The introduction of the product intervention power proposed by the FSI is intended to work together with the design and distribution obligations to ensure that the regulatory framework delivers fairer outcomes for consumers. It will provide ASIC with a power to intervene in the market where it considers there to be a risk of significant consumer detriment. The introduction of the design and distribution obligations, and associated changes in market practices, should reduce the likelihood of ASIC needing to intervene in the market using the product intervention power. However, the introduction of the product intervention power will ensure ASIC can respond in a timely manner to address situations not covered by the design and distribution obligations or take action to correct market-wide behaviour that cannot be effectively managed through individual enforcement action. These measures are intended to reduce the likelihood of consumers acquiring (or being missold) products without fully understanding the associated risks and that are misaligned with their financial situation, objectives and needs. This should promote greater consumer trust in the financial system. However, they will not eliminate all product failures or instances of mis-selling. In some cases, product failures involving fraud or other forms of misconduct are often extremely difficult to detect in advance. 1.3 What laws are in place internationally? The introduction of design and distribution obligations and product intervention power in Australia is consistent with trends in comparable international jurisdictions. For example: Design and distribution obligations: In the UK, the Financial Conduct Authority (FCA) has issued a Guidance Note on The Responsibilities of Providers and Distributors for the Fair Treatment of Customers. The Guidance Note indicates that issuers should identify target markets for which products are suitable, monitor the distribution of the product to ensure it is consistent with the target market and periodically review products to determine whether they continue to meet the general needs of the target audience. Broadly similar requirements are proposed in the European Union as part of MiFID II. Similar obligations are also in place in Hong Kong and the United States. Product intervention power: In the UK, the FCA has a broad power to make temporary product interventions where considered necessary for the FCA to achieve its objectives. The FCA also has a permanent intervention power. This reflects the UK regulatory structure where the FCA has a broader rule making role, which in Australia reside with Parliament. In the US, the Consumer Financial Protection Bureau has the power to intervene where conduct or practices are ‘unfair, deceptive or abusive’. In Hong Kong, the Securities and Futures Commission has the power to authorise or prohibit the advertising and public offering of structured products.
The introduction of the product intervention power proposed by the FSI is intended to work together with the design and distribution obligations to ensure that the regulatory framework delivers fairer outcomes for consumers. It will provide ASIC with a power to intervene in the market where it considers there to be a risk of significant consumer detriment. The introduction of the design and distribution obligations, and associated changes in market practices, should reduce the likelihood of ASIC needing to intervene in the market using the product intervention power. However, the introduction of the product intervention power will ensure ASIC can respond in a timely manner to address situations not covered by the design and distribution obligations or take action to correct market-wide behaviour that cannot be effectively managed through individual enforcement action. These measures are intended to reduce the likelihood of consumers acquiring (or being missold) products without fully understanding the associated risks and that are misaligned with their financial situation, objectives and needs. This should promote greater consumer trust in the financial system. However, they will not eliminate all product failures or instances of mis-selling. In some cases, product failures involving fraud or other forms of misconduct are often extremely difficult to detect in advance. 1.3 What laws are in place internationally? The introduction of design and distribution obligations and product intervention power in Australia is consistent with trends in comparable international jurisdictions. For example: Design and distribution obligations: In the UK, the Financial Conduct Authority (FCA) has issued a Guidance Note on The Responsibilities of Providers and Distributors for the Fair Treatment of Customers. The Guidance Note indicates that issuers should identify target markets for which products are suitable, monitor the distribution of the product to ensure it is consistent with the target market and periodically review products to determine whether they continue to meet the general needs of the target audience. Broadly similar requirements are proposed in the European Union as part of MiFID II. Similar obligations are also in place in Hong Kong and the United States. Product intervention power: In the UK, the FCA has a broad power to make temporary product interventions where considered necessary for the FCA to achieve its objectives. The FCA also has a permanent intervention power. This reflects the UK regulatory structure where the FCA has a broader rule making role, which in Australia reside with Parliament. In the US, the Consumer Financial Protection Bureau has the power to intervene where conduct or practices are ‘unfair, deceptive or abusive’. In Hong Kong, the Securities and Futures Commission has the power to authorise or prohibit the advertising and public offering of structured products.