ASIC's approach to new laws reforming financial services sector

Six reforms arising out of recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) and other inquiries will commence in October.

The new laws include design and distribution obligations, restrictions on the unsolicited selling of financial products (hawking), a deferred sales model for add-on insurance products, reference checking and information sharing requirements for financial advisers and brokers, and new requirements around how breaches are reported to ASIC and disputes are managed internally in firms.

"These changes will support fairer outcomes for consumers and a stronger financial system for all Australians" ASIC Chair Joe Longo said.

"The benefits will increase over time as consumer outcomes become the focus and experience accrues.

"While these reforms have been in the pipeline for some time, ASIC recognises they require significant changes to businesses' systems and processes and take effect at the same time industry is facing other challenges, including from COVID-19 and renewed lockdowns.

"We therefore recognise there will be a period of transition as industry finalises implementation of additional compliance measures, and ASIC will take a reasonable approach in the early stages of these reforms provided industry participants are using their best efforts to comply.

"In adopting this approach, ASIC will take into account the context that firms are operating in. This includes the scale of the changes, the challenges arising from the current operating environment and noting industry will receive the final guidance on two measures relatively close to the start date.

"ASIC's initial approach extends to technical or inadvertent breaches, where firms have systems changes underway and act quickly to address problems as they arise. However, where firms are not acting in good faith or where we detect conduct causing actual harm, we will not hesitate to enforce the law.

"We want to ensure the reforms are successfully implemented - and that means we will continue to work with industry, and build on the efforts by industry associations and individual licensees in preparing for these reforms".

Background

The following reforms commence in October 2021: