and

(b) the person engages in a life insurance activity relating to a life policy issued by the company in reliance on the advice; and

(c) it is reasonable, having regard to the advice and all other relevant circumstances, for the person to have relied on the advice; and

(d) the person suffers loss or damage as a result of so acting in reliance on the advice;


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the person may recover the amount of the loss or damage by action against the company in a court of competent jurisdiction.

(2) It is a defence to an action based on an alleged failure to comply with subsection 29(4) if the life company proves that the life insurance adviser who made the relevant recommendation was not, and cannot reasonably be expected to have been, aware of the benefit, advantage or interest not disclosed in the advice.

(3) It is a defence to an action based on an alleged failure to comply with section 29 if the life company proves that a reasonable person in the same circumstances as the person to whom the advice was given could be expected to have acted in reliance on the advice even if the adviser had complied with that section in relation to the advice.

(4) In addition to other relief granted in an action under subsection (1), the court, if it thinks it necessary in order to do justice between the parties:

(a) may make an order declaring a life policy (other than a group policy) to be void; and

(b) if it makes an order under paragraph (a), may make a further order directing the life company to repay to the plaintiff money paid to the company in connection with the policy, including an amount of interest on that money specified in, or calculated in accordance with, the order.

33 False or misleading statements etc.: civil liability (1) If:

(a) a person engages in a life insurance activity relating to a life policy issued by a life company; and

(b) the person does so in reliance on a statement made by, or information provided by, a life insurance adviser of the company in or in connection with giving the person life insurance advice; and

(c) the statement or information is false or misleading in a material particular, or there is a material omission from the statement or information; and

(d) the person suffers loss or damage as a result of so acting in reliance on the statement or information;

the person may recover the amount of the loss or damage by action against the life company in a court of competent jurisdiction.

(2) In addition to other relief granted in an action under subsection (1), the court, if it thinks necessary in order to do justice between the parties:

(a) may make an order declaring a life policy (other than a group policy) to be void; and

(b) if it makes an order under paragraph (a), may make a further order directing the life company to repay to the plaintiff money paid to the company in connection with the policy, including an amount of interest on that money specified in, or calculated in accordance with, the order.

Part 4--Conduct of life brokers and their life insurance advisers

34 Effect of Part This Part contains provisions governing the conduct of life brokers and their life insurance advisers in relation to the giving of certain insurance services, including in particular the giving of life insurance advice.

35 Application of Part This Part does not apply in relation to anything done by a life broker if it is done in the course of acting as an agent or sub-agent of a life company.

36 Definitions In this Part:

exempt person means a person included in a class of persons declared by the regulations to be exempt from this Part.

life insurance adviser, in relation to a life broker, means:

(a) a natural person (other than an exempt person) who is an agent or sub-agent of the life broker, whether or not the person is authorised to give life insurance advice by or under the terms of his or her agency agreement; or

(b) a natural person (other than an exempt person) who is an employee of the life broker, whether or not the person is authorised to give life insurance advice by or under the terms of his or her employment; or

(c) any other natural person (other than an exempt person) who is authorised to give life insurance advice by the life broker, or by or under the terms of his or her employment by an agent or sub-agent of the life broker, or who gives such advice while ostensibly acting within the scope of such an authorisation.

37 Disclosure statements (1) A life broker, or a life insurance adviser of a life broker, who offers, or

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is asked to give, a person (the client) an insurance service in relation to a life policy or life policies must, as soon as practicable after the broker's or adviser's first contact with the client, give or send to the client a written disclosure statement containing the prescribed particulars.

(2) Subsection (1) does not apply in relation to a client who has previously received a disclosure statement from the broker or the adviser, as the case may be, unless the particulars set out in that disclosure statement are no longer accurate or complete.

(3) A person is guilty of an offence punishable, on conviction, by a fine not exceeding 200 penalty units if:

(a) the person fails to do an act; and

(b) failing to do the act results in a contravention of subsection (1).

Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

(4) In this section:

insurance service, in relation to a life policy or life policies, means any service or advice about, or connected with, the policy or policies (including life insurance advice within the meaning of this Act), but does not include any service or advice of a kind declared by the regulations to be a service or advice to which this section does not apply.

38 Life insurance advice must contain certain information (1) A life broker, or a life insurance adviser of a life broker, who gives life insurance advice to a person who may reasonably be expected to rely on it must ensure that the advice meets the requirements of this section.

(2) An advice must be in writing.

(3) The document containing the advice must also set out:

(a) the name and business address of the life broker or life insurance adviser; and

(b) if the advice is given by a life insurance adviser of a life broker--such other particulars as are prescribed; and

(c) the basis on which the advice is given.

(4) Subject to this section, the document containing the advice must also set out details of:

(a) any benefit or advantage, whether pecuniary or not and whether direct or indirect, that the person giving the advice, or an associate of the person, has received, or will or may receive, in connection with the giving of the advice or the issue of a life policy to the person to whom the advice is given; and

(b) any other pecuniary or other interests, whether direct or indirect, of the person giving the advice, or an associate of the person, that may reasonably be expected to be capable of influencing the person in giving the advice.

(5) Subsection (3) does not apply to a life insurance advice in respect of a life policy, or a kind of life policy, prescribed for the purposes of this subsection.

(6) Subsection (4) does not apply:

(a) in relation to any fees or commission that the person giving the advice has received directly, or will or may receive directly, from the person to whom the advice is given; or

(b) to life insurance advice in respect of a life policy, or a kind of life policy, prescribed for the purposes of this paragraph.

(7) If:

(a) a life broker, or a life insurance adviser of a life broker, gives life insurance advice to a person in respect of a risk insurance policy; and

(b) the person may reasonably be expected to rely on the advice;

the document containing the advice need not contain the details specified in subsection (4), but, if it does not contain those details, it must include a statement notifying the person that he or she may ask the life broker, or life insurance adviser, as the case may be, to supply the person with those details.

(8) Material included in a document under subsection (3), (4) or (7) must be in writing that is not less legible than the other material in the document.

39 Life insurance advice must have a reasonable basis (1) A life broker, or a life insurance adviser of a life broker, who gives life insurance advice to a person who may reasonably be expected to rely on it must have a reasonable basis for giving the advice to the person.

(2) For the purposes of subsection (1), a life broker, or a life insurance adviser of a life broker, does not have a reasonable basis for giving life insurance advice to a person unless:

(a) having regard to the person's objectives, financial situation and particular needs, the broker or adviser has given such consideration to, and conducted such investigation of, the subject matter of the advice as is reasonable in all the circumstances; and

(b) the advice is based on that consideration and investigation.

(3) Subsection (1) does not apply to life insurance advice in respect of a prescribed life policy, or kind of life policy.


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40 Life broker must not arrange for issue or variation of a life policy in certain cases
(1) A life broker is guilty of an offence punishable, on conviction, by a fine not exceeding 200 penalty units if:

(a) the life broker arranges for the issue of a life policy to, or the variation of a life policy at the request of, a person (the client); and

(b) the client has received life insurance advice in respect of the life policy from the life broker or a life insurance adviser of the life broker; and

(c) the advice does not meet the requirements of section 38, or the person who gave the advice contravened section 39 in giving the advice; and

(d) the client has not indicated in writing to the broker that the person does not rely on the advice in entering into, or varying, the policy, as the case may be.

Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

(2) In this section, a reference to life insurance advice in respect of a life policy includes life insurance advice in respect of a class of life policies that includes that policy.

41 Life broker's civil liability if section 38 or 39 is contravened (1) Subject to this section, if:

(a) a life broker, or a life insurance adviser of a life broker, contravenes section 38 or 39 in relation to life insurance advice given to a person by the broker or adviser; and

(b) the person engages in a life insurance activity in reliance on the advice; and

(c) it is reasonable, having regard to the advice and all other relevant circumstances, for the person to have relied on the advice; and

(d) the person suffers loss or damage as a result of so acting in reliance on the advice;

the person may recover the amount of the loss or damage by action against the life broker in a court of competent jurisdiction.

