The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2019 was passed by Parliament on 3 April 2019 and Royal Assent was given on 5 April. Background.
The Bill amends the Corporations Act, the National Consumer Credit Protection Act (the Credit Act) and the Australian Securities and Investments Commission Act (the ASIC Act) to introduce design and distribution obligations (DDO) in relation to financial and credit products and to introduce a product intervention power (PIP) for ASIC to prevent or respond to significant consumer detriment in relation to financial and credit products.
ASIC’s product intervention powers commenced on 6 April 2019.
Financial product providers’ obligations in respect of design and distribution of financial products will commence on 6 5 April 2021.
UPDATE May 2020: Design and distribution obligations commencement deferred to 5 October 2021.
ASIC Corporations (Deferral of Design and Distribution Obligations) Instrument 2020/486
Amendments
The Bill was amended before passage to include provisions recommended by the Royal Commission and the Senate Economics Legislation Committee’s inquiry into the Bill.
The amendments:
- extend the DDO regime to financial products regulated under the ASIC Act so that the DDO regime applies to both financial products requiring disclosure under Chapter 6D.2 and Part 7.9 of the Corporations Act as well as financial products that are not regulated under the Corporations Act, but are regulated under the ASIC Act (which includes credit);
- extend the PIP regime to all financial products regulated by the ASIC Act. The PIP regime was previously limited to financial products regulated by the Corporations Act and products regulated by the Credit Act;
- provide a further private cause of action where an entity fails to make a target market determination under the DDO regime; and
- enable the court, on application from ASIC, to make orders to benefit non-party consumers who have suffered loss or damage because of contraventions of the DDO regime.
Offences and Penalties
The Treasury Laws Amendment (Strengthening Corporate And Financial Sector Penalties) Act 2019 includes civil penalty and criminal offence provisions contingent on the commencement of the DDO and PIP provisions.
These include:
PIP offences
- engaging in conduct contrary to a product intervention order;
- failure to notify retail clients;
- failure to take reasonable steps to make others aware of a product intervention order.
DDO Offences
- failure to make and make available target market determinations for financial products;
- failure to review target market determinations;
- engaging in retail product distribution conduct in relation to financial products before review of target market determinations;
- failure to inform regulated persons of obligations not to engage in retail product distribution conduct in relation to financial products before review of target market determinations;
- engaging in retail product distribution conduct in relation to financial products before review of target market determinations;
- engaging in retail product distribution conduct where no target market determination;
- ensuring that retail product distribution conduct is consistent with target market determinations;
- failure to keep records;
- failure to report complaints and other information;
- failure to comply with requirements of regulations;
- failure to notify ASIC of a significant dealing that does not comply with a target market determination;
- failure to provide information to ASIC on request;
- failure to comply with stop order obligations.
