A new bill requiring product issuers to ensure products are targeted and offered to the right customers, as well as enabling ASIC to intervene when inappropriate products are distributed, has passed Australia's Parliament.
The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) legislation introduces a design and distribution obligations regime for financial services firms as well as a product intervention power for ASIC.
The new regime - to be phased in over two years - will require issuers to identify in advance the consumers for whom their products are appropriate, and direct distribution to that target market.
These reforms mean consumers will be better protected from being sold financial and credit products that are not suitable for their circumstances"
"These reforms mean consumers will be better protected from being sold financial and credit products that are not suitable for their circumstances," said Treasurer Josh Frydenberg.
The new product intervention power will strengthen ASIC's consumer protection toolkit, allowing it to intervene where there is a risk of significant consumer detriment.
"These reforms were recommended by the Financial System Inquiry in 2014 and represent a fundamental shift away from relying predominantly on disclosure to drive good consumer outcomes," ASIC said in a statement welcoming the newly-passed legislation.
ASIC's intervention powers take effect immediately, allowing it to intervene whenever there is a risk of significant damage to the consumer.