ASIC opens consultation into new product intervention power
The new powers allow the regulator to intervene when a product has resulted or is likely to result in significant detriment to consumers.
Shortly after the Australian Securities and Investments Commission (ASIC) indicated its enforcement approach is becoming more stringent, the regulator is consulting on its new product intervention powers.
The Product Regulation Act introduces a proactive power for ASIC to intervene when a product has resulted or is likely to result in significant detriment to consumers. There does not need to be a breach of the law in order for the regulator to exercise the product intervention power.
ASIC can intervene in relation to:
- (a) financial products, as defined by the Corporations Act;
- (b) credit products, as defined by the National Credit Act;
- (c) financial products, as defined by the Australian Securities and Investments Commission Act 2001 (ASIC Act); and
- (d) additional products prescribed by regulation.
There are two types of product intervention orders that ASIC can make under the product intervention power:
- (a) an individual product intervention order, which applies to a specified person, or specified persons, in relation to a product; or
- (b) a market-wide product intervention order, which applies to a person, in relation to a class of products.
The regulator can issue a product intervention order for an initial period of up to 18 months. This can be extended or made permanent with the approval of the Minister.
The regulator expects that the product intervention power will complement the design and distribution obligations of the Corporations Act. When the design and distribution obligations commence, they will require firms to have appropriate financial product governance processes and controls in place. The design and distribution obligations are expected to overcome gaps in the current regulatory regime across the lifecycle of financial products and promote fairer outcomes for consumers.
The obligations will encourage:
- the development of financial products that are appropriately designed for the consumers for whom they are intended;
- distribution processes and controls that reduce the chance that products will be issued to consumers for whom they are inappropriate; and
- a dynamic and responsive process where product design and distribution is reviewed and improved in response to feedback and experience.
When these systems are in place and are working effectively, ASIC expects it will be less likely that it will be required to exercise the product intervention power. However, the scope of the product intervention power, which is focused on preventing significant consumer detriment, extends beyond the design and distribution obligations. When there is significant consumer detriment, the power can be exercised even when these obligations are being complied with.
ASIC invites public input on the product intervention power consultation documents by August 7, 2019.
