The Federal Government will support moves to hand new regulatory powers to the corporate regulator for product intervention, which gives it the authority to intervene in and ban the distribution of products it believes will cause “significant consumer detriment”.
The Minister for Revenue and Financial Services, Kelly O’Dwyer, told Association of Financial Advisers (AFA) delegates the Australian Securities and Investments Commission (ASIC) would have the power to ban financial and credit products.
“In line with global moves, the Government believes that product issuers and distributors should be required to target the distribution of their products – ensuring they are not inappropriately marketed to those consumers for which they would not be suitable,” she told the 2017 AFA National Adviser Conference at the Gold Coast last week.
ASIC would be empowered to amend product marketing and disclosure materials, impose consumer warnings and labelling changes, restricting how a product was distributed, and banning products if required.
“While similar powers exist in the UK, the European Union, and Hong Kong, the government does recognise this will be a significant change for Australia,” O’Dwyer said.
“That’s why the government has been very conscious of the need to allow flexibility to intervene where there are risks to consumers while at the same time giving industry certainty about when that power will be used,” she said.
ASIC would be held to account by all stakeholders, while a rigorous process would ensure it would intervene only as a last resort when it had exhausted all other regulatory options, O’Dwyer added.
On the issue of the Australian Financial Complaints Authority (AFCA), O’Dwyer said the body would be answerable to an accountability regime and would face oversight by the ASIC.
AFCA would face an independent assessor and regular independent reviews, while also being guided by a board comprising an independent chair and equal numbers of director with industry and consumer backgrounds.
“I will be appointing an initial minority of the board – including the independent chair – to make sure it has the necessary skills and expertise, and is able to appropriately balance the needs of member firms and consumers,” O’Dwyer said.
AFCA would be industry-funded when it commences on 1 July, 2018 and all financial firms that dealt with consumers, including superannuation funds, would be required to be members of the authority.
AFCA would also need to report to O’Dwyer annually on any decisions to change fees as a condition of authorisation.