Today ASIC initiated consultation on the proposed administration of its new product intervention power.
The product intervention power allows ASIC to intervene and take temporary action where financial and credit products have resulted in or are likely to result in, significant consumer detriment.
The regulatory guide sets out the scope of the power, when and how ASIC expects to use the power and how a product intervention order is made.
Announcing the consultation ASIC Deputy Chair Karen Chester said, ‘The product intervention power is an incredibly important addition to ASIC’s regulatory toolkit. ASIC can now step in and respond to significant consumer detriment in a targeted and timely way. But there are also important checks and balances – it is a temporary intervention power and we must consult before each and every use.’
ASIC’s principles-based approach to the regulatory guidance, outlined in Consultation Paper 313 Product intervention power (CP 313), reflects the product intervention power being a broad and flexible tool for ASIC to use. ASIC can take a range of temporary actions including banning a product or product feature, imposing sale restrictions, amending product information or choice architecture.
To assist consultation, the paper provides case studies of past products and practices to illustrate the circumstances in which ASIC may have contemplated using the product intervention power (had it been available) to address consumer detriment identified at the time.
‘The product intervention power is not a new concept. Australia is joining regulators in other jurisdictions like the US, the UK, the EU, Hong Kong and Taiwan with product intervention powers’, Ms Chester said.
The power is unique in its focus on reducing significant detriment to consumers, rather than stepping in only after a breach of the law. ASIC can also use the power on a market-wide basis to address industry-wide problems. ASIC is required to consult before making a product intervention order.
‘ASIC having this power was recommended by the 2014 Financial System Inquiry, supported by the Financial Services Royal Commission, consulted on and agreed to by the Government and received overwhelming support across the Parliament in April this year.’ Ms Chester said.
The product intervention power was enacted in April 2019 with new design and distribution obligations. The product intervention power is available for ASIC to use now. The design and distribution obligations do not apply to industry until April 2021.
ASIC seeks public input on the product intervention power consultation documents by 7 August 2019 and aims to release its final regulatory guide in September 2019. A further, separate ASIC consultation on its proposed guidance on the design and distribution obligations will commence later this year.
ASIC welcomed the passage of legislation introducing the product intervention power in April 2019 (refer: 19-079MR).
The consultation covers ASIC’s proposed guidance on the product intervention power, including:
- the meaning of significant consumer detriment, including the impact the detriment has on consumers and the factors we will take into account in determining whether significant consumer detriment is likely to occur
- the types of interventions we can make and examples of these interventions
- limitations of the power
- consultation with affected persons
- how significant consumer detriment will be described at consultation
- when a product intervention order will commence
- the consequences of breaching an intervention order.