Mr TUDGE (Aston—Minister for Education and Youth) (09:55): I move: That this bill be now read a second time. The Financial Sector Reform (Hayne Royal Commission Response No. 3) Bill 2021 is part of a package that delivers on two of the remaining key commitments made by the government in response to the financial services royal commission. Schedules 1 and 2 to the bill make minor and consequential amendments to various Commonwealth laws, including the Australian Prudential Regulation Authority Act 1998, Australian Securities and Investments Commission Act 2001 and other industry Acts administered by APRA, to support the new Financial Accountability Regime, and provide transitional arrangements relating to the repeal of the Banking Executive Accountability Regime, known as BEAR, under the Banking Act 1959. Schedule 3 to the bill establishes a financial services compensation scheme of last resort to compensate consumers where the Australian Financial Complaints Authority (AFCA) has made a determination in their favour that remains unpaid. This bill is part of a package of three bills to establish and fund the compensation scheme of last resort, the CSLR. The 2017 Ramsay review of the financial system external dispute resolution framework noted that existing redress arrangements are inadequate to ensure all consumers and small businesses are compensated for losses. The Ramsay review recommended the establishment of an industry funded and forward looking CSLR that targets the areas of the financial sector with the greatest evidence of need. This was supported by recommendation 7.1 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The bill establishes a CSLR consistent with the recommendations of the Ramsay review and extending the scheme beyond personal advice failures. In particular, the scheme will pay compensation to claimants with an unpaid AFCA determination relating to the following four financial products or services: personal advice on relevant financial products to retail clients, credit intermediation, securities dealing and credit provision, up to a cap of $150,000, which is consistent with the caps in operation under similar schemes in other jurisdictions. The $150,000 compensation cap also balances the provision of compensation to claimants with scheme sustainability for those firms that are not responsible for the misconduct giving rise to the compensation being claimed but are nonetheless being required to pay for it. Under the scheme, after a claimant has notified AFCA that their determination remains unpaid, AFCA will be required where appropriate to take steps to ensure the AFCA member pays the compensation owed. A defining element of the CSLR is that it would only provide compensation as a last resort where no other schemes are available to do so. The operator of the scheme will confirm that no other statutory arrangement, including a relevant state or territory statutory arrangement,is able to pay all or part of the determination. If the CSLR compensates a claimant in relation to an eligible unpaid AFCA determination, ASIC will be required to cancel the financial firm's Australian financial service licence and/or Australian credit licence. This will incentivise licensees to meet their obligations in relation to AFCA determinations. It will also deter licensees from seeing the CSLR as an opportunity to avoid meeting those obligations. The operator of the CSLR will be a subsidiary of AFCA, limited by guarantee and operate on a not-for-profit basis. The scheme operator must administer the scheme in accordance with primary legislation and regulations and will be overseen by a board with an independent chair appointed by the minister, the AFCA Chair and an actuary with at least five-years experience in actuarial analysis. Finally, the Legislative and Governance Forum for Corporations was notified in relation to the bill as required under the Corporations Agreement 2002. Full details of the measure are contained in the explanatory memorandum. Debate adjourned.