With the design and distribution obligations due to kick in on 5 October, ASIC has revealed how it will police the regime.
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.
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