Earlier this week, ASIC Commissioner Sean Hughes outlined ASIC’s expectation that issuers and distributors of financial products adopt a “consumer-centric” approach when designing and distributing their products.
In an address to the 30th Annual Credit Law Conference, Mr Hughes provided an update on reforms since the 2019 Royal Commission, ASIC’s strategic priorities, and future credit reforms and design and distribution obligations (DDO).
ASIC’s 2021 regulatory agenda includes a focus on DDO and responsible lending.
Mr Hughes described the 2021 DDO regime, commencing 5 October, as “a step-change in financial services regulation.”
“[DDO is] placing greater responsibility on issuers and distributors of financial products to appropriately design and distribute their financial products,” said Mr Hughes.
In response to misselling and poor product design identified in the 2019 Royal Commission, these obligations require industry to design fit-for-purpose products to meet consumer needs.
This means industry must ensure their products are reaching the right consumers through appropriate marketing and sales.
Leica Ison, CEO of regtech firm Skyjed, noted that ASIC’s focus on DDO will require businesses to invest in data systems now in order to monitor their products by October 2021.
“ASIC wants the days of tick-a-box product governance over, as it now ‘expects compliance with DDO from day one’ – with ‘day one’ here meaning from 5th October next year. The step-change stance from ASIC signals to the financial institutions out there that are behind on investing or developing appropriate data systems that time is running out to ensure they’re able to monitor outcomes of their products.
“This lines up with the recent Productivity Commission Report that highlighted the scope for deeper adoption of SaaS for regulatory monitoring, reporting and compliance. For those found wanting on the 5th October next year, they have certainly been warned.”
ASIC is also collaborating with Treasury and APRA to progress the responsible lending reforms that were announced in September this year.
“[T]his is very much an ongoing process and entirely a matter for Government to give effect to its policy,” said Mr Hughes.
ASIC will continue to explore the regulation of Buy Now Pay Later services, which have been rapidly expanding during the pandemic and may entail risks for certain consumers.
Mr Hughes’ speech is a much-needed update amidst the pandemic-induced disruption facing businesses and the ANAO audit of ASIC chair Mr James Shipton.
“Just like it has over the past three decades, the industry continues to respond, adapt and evolve. And as regulators, we have an obligation and imperative to remain flexible and nimble to adapt to and move with these changing times,” said Mr Hughes.
Since the 2019 Royal Commission, ASIC has published regulatory guidance on mortgage brokers’ duty to act in the best interests of consumers.
In the first half of this year, ASIC commenced 99 enforcement investigations and completed 62 investigations and litigation actions.
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