We strongly support the integrated package of reforms proposed in the Bill, which we believe would significantly improve consumer outcomes and improve trust and confidence in the financial system. The design and distribution obligations (DADOs) should help to achieve a cultural shift within financial firms away from simply ‘selling’ financial products towards designing and distributing suitable products that meet customer needs. Further, equipping the Australian Securities and Investments Commission (ASIC) with the product intervention powers would allow the regulator to intervene before consumer harm occurs and deter misconduct by financial firms.
Where this submission is silent on proposed reforms, we can be taken as being supportive. While we are supportive of the proposed reforms, we consider that the Bill should be strengthened in several key areas. Most importantly, we recommend that the new DADOs and product intervention powers apply to ‘financial products’ as defined in the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). This would ensure that a broader range of financial products is captured by the reforms, including regulated and unregulated consumer credit.
We have made additional recommendations relating to DADOs, which include:
- strengthening the definition of ‘appropriate target markets’;
- specifying maximum target market determination review periods;
- reducing the transition period, particularly for existing products;
- extending ASIC’s stop order powers to a broader range of contraventions; and
- extending the civil liability regime to ensure that consumers are adequately compensated for loss or damage.
In relation to ASIC’s product intervention powers, our recommendations include:
- permitting interventions to continue until deemed appropriate to remove by ASIC or the Minister;
- empowering ASIC to make a broader range of interventions, particularly in relation to remuneration and training;
- specifying that the extent of ASIC’s consultation is to be commensurate with the assessed risk of detriment to consumers and the need for prompt intervention; and
- ensuring that affected consumers are appropriately notified in the event of an intervention.
We have provided further comments and recommendations within the downloadable submission.
