The Australian Securities and Investments Commission (ASIC) has signalled that financial services companies which are the subject of its product intervention powers can expect the regulator to use its full array of public relations tools to name the companies and products involved and to inform consumers.
The regulator has issued a guide around how the new product intervention power will work, and at the same time has made clear that the name of the company against which the power has been used and the reasons for using the power will be made public.
“As a general principle, it is our view that there is significant public interest in ensuring that consumers and the broader community are aware of and informed about action taken by us,” the guide said. “Transparency and disclosure are important factors in market integrity and investor confidence and serve to promote deterrence as well as to educate.”
The ASIC guide said the regulator could make a product intervention order for an initial period of up to 18 months and that, beyond the initial period, an order could only continue “if we extend it by declaration, after receiving approval from the minister”.
“In seeking approval from the minister, we must provide a report to the minister on whether the extension should be made. The declaration must be made by legislative instrument. ASIC must, before making a declaration, undertake the consultation that ASIC considers to be appropriate and reasonably practicable to undertake,” it said.
Releasing the guide, ASIC deputy chair, Karen Chester described the product intervention power as “an incredibly important addition to ASIC’s regulatory toolkit”.
“It allows us to intervene where we are satisfied that a product (or class of products) is likely to result in significant consumer detriment. The power enables us to confront, and respond to, harms in the financial sector in a targeted and timely way. But there are important checks and balances – it is a temporary intervention power and we must consult before each and every use,” she said.
“Over time the targeted solving of problems through product intervention may result in less regulation of industry overall. In recommending the power, the Financial System Inquiry identified the objective of limiting or avoiding the future need for more prescriptive regulation.”