Overview

ASIC Commissioner Sean Hughes has given a regulatory update explaining where it is up to on the Financial Services Royal Commission reforms from 2019, ASIC’s current strategic priorities and enforcement action, and what’s on the horizon for 2021 – namely ongoing credit reform and design and distribution obligations.

Financial Services Royal Commission reforms

The update focussed on 3 areas:

• From 1 January 2021, mortgage brokers will be required to act in the best interests of consumers and to prioritise consumers’ interests when providing credit assistance. ASIC has published RG 273 which contains guidance for mortgage brokers and other relevant Australian credit licensees on the best interests duty.
• Breach reporting obligations for credit licensees will commence on 1 October 2021. The proposed reforms include requirements for third-party licensees to report breaches by individual mortgage brokers and financial adviser representatives of other licensees. ASIC intends to consult on an updated RG 78 on breach reporting in early 2021. There will also be new requirements for financial advisers and mortgage brokers to investigate misconduct, and notify and remediate affected clients.
• A reference checking and information sharing protocol for mortgage brokers and financial advisers is also expected to commence on 1 October 2021, subject to passage of legislation.

Present priorities

Mr Hughes identified ASIC’s present priorities as:

• Product intervention on continuing credit
• Enforcement action in the automotive industry
• Debt management firm licensing.

Regulatory agenda for 2021

Mr Hughes identifies responsible lending and the design and distribution obligations as the priorities for 2021.

Responsible lending
On the topic of responsible lending, he said that ASIC’s work is subject to seeing the draft legislation. He said that also applied to Buy-Now-Pay-Later.

With respect to the design and distribution obligations, which will commence on 5 October 2021, he said:

“ASIC expects compliance with DDO from day one. Not in a ‘tick-a-box’ way, but compliance in a way that meaningfully improves outcomes for consumers. Ultimately, this means firms will need to understand their products and the outcomes they are delivering to consumers. In order to do this, industry needs to invest in the data systems now and ensure that they are properly able to monitor the outcomes of their products come 5 October next year.”

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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.