(2) It is a defence to an action based on an alleged failure to comply with subsection 38(4) if the life broker proves that the person who gave the relevant advice was not, and cannot reasonably be expected to have been, aware of the benefit, advantage or interest not disclosed in the advice.

(3) It is a defence to an action based on an alleged failure to comply with section 38 if the life broker proves that a reasonable person in the same circumstances as the person to whom the advice was given could be expected to have acted in reliance on the advice even if the person who gave the advice had complied with that section in relation to the advice.

(4) In addition to other relief granted in an action under subsection (1), the court, if it thinks it necessary in order to do justice between the parties:

(a) may make an order declaring a life policy (other than a group policy) to be void; and

(b) if it makes an order under paragraph (a), may make all or any of the following further orders:

(i) an order directing the broker to repay to the plaintiff an amount equal to the total amount paid by the plaintiff to the broker in connection with the policy less an amount equal to the total amount paid by the broker to the relevant life company in connection with the life policy under section 27 of the Insurance (Agents and Brokers) Act 1984;

(ii) an order directing the broker to repay to the relevant life company an amount equal to the total of the amounts paid by the company to the broker, or retained by the broker, in connection with the life policy under an agreement between the broker and the company;

(iii) an order directing the relevant life company to pay to the plaintiff an amount equal to the total amount paid to the company in connection with the policy by the plaintiff, or by the broker under section 27 of the Insurance (Agents and Brokers) Act 1984.

(5) An order under paragraph (4)(b) may include a direction for the payment of an amount of interest specified in, or calculated in accordance with, the order.

42 False or misleading statements etc.: civil liability (1) If:

(a) a person engages in a life insurance activity in reliance on a statement made by, or information provided by, a life broker or a life insurance adviser of a life broker in or in connection with giving the person life insurance advice; and

(b) the statement or information is false or misleading in a material particular, or there is a material omission from the statement or information; and

(c) the person suffers loss or damage as a result of so acting in reliance on the statement or information;

the person may recover the amount of the loss or damage by action against the life broker in a court of competent jurisdiction.

(2) In addition to other relief granted in an action under subsection (1), the

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court, if it thinks necessary in order to do justice between the parties:

(a) may make an order declaring a policy (other than a group policy) to be void; and

(b) if it makes an order under paragraph (a), may make all or any of the following further orders:

(i) an order directing the broker to repay to the plaintiff an amount equal to the total amount paid by the plaintiff to the broker in connection with the policy less an amount equal to the total amount paid by the broker to the relevant life company in connection with the life policy under section 27 of the Insurance (Agents and Brokers) Act 1984;

(ii) an order directing the broker to repay to the relevant life company an amount equal to the total of the amounts paid by the company to the broker, or retained by the broker, in connection with the life policy under an agreement between the broker and the company;

(iii) an order directing the relevant life company to pay to the plaintiff an amount equal to the total amount paid to the company in connection with the policy by the plaintiff, or by the broker under section 27 of the Insurance (Agents and Brokers) Act 1984.

(3) An order under paragraph (2)(b) may include a direction for the payment of an amount of interest specified in, or calculated in accordance with, the order.

Part 5--Code of Practice for the Life Insurance Industry

43 Effect of Part This Part provides for the establishment of a Code of Practice for the Life Insurance Industry applying to life companies, life brokers and life insurance advisers.

44 Establishment of the Code (1) The regulations may make provision for a Code of Practice for the Life Insurance Industry.

(2) The regulations comprising the Code may include provisions for and in relation to the following:

(a) preventing, as far as possible, the issue of life policies that are not appropriate to the needs of the persons to whom they are issued;

(b) ensuring that life companies, life brokers and life insurance advisers maintain at least the standard of service specified or described in the Code when dealing with owners and prospective owners of life policies, and with group members and prospective group members;

(c) ensuring that life insurance advisers are competent in providing life insurance advice;

(d) ensuring that life companies and life brokers have adequate procedures for supervising the competence and conduct of their life insurance advisers;

(e) ensuring that life companies and life brokers have adequate procedures for dealing with inquiries and complaints by owners and prospective owners of life policies, and by group members and prospective group members;

(f) ensuring that, in the case of disputes that are not able to be resolved under procedures referred to in paragraph (e), owners and prospective owners of life policies, and group members and prospective group members, have access to a dispute-handling mechanism approved by ASIC.

