Proposed new product intervention power for ASIC

In its recent Proposals Paper issued in December 2016, the Commonwealth Government is seeking consultation on proposals to introduce a new product intervention power for ASIC, alongside proposed regulatory reforms relating to new design and distribution obligations applying to financial products.

The proposed product intervention power will provide a power for ASIC to proactively intervene in the issue and distribution of financial and credit products where ASIC forms a view that there is a risk of ‘significant consumer detriment’. Consumer detriment is likely to be assessed on an individual basis having regard to subjective matters.

Currently, intervention by ASIC is largely restricted to utilising its regulatory product disclosure and licensing powers.

The proposed new ‘intervention’ power may apply to a range of products on a market-wide (or class) basis or an individual basis and may be activated by ASIC to address:

  • a financial product or feature of the product;
  • the types of consumers that can access the financial product; or
  • the circumstances in which consumers might access the financial product.

Type of products captured

The proposals indicate that the product intervention power will apply to all financial products that are made available to retail clients and in addition to all credit products regulated by the National Consumer Credit Protection Act 2009.

In what ways might ASIC ‘intervene’?

The scope of ASIC’s potential powers of intervention may include:

  • a product ban in the market
  • imposition of additional product disclosure obligations
  • a mandated warning statement in connection with the issue of the product
  • a direction to amend advertising or marketing material
  • imposition of a limitation to restrict certain distribution channels.

It is suggested that ASIC would be required to engage with affected parties prior to initiating the intervention power to provide an issuer or distributor with an opportunity to avoid an intervention.

Scope of the power

Under the proposals an intervention by ASIC may apply for up to 18 months, on either a market-wide or individual basis. During this time, ASIC may consider whether the intervention should be permanent or not. If not made permanent, then the intervention will lapse after 18 months and cannot be extended.

The power is viewed as a last resort power and ASIC will be encouraged to use alternative powers available to it which may be more appropriate in the circumstances (however the power could be used pre-emptively).

There are proposed regulatory processes which ASIC will be required to follow before it can intervene. These may include undertaking adequate consultation with interested parties and other regulators such as APRA.

In addition, market-wide interventions may be subject to Parliamentary oversight and a potential disallowance via a 15-day Parliamentary disallowance period, while those affected by individual interventions will have recourse to administrative and judicial review.

ASIC is likely to issue guidance on when and how it intends to apply the power prior to or upon the proposed legislative amendments taking effect.

The Consultation Paper calls for submissions from the public by 15 March 2017.

Refer to related news release: “Proposed new statutory accountability for ‘issuers’ and ‘distributors’ of financial products”.

For further advice about the proposed product intervention power and its potential impact, or for assistance in preparing any submission to Treasury regarding the proposed reforms, please contact our Corporate Advisory and Financial Services Principal, Michael Bracken

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