January 9, 2018
ASIC will be given powers to ban products and prevent their release to consumers under new powers proposed by the Federal Government in draft legislation.
Under the proposed bill, titled Design and Distribution Obligations and Product Intervention Power – Draft Legislation, ASIC would be able to intervene in the distribution of a financial product where it identified a risk of significant consumer detriment.
The regulator would be able to take a range of actions from requiring the amendment of product marketing and disclosure materials, the inclusion of consumer warnings and labelling changes through to restrictions on the distribution of a product or banning the product.
ASIC would also be given the power to ban remuneration practices if there is a direct link between the remuneration and the distribution of the product.
“…ASIC will be empowered to intervene in the distribution of the product to prevent harm to consumers”
The regulator would not be able to use the new power without making a public statement of reasons for any intervention and interventions could last for a period of 18 months or be made permanent by the Federal Government.
Under the Design and Distribution Obligations of the draft legislation, financial product issuers will be required to identify target markets for their products and select appropriate distribution channels for those products and periodically review those arrangements to ensure they continue to be appropriate.
Announcing the proposed changes in late December, the Minister for Revenue and Financial Services, Kelly O’Dwyer said draft legislation was an important reform for consumer and “…will ensure that financial products are targeted and sold to the right consumers”, and “…ASIC will be empowered to intervene in the distribution of the product to prevent harm to consumers”.
The draft legislation is in response to recommendations of the Financial System Inquiry and is open to public submissions until 9 February 2018.