The Australian Securities and Investments Commission (ASIC) has had its hand strengthened with respect to its ability to use its product intervention power.
The power, which is largely yet to be tested in the financial planning arena, received a judicial boost in the form of a Federal Court judgement relating to a short-term credit product with ASIC’s 20 September, 2019, intervention having been challenged by Cigno Pty Ltd.
Importantly, the Court upheld the view that ASIC was entitled to act not only where detriment had actually occurred but where it believed it was likely to occur.
The decision has prompted ASIC commissioner, Sean Hughes to signal the regulator’s determination to use the power where necessary.
In his judgement against Cigno, Justice Stewart found ASIC was entitled to consider “detriment caused indirectly by the financial product or a class of financial products in the sense of there being something in the circumstances of the availability of the product or the class of products to retail clients that causes the detriment”.
“In my view ASIC’s delegate identified the relevant class of financial products as being short-term credit or short-term credit provided in particular circumstances, namely as part of the short-term lending model.”
“…s 1023D(3) provides for the exercise of the product intervention order power on the basis not only of detriment that has actually occurred, but also detriment that ‘will or is likely to’ occur as a result of a class of financial products. Thus, there need be no existing product, let alone more than one, for the power to be able to be exercised.”
Commenting on the judgement, Hughes said ASIC would continue to act to protect consumers, “in particular where we see evidence of significant harm”.
Hughes added: “We are pleased today’s judgment upheld our intervention order and the consumer protections it is designed to deliver. We will continue our efforts to protect vulnerable consumers, particularly during this time when significant numbers of people are facing uniquely challenging circumstances. We will move swiftly where we see high cost products that seek to exploit the day-to-day immediate needs of financially vulnerable consumers”.