(3) Without limiting subsection (2), the regulations comprising the Code may include provisions in relation to the following:

(a) the establishment of standards of practice that must be complied with by life companies, life brokers and life insurance advisers when dealing with owners and prospective owners of life policies, and with group members and prospective group members;

(b) the selection and training of life insurance advisers;

(c) the establishment by life companies and life brokers of procedures and mechanisms to handle inquiries and complaints by owners and prospective owners of life policies, and by group members and prospective group members;

(d) the establishment by life companies and life brokers of procedures and mechanisms for the appropriate provision of information by their life insurance advisers in giving life insurance advice to owners and prospective owners of life policies, and to group members and prospective group members.

45 ASIC may give directions (1) If it appears to ASIC that a life company or a life broker has contravened a provision of the Code by an act or omission, ASIC may give the company or broker written notice:

(a) informing the company or broker that ASIC is considering giving the company or broker a direction under this section; and

(b) setting out particulars of the act or omission and the provision of the Code alleged to have been contravened; and

(c) inviting the company or broker to make submissions to ASIC on the question whether a direction under this section should be given; and

(d) specifying the period within which the submissions must be given to

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ASIC.

(2) The period must be a period of at least 14 days beginning on the day on which the notice is given.

(3) ASIC may give a written direction to the life company or broker if:

(a) the period specified in the notice has expired; and

(b) after considering the submissions (if any) made by the company or broker, ASIC is satisfied that the company or broker has contravened the provision of the Code by the act or omission specified in the notice.

(4) The direction may:

(a) require the company or broker not to do a specified act; or

(b) require the company or broker to do a specified act.

(5) The direction takes effect:

(a) on the day specified in the direction; or

(b) if no day is so specified--on the day on which the direction is given to the company or broker.

(6) A life company or life broker is guilty of an offence punishable, on conviction, by a fine not exceeding 300 penalty units if:

(a) the company or broker does, or fails to do, an act; and

(b) doing, or failing to do, the act results in a contravention of a direction (including a direction as varied) given to the company or broker under this section.

Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

46 Revocation or variation of directions (1) If ASIC thinks that a direction given under section 45 is no longer required or should be varied, ASIC must, by written notice given to the relevant life company or life broker, revoke the direction.

(2) If a life company or life broker to which a direction has been given asks ASIC, in writing, to revoke or vary the direction, ASIC must:

(a) if ASIC thinks that the direction is no longer necessary or should be varied--revoke or vary the direction; or

(b) in any other case--refuse to revoke or vary the direction.

(3) ASIC must give to the life company or life broker written notice of a decision made under subsection (2).

Part 6--Compliance provisions Division 1--Compliance committees 47 Obligation of life company to have compliance committee (1) A life company must at all times have a compliance committee.

(2) The committee may have whatever name the life company chooses.

48 Membership of compliance committee (1) A member of a compliance committee must either be:

(a) a director of the life company concerned; or

(b) a person whose appointment is approved by ASIC.

(2) ASIC may approve of a person who is not a director of a life company being appointed a member of the company's compliance committee if ASIC thinks that the person's appointment is likely to promote the efficiency or effectiveness of the compliance committee's operations.

49 Functions and powers of compliance committee (1) A compliance committee must be given the following functions:

(a) to assist the directors of the company to deal with consumer-related issues that arise in the course of the company's operations;

(b) to assist the directors of the company to ensure that the company at all times has a proper system of management controls that will enable the company to comply with this Act.

(2) A compliance committee may be given functions additional to, but not inconsistent with, those described in subsection (1).

(3) A life company must make such arrangements, and give its compliance committee such powers, as will enable the committee to obtain all information in the possession, or under the control, of the company that the committee needs for the performance of the functions described in paragraphs (1)(a) and (b).

