Govt sets terms of ASIC product intervention powers

ASIC/financial-planning/markets/funds/

22 December 2017
| By Mike |
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The Federal Government has taken the next step in giving the Australian Securities and Investments Commission (ASIC) product intervention powers, including the ability to ban some types of remuneration.

The Minister for Revenue and Financial Services, Kelly O’Dwyer has issued exposure draft legislation on the new ASIC power, claiming that is aimed ensuring that financial products are targeted and sold to the right consumers and where products are inappropriately targeted or sold, ASIC will be empowered to intervene in the distribution of the product to prevent harm to consumers.

The minister said the Design and Distribution Obligations would require issuers of financial products to:

  • identify target markets for their products, having regard to the features of products and consumers in those markets;
  • select appropriate distribution channels; and
  • periodically review arrangements to ensure they continue to be appropriate.

 

She said that, in addition, distributors of financial products would be required to:

  • put in place reasonable controls to ensure products are distributed in accordance with the identified target markets; and
  • comply with reasonable requests for information from the issuer in relation to the product’s review.

 

The minister said the Design and Distribution obligations would apply to products that are sold to retail clients (with some exceptions) and ASIC would also have the power to exempt a product, or a class of products, on a case-by-case basis.

The Product Intervention Power would enable ASIC to intervene in the distribution of a product where it perceived a risk of significant consumer detriment. The actions ASIC could take include:

  • requiring the amendment of product marketing and disclosure materials;
  • imposing consumer warnings and labelling changes;
  • restricting how a product is distributed; and
  • banning products.

 

The minister said ASIC would also be empowered to ban aspects of remuneration practices, where there is a direct link between remuneration and distribution of the product but that before it used the new power it would be required to consider a range of relevant factors and to consult prior to making an intervention.

It said ASIC would ale able to make an intervention for a period of up to 18 months, during which time the Government would consider whether the intervention should be made permanent.

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