Following consultation, ASIC has released a new regulatory guide on the administration of its product intervention power ().
ASIC Deputy Chair Karen Chester said, ‘The product intervention power is an incredibly important addition to ASIC’s regulatory toolkit. It allows us to intervene where we are satisfied that a product (or class of products) is likely to result in significant consumer detriment. The power enables us to confront, and respond to, harms in the financial sector in a targeted and timely way. But there are important checks and balances – it is a temporary intervention power and we must consult before each and every use.
‘Over time the targeted solving of problems through product intervention may result in less regulation of industry overall. In recommending the power, the Financial System Inquiry identified the objective of limiting or avoiding the future need for more prescriptive regulation.’
Ms Chester concluded, ‘The availability of this power to protect consumers from products that result in significant harm is particularly timely now, when so many are facing uniquely challenging circumstances with the impact of COVID-19. We have already used the product intervention power in relation to a short-term credit product and have consulted on the use of the power in relation to other products.’
Product intervention power (RG 272) sets out:
- the scope of the power, including products that can be subject to an intervention order and the types of orders ASIC may consider making
- when and how ASIC may exercise the power, including how we may determine when consumer detriment is significant and how we may intervene
- the process for making an intervention order, including how we may consult with affected parties, when an order will commence, the process by which an order can be extended, amended or revoked, and the consequences of breaching an order.
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- Product intervention power (RG 272)
- Response to submissions on CP 313 Product intervention power (REP 661)
- Product intervention power (CP 313)
Background
ASIC welcomed the passage of legislation introducing the product intervention power in April 2019 (refer: ). Regulators in the United States, the United Kingdom, the European Union, Hong Kong and Taiwan have similar product intervention powers.
ASIC released its draft guidance on the product intervention power for consultation in June 2019. ASIC received 28 submissions from industry groups and associations, consumer groups and financial firms.
ASIC has used its product intervention power to ban a short-term credit product (refer: ).
ASIC has also consulted on the proposed use of its power to address:
- over-the-counter (OTC) binary options and CFDs (refer: ); and
- the sale of add-on financial products by car yards (refer: .
In finalising the guidance, ASIC also considered the judgment in Cigno Pty Ltd v Australian Securities and Investments Commission [2020] FCA 479. This related to a judicial review application by Cigno Pty Ltd (Cigno) that sought to challenge ASIC’s product intervention order in respect of a short-term credit product. Cigno’s application was dismissed with costs awarded to ASIC. ASIC released a statement on 15 April 2020 in relation to this matter (refer: ). This matter is now subject to appeal.
