ASIC has welcomed the passage of key financial services reforms contained in the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) legislation introducing:
- a design and distribution obligations regime for financial services firms; and
- a product intervention power for ASIC
The design and distribution obligations will bring accountability for issuers and distributors to design, market and distribute financial and credit products that meet consumer needs. Phased in over two years, this will require issuers to identify in advance the consumers for whom their products are appropriate, and direct distribution to that target market.
The product intervention power will strengthen ASIC’s consumer protection toolkit by equipping it with the power to intervene where there is a risk of significant consumer detriment. To take effect immediately, this will better enable ASIC to prevent or mitigate significant harms to consumers.
These reforms were recommended by the Financial System Inquiry in 2014 and represent a fundamental shift away from relying predominantly on disclosure to drive good consumer outcomes.
ASIC Chair James Shipton said the reforms were a critical factor in the development of a financial services industry in which consumers could feel confident placing their trust.
‘These new powers will enable ASIC to take broader, more proactive action to improve standards and achieve fairer consumer outcomes in the financial services sector. This will be a significant boost for ASIC in achieving its vision of a fair, strong and efficient financial system for all Australians,’ he said.
‘This will also provide invaluable assistance to ASIC as we all seek to rebuild the community’s trust in our banking and broader wealth management industries. And we note the overwhelming level of support this attracted from across the Parliament.’
Mr Shipton also welcomed the amendments to the original legislation, which extended the reach of these reforms, providing a comprehensive framework of protection for most consumer financial products. It will also empower ASIC to intervene in relation to a wider range of products where ASIC identifies a risk of significant detriment to consumers.