(4) A member of a life company's compliance committee has qualified privilege in respect of any report or statement about the company's operations made for, by or on behalf of the committee, or a member of the committee, to the directors or the company.

(5) The privilege conferred by subsection (4) is in addition to any privilege conferred on a person by any other law.


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Division 2--Monitoring life companies and life brokers 50 Purpose of Division The purpose of this Division is to provide the means by which ASIC is able to monitor the extent of compliance by a life company or a life broker with this Act and directions given under this Act.

51 Definition In this Division:

authorised person means a person appointed under section 52.

52 Appointment of authorised persons (1) ASIC may appoint in writing:

(a) a staff member of ASIC; or

(b) an APRA staff member (within the meaning of the Australian Prudential Regulation Authority Act 1998);

as an authorised person for the purposes of this Division.

(2) ASIC must issue to an authorised person an identity card, containing a photograph of the person.

(3) If a person stops being an authorised person, he or she must return his or her identity card to ASIC as soon as possible.

(4) A person who contravenes subsection (3) is guilty of an offence punishable, on conviction, of a fine not exceeding one penalty unit.

Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

53 Requirement to give information to ASIC (1) For the purposes of this Act, ASIC may give a person a written notice requiring the person to give ASIC, at a reasonable time and place specified in the notice:

(a) information in writing about any matter relating to the business of a specified life company or life broker, being information in the person's possession or known to the person; or

(b) a copy of any document relating to such a matter that is in the person's possession or control.

(2) A person to whom a notice is given must not fail to comply with the notice.

Penalty: 30 penalty units.

Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

(3) A person is entitled to be paid reasonable compensation for making copies for the purpose of complying with a notice requiring that a copy of a document be given to ASIC.

54 Requirement to produce records (1) For the purposes of this Act, ASIC may give a person a written notice requiring the person to produce to ASIC or a specified authorised person, at a reasonable time and place specified in the notice, any records in the person's possession or control relating to the affairs of a specified life company or life broker.

(2) ASIC or the authorised person may inspect, take extracts from and make copies of any record produced under this section.

(3) A person to whom a notice is given must not fail to comply with the notice.

Penalty: 30 penalty units.

Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

(4) If:

(a) a requirement is made under subsection (1); and

(b) the information that constitutes the records to which the requirement relates is stored, in whole or in part, by electronic means;

the person to whom the requirement is directed is taken not to comply with the requirement unless the person produces all of the records in documentary form.

55 Self-incrimination A person is not excused from giving information or producing records or a copy of a document under section 53 or 54 on the ground that the information or the production of the records or copy, as the case may be, might tend to incriminate the person or make the person liable to a penalty. However, if the information is given or the records or copy are produced by the person, the information or the records or copy, and any information or thing (including any document) obtained as a direct or indirect result of the giving of the information or the production of the records or copy, as the case may be, is

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not admissible in evidence against the person in any proceedings.

56 Access to premises (1) For the purposes of this Act, an authorised person may enter, at any reasonable time, any premises at which the authorised person has reasonable cause to believe records relating to the affairs of a life company or life broker are kept.

(2) The authorised person may:

(a) inspect any records found on the premises that the authorised person believes on reasonable grounds to relate to the affairs of the life company or life broker; and

(b) take extracts from, or make copies of, such records.

(3) An authorised person may not enter premises under subsection (1) except with the consent of the occupier of the premises.

(4) An authorised person is not entitled to:

(a) enter or remain on premises under this section; or

(b) exercise any powers under subsection (2);

if the authorised person fails to produce his or her identity card for inspection when asked to do so by the occupier of the premises.

Part 7--Miscellaneous

57 Statistics (1) ASIC must collect such statistics as are prescribed relating to matters prescribed by, or arising out of the operation of, this Act.

(2) The statistics must be collected as at the prescribed time and in the prescribed manner.

(3) Life companies and life brokers must give ASIC the information ASIC reasonably requires to enable the statistics to be collected.

