Minister for Revenue and Financial Services Kelly O’Dwyer says the measures included in the consultation paper, "will improve outcomes for consumers and make ASIC a more proactive regulator."
The Government has announced that it will proceed with plans to give increased power to ASIC to ban or intervene in the sale of financial products that it deems unsuitable for consumers.
The Turnbull Government released a consultation paper earlier this week that requires feedback for two proposals that emerged as a result of the Financial System Inquiry.
The paper, released by Financial Services Minister Kelly O’Dwyer contains proposals to give ASIC greater powers that are similar to those the Australian Competition and Consumer Commission are afforded that can ostensibly enforce an interim ban on the sale of a product while due diligence on its safety and suitability is conducted.
The first of the Government’s proposals relates to the introduction of design and distribution obligations on issuers and distributors. This proposal is closely linked with transparency and its intention is to ensure that product issuers and distributors are more accountable for the products they sell – it will include providers of insurance products, investment products, margin loans and derivatives.
The second proposal will see an increase in product intervention power for ASIC, that would give them the authority to intervene where a product is identified as “creating a risk of significant consumer detriment”.
Such powers will give ASIC authority to impose additional disclosure obligations, mandate warning statements, require amendments to advertising documents and the authority to intervene on products such as: insurance products, margin loans, contracts for difference and managed funds sold by banks, brokers, fund managers and insurance companies.
The consolation paper comes in the wake of the Government’s shock announcement that they will not proceed with its intended banking tribunal to examine dispute resolutions in the financial services industry but will proceed with a new ombudsman.
While the Government’s decision to dissemble the banking tribunal was criticised as adding further confusing for consumers, the consultation paper will give some solace to those left scratching their heads at the uncertainty of the sector. The paper also builds on the Government’s recent introduction of legislation to raise professional standards for financial advisers: The Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016.
O’Dwyer commented that the new powers will, “allow regulators to intervene in the market “at an earlier stage where there is potential for consumer detriment.” She said, “too often the regulator comes to the events after the harm has occurred – and we want to give them the power to intervene to prevent the harm occurring.”
The proposed powers would give ASIC authority to enforce an interim ban on a financial product for up to 18 months, and then subsequently either lift the ban or make it permanent. It is a move that O’Dwyer says, “will improve outcomes for consumers and make ASIC a more proactive regulator.”
Minister O’Dwyer also commenting that the “implementation of these measures is a further example of the Turnbull Government taking real action to protect consumers of financial products and services.”
The consultation period on the paper will be 3 months with the due date for submissions being the 15th March 2017.