In a speech at the 2020 Credit Law Conference, ASIC commissioner Sean Hughes outlined what ASIC is expecting financial product providers and distributors to do ahead of the introduction of the design and distribution obligations reforms in 2021.
The DDO reforms, discussed in more detail here and here, target “retail product distribution conduct,” which is defined as dealing in the product in relation to a retail client; giving a disclosure document in relation to an offer of the product to a retail client; providing financial product advice in relation to the retail client; and making a “recognised offer, in relation to a recognised jurisdiction, of the product.”
Now that they’re firmly on the horizon, Hughes said ASIC expects compliance from “day one”.
Describing DDO as “a step-change in financial services regulation” which will place “greater responsibility on issuers and distributors of financial products to appropriately design and distribute their financial products,” Hughes said a “tick the box” approach to the new obligations will not suffice.
“[We expect] compliance in a way that meaningfully improves outcomes for consumers,” Hughes explained. “Ultimately, this means firms will need to understand their products and the outcomes they are delivering to consumers.”
In order to reach this level of understanding, Hughes said the industry – both providers and distributors, which includes advice businesses – will need 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.”
Expanding on this, he said: “The obligations embed a consumer-centric approach to the product lifecycle and should assist industry to deliver better outcomes for consumers whilst managing non-financial risks and avoiding costly remediation.
“Under the design and distribution obligations, industry must design fit-for-purpose products that meet consumer needs. They will also need to take steps to ensure their products are reaching the right consumers.”
Hughes also touched on the recent controversy at ASIC in his speech, describing James Shipton’s departure as chair following an ANAO audit as a “disruptive impact”.
“Amid this disruption and the ongoing uncertainty to business and consumers which the pandemic has brought,” Hughes added, “there is something that cannot and should not change – ASIC’s core purpose. We’re here to ensure confidence in a financial system that – even under stress – can remain fair, strong and efficient.”
The importance of confidence in Australia’s financial system as a part of the country’s recovery from COVID-19 is discussed extensively in the new season of Secrets of the Money Masters, which explores the financial lives (pre- and post-COVID) of five Australians and addresses how financial advice could benefit them.
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