New product design and distribution obligations come into force from 5 October 2021, requiring firms to design financial products to meet the needs of consumers and to distribute them in “a more targeted manner”.
But ASIC chair Joseph Longo has now revealed the corporate regulator will be proactively scanning for breaches.
“The DDO regime is happening at the same time as an expansion of the breach reporting scheme. So, we do expect to get many more breach reports that will inform our regulatory enforcement activity,” Mr Longo said during Friday’s standing committee on economics hearing.
ASIC deputy chair Karen Chester explained that the DDO regime is very consumer-centric, noting that the regime is “good common sense business practices” for financial product issuers.
“If anything, we learnt from Hayne it’s where board and companies lose sight of the needs of their consumers that they run into trouble with regulators, so this is ground zero from our perspective,” Ms Chester noted.
ASIC’s product intervention order is the final safety net, she added.
“Design and distribution obligations are the railroad tracks they should be following, and if they go outside of those, we can now act. But we still have in reserve the product intervention order if we need to act promptly if there is a significant consumer detriment being caused,” Ms Chester outlined.
Last month, the Treasury announced a number of amendments to the DDO framework in response to industry feedback, which included a clarification of the product types exempted from the obligations — margin loans to corporates, foreign cash that is settled immediately, and non-cash payment facilities such as credit and debit card facilities.
The amendments also made clear that employees of licensees are not subject to their own separate set of DDO obligations, and that 31-day term deposits are included in the regime.
The Treasury at the time confirmed ASIC would provide temporary relief giving effect to the government’s policy intention for the changes until the legislative amendments were passed.
This is akin to using a rocket propelled grenade to kill a fly. The majority of financial advisers DO ensure that products are fit for the client (as evidenced by the royal commission, where around 9% of complaints were to do with poor financial advice, and that’s without digging in to specifics). A financial adviser is bound by law to act in the client’s best interests, and put the client before themselves. If they are found not to be doing this, penalties apply. As such, it is extremely unclear as to why the DDOs are to be implemented in the first place.
I am unsure as to the benefit of these new DDOs, and what positive change they will make to the industry. At face value it seems they will only add to the existing mountains of red tape, and do nothing else. I’d be happy to be proven wrong, but at this stage it seems a hard ask.
Railroad tracks, ground zero. Never heard so many buzzwords come out of one organisation. Just speak properly please! They expect many more breach reports. Which will then now be filed on the ar register. Why not give it 12 months to let everyone get used to all this before destroying our reputations in public
Actually, they won’t have much time to police anything, as most of ASIC’s time will be opening millions of emails reporting “we have nothing to report” Reports. This Fed Govt has seriously lost the plot with Red Tape. It’s almost getting to the point that advisers should be able to apply for an annual $50,000 subsidy, just to meet the plethora of “red tape” required to meet full compliance standards. It’s got so bad, that this Fed Govt seriously needs the boot.
But ASIC chair Joseph Longo has now revealed the corporate regulator will be proactively scanning for breaches.
What, compared to their usual tacti of waiting until someone else does their job for them.
Yet you can go and by a $1million property with none of this BS.
And fudge the loan application – no questions asked.
and be encouraged by the mortgage broker and lender to lie and deceive.
ha ha what a joke. KABOOM is coming.
So, the staff at ASIC will be off skiing?