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ASIC’s Product Intervention Powers commenced on 6 April 2019 with amendments to the Corporations Act 2001 (Corporations Act) and the National Consumer Credit Protection Act 2009 (NCCP Act) passed by parliament. Powers have been introduced for ASIC to proactively intervene to reduce the risk of significant detriment to retail clients in relation to all financial products as defined by the Corporations Act and the Australian Securities and Investments Commission Act 2001 (ASIC Act), which includes securities, insurance products, derivatives, superannuation and credit products as defined by the NCCP Act.

ASIC’s Power

The new powers enable ASIC to make orders, called ‘Product Intervention Orders’, to intervene and take action where it considers financial products may cause harm. Prior to the changes, ASIC could only intervene if there was a suspected contravention of the law (for example defective disclosure documents). The new powers give ASIC increased scope to intervene in the distribution of products and enable ASIC to take action before harm, or further harm, is caused to retail clients.

Important Points

  • ASIC can make a Product Intervention Order if a financial or credit product has, or is likely to, result in significant detriment to retail clients.
  • The new powers will only apply to products acquired by consumers on or after 6 April 2019.
  • A Product Intervention Order may include requirements that a person not engage in specified conduct, either entirely or in accordance with conditions. This may include banning a person from issuing the product or directing that a product be issued with a specific warning or limitation.
  • A Product Intervention Order may contain a condition that the product not be issued to a retail client unless the client has received personal advice, or that a client be notified of the details of the Product Intervention Order.
  • ASIC can use the power to address industry-wide problems.

How is a Product Intervention Order Issued?

In order to be satisfied that a financial or credit product has or is likely to result in significant detriment or harm, ASIC will take into account the nature and extent of the potential detriment, the actual or potential loss to the client and the impact on the client. It is important to note that a client may suffer detriment despite product disclosure obligations being complied with. ASIC must also satisfy consultation and notification obligations before an order can be issued, including consulting with people reasonably likely to be affected by the order, and/or making the order available on the ASIC website for public comment.

If a Product Intervention Order is issued, details of the Order and a description of the detriment will be published on ASIC’s website.

ASIC can make a Product Intervention Order that may last for up to 18 months. It can also, with approval from the Minister, declare that the order be extended to remain in force for either a specified time or permanently.

Failure to comply with an Order may result in civil liability as well as criminal penalties. A person who suffers loss or damage as a result can recover their loss through civil action.

ASIC is currently consulting on the proposed administration of its Product Intervention Power and is seeking public input on the Consultation Paper 313 by 7 August 2019.

Further Information

Should you have any questions about how ASIC’s new powers could affect your business, please contact us.

Amanda Christie

Amanda works with the Compliance and Legal Team with a focus on compliance and legal services. Amanda assists the compliance team in implementing ongoing compliance support, updating procedural documentation and assisting clients with the preparation of AFSL and ACL applications, variations and also assists in the implementation of compliance reviews. She also assists in the preparation of legal documentation and legal research.