ASIC has taken the next step along its path to implementing new financial product design and distribution rules intended to deliver ‘fit for purpose’ outcomes for consumers.
Regulatory Guide 274, released at the end of last week, seeks to provide guidance for the industry around the implementation of product design and distribution obligations that will take effect from 5 October 2021.
Introduced as a result of reforms recommended by David Murray’s 2014 Financial System Inquiry (see: New Product Intervention Powers for ASIC), these obligations require institutions to design financial products to better meet the needs of consumers and to distribute their products in a more targeted manner.
ASIC’s Acting Chair, Karen Chester, has characterised the intended obligations as a ‘game changer’ for the industry in that they are “…designed to embed a consumer-centric approach and assist industry to deliver better outcomes for consumers while managing non-financial risks and avoiding costly remediation.”
Chester noted ASIC’s guidance was greatly enhanced by the valuable input received from industry through an extensive consultation process: “Engagement with industry was particularly important as the obligations require firms to set their own boundaries to suit their business, products and customers.” The Acting Chair said that if firms stay within these boundaries this will mean less enforcement action from ASIC and the opportunity for deregulatory initiatives over time.
The guidance in RG 274 is intended to be principles-based which, according to ASIC, reflects Parliament’s intent that industry is best placed to implement the obligations in the context of their existing operations and product offerings. It also reflects the fact that the design and distribution obligations cover most financial products across all sectors of the financial services market, including life insurance products.
Click here to access ASIC Regulatory Guide 274 Product design and distribution obligations, which sets out:
- The financial products to which the design and distribution obligations apply
- ASIC’s interpretation of the obligations
- ASIC’s administration of the obligations
Of interest in the background detail to last week’s release, the regulator notes the intended obligations reflect similar obligations placed on financial product issuers in the United Kingdom, the Netherlands and the European Union.