(4) ASIC may publish, in such form as ASIC thinks appropriate, any statistics collected under this section.

(5) ASIC may determine that fees are to be paid in respect of the supply of publications under this section.

(6) Fees determined under this section must be reasonably related to the expenses incurred, or to be incurred, by ASIC in relation to the supply of publications under this section and must not be such as to amount to taxation.

58 Jurisdiction of courts under this Act (1) In this section:

prescribed provision means a provision of this Act that confers a right to bring an action in a court of competent jurisdiction.

(2) Jurisdiction is conferred on the Federal Court to hear and determine actions brought under a prescribed provision.

(3) The several courts of the States are invested with federal jurisdiction, within the limits of their several jurisdictions (whether those limits are as to locality, subject-matter or otherwise), to hear and determine actions brought under a prescribed provision.

(4) Subject to the Constitution, jurisdiction is conferred on the several courts of the Territories to hear and determine actions brought under a prescribed provision.

(5) Nothing in subsection (3) or (4) is taken to enable an inferior court of a State or Territory to grant a remedy other than a remedy of a kind that the court is able to grant under the law of that State or Territory.

59 Transactions not invalidated A person's failure to comply with this Act does not invalidate any life policy, or any transaction entered into by the person.

60 Operation of State and Territory laws (1) Subject to this section, it is the intention of the Parliament that this Act is not to apply to the exclusion of a law of a State or Territory to the extent that the law is capable of operating concurrently with this Act.

(2) Subject to subsection (3), the Parliament intends that this Act is to apply to the exclusion of:

(a) a superseded State Act; and

(b) any State Act amending a superseded State Act; and

(c) any State Act enacted in substitution for a superseded State Act.

(3) This section is not intended to prejudice the rights, powers or privileges of the owner, or a person entitled to the benefit, of a life policy issued before 20 June 1946 (the date of commencement of the Life Insurance Act 1945).

(4) In this section:

superseded State Act means a State Act:

(a) that is referred to in subsection 8(1) of the Life Insurance Act

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1945
, as in force immediately before 1 July 1995 (the date of commencement of the Life Insurance Act 1995); and

(b) that is still in operation at the commencement of this Act.

61 Injunctions (1) If a life company or life broker has engaged, is engaging, or proposes to engage, in any conduct in contravention of this Act, or of a direction given under this Act, the Court may grant an injunction:

(a) restraining the company or broker from engaging in the conduct; or

(b) requiring the company or broker to do a particular act.

(2) If a life company or life broker has not done, or is proposing not to do, an act that the company or broker is required by this Act to do, the Court may grant an injunction requiring the company or broker to do the act.

(3) An injunction under this section may only be granted on application by ASIC or an interested person.

(4) The Court may grant an interim injunction pending the determination of an application.

(5) The Court may discharge or vary an injunction granted under this section.

(6) ASIC cannot be required, as a condition of the grant of an interim injunction, to give an undertaking as to damages.

(7) The Court's power to grant an injunction restraining a person from engaging in conduct may be exercised:

(a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind; and

(b) whether or not the person has previously engaged in conduct of that kind.

(8) The Court's power to grant an injunction requiring a person to do an act may be exercised whether or not it appears to the Court that the person intends not to do the act again, or intends to continue not to do the act.

(9) The Court's powers under this section are in addition to, and not in derogation of, any other powers of the Court.

62 Review of certain decisions (1) In this section:

person affected by a reviewable decision means the life company or life broker in relation to whom the decision was made.

reviewable decision means any of the following decisions of ASIC:

(a) giving a direction under section 20;

(b) varying a direction under subsection 21(1);

(c) refusing to revoke or vary a direction under subsection 21(2);

(d) issuing a stop order under section 22;

(e) giving a direction under section 45;

(f) refusing to revoke or vary a direction under subsection 46(2);

(g) giving a notice under section 53;

(h) giving a notice under section 54.

(2) A person affected by a reviewable decision may request ASIC to reconsider the decision.

(3) The request must be made by written notice given to ASIC within 21 days after the person first receives notice of the decision, or within such further period as ASIC allows.

(4) The request must set out the reasons for making the request.

(5) On receipt of the request, ASIC must reconsider the decision and may, subject to subsection (6), confirm or revoke the decision or vary the decision in such manner as ASIC thinks fit.

(6) If ASIC does not confirm, revoke or vary a decision within 60 days after ASIC received the request to reconsider the decision, ASIC is taken to have confirmed the decision on the last day of that period.

(7) If ASIC confirms, revokes or varies a decision before the end of the period referred to in subsection (6), ASIC must give written notice to the person telling the person:

(a) the result of the reconsideration of the decision; and

(b) the reasons for confirming, revoking or varying the decision, as the case may be.

(8) Application may be made to the Administrative Appeals Tribunal for review of a decision of ASIC that has been confirmed or varied.

(9) If a decision is taken to be confirmed because of subsection (6), section 29 of the Administrative Appeals Tribunal Act 1975 applies as if the making of the request were the making of an application to the Administrative Appeals Tribunal for a review of that decision.

63 Constitution and procedure of Tribunal (1) Subject to subsections 21(1A) and 23(1) of the Administrative Appeals Tribunal Act 1975, the Administrative Appeals Tribunal is to be constituted by a presidential member and 2 non-presidential members for the purposes of a review of a reviewable decision.


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(2) In giving a direction as to the persons who are to constitute the Tribunal for the purposes of a review of a reviewable decision, or for the purposes of a request under subsection 41(2) of the Administrative Appeals Tribunal Act 1975 in respect of such a decision, the President is to ensure that each non-presidential member of the Tribunal as so constituted is a person who, in the President's opinion, has special knowledge or skill in relation to life insurance business.

(3) A non-presidential member of the Tribunal must not sit as a member of the Tribunal for the purposes of a review of a reviewable decision, or for the purposes of a request under subsection 41(2) of the Administrative Appeals Tribunal Act 1975 in respect of such decision, if he or she is a director or employee of a company or body carrying on life insurance business or insurance business (whether in Australia or elsewhere).

(4) An order must not be made under subsection 41(2) of the Administrative Appeals Tribunal Act 1975 in respect of a reviewable decision except by the Tribunal.

(5) The hearing of a proceeding relating to a reviewable decision is to take place in private and the Tribunal may, by order:

(a) give directions as to the persons who may be present; and

(b) give directions of a kind referred to in paragraph 35(2)(b) or (c) of the Administrative Appeals Tribunal Act 1975.

(6) In this section:

reviewable decision has the same meaning as in section 62.

64 Institution of proceedings for offences (1) Despite anything in any other law, proceedings for an offence against this Act may be instituted within 5 years after the commission of the offence or, with the Treasurer's consent, at any later time.

(2) The institution of proceedings against a company for an offence against this Act does not prevent the institution of proceedings for:

(a) the judicial management; or

(b) the winding-up;

of the company, or of part of the business of the company, on a ground that relates to the matter that constitutes the offence.

65 ASIC may begin and carry on certain civil actions (1) Subject to subsection (2), if ASIC thinks that it would be in the public interest for a person to begin an action under section 23, 32, 33, 41 or 42 for the recovery of an amount of loss or damage, ASIC may begin and carry on the action in the person's name.

(2) ASIC must not begin or carry on an action in the name of a natural person without the person's written consent.

(3) If ASIC begins or carries on an action in the name of a person under this section, the person is not liable to pay any costs in relation to, or arising out of, the action.

66 Regulations The Governor-General may make regulations:

(a) prescribing matters required or permitted by this Act to be prescribed; or

(b) prescribing matters necessary or convenient to be prescribed for carrying out or giving effect to this Act.

Schedule 1--Amendment of other Acts

Australian Securities and Investments Commission Act 1989

1 After paragraph 12A(1)(e)

Insert:

(ea) the Choice of Superannuation Funds (Consumer Protection) Act 1999;

Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999

2 Subsection 3(11)

Repeal the subsection.

3 Item 118 of Schedule 7

Repeal the item.