The regulator will take a “reasonable approach” when enforcing the swathe of incoming financial services laws, chair Joe Longo has said.
The Australian Securities & Investments Commission (ASIC) has said it will take a “reasonable approach” to enforcing new financial services reforms in their early stages of implementation, given their wide impact and the current COVID-19 environment.
From October 2021, six new laws will come into force impacting the broker channel and financial services industry more broadly.
- Reference checking and information sharing requirements - starting 1 October
- Breach reporting and the ‘notify, investigate and remediate’ obligations - starting 1 October (final guidance yet to be issued)
- Design and distribution obligations - starting 5 October
- Deferred sales model for add-on insurance products - starting 5 October
- Internal dispute resolution - starting 5 October
- Hawking reforms - starting 5 October (currently open for consultation with final guidance expected September 2021)
All six of these incoming reforms seek to implement recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
However, given that many of these reforms were delayed when the COVID-19 pandemic hit (with final guidance for two of the above reforms still awaited) – as well as the fact that the reforms require significant process changes (made harder by ongoing lockdowns) – the financial services regulator has said that its approach to early enforcement would be “reasonable”.
‘We want to ensure the reforms are successfully implemented’
ASIC chair Joe Longo said: “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.”
As such, Mr Longo said that ASIC’s approach would “take into account the context that firms are operating in”, including “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,” he said.
“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.”
Mr Longo highlighted that he believed the incoming laws would provide consumers with long-term protection from the harms highlighted by the royal commission, and close regulatory gaps that previously existed.
“These changes will support fairer outcomes for consumers and a stronger financial system for all Australians. The benefits will increase over time as consumer outcomes become the focus and experience accrues,” he said.
The reforms will also provide ASIC with greater visibility of issues in the marketplace, which it said it hopes would enable it to identify problems earlier and address them more quickly.
The broking associations have been busy working with Treasury on the incoming arrangements and their impacts on the broker channel, with MFAA CEO Mike Felton recently outlining his conversations with Treasury and ASIC on some of the unintended consequences of the incoming laws.
[Related: Treasury to amend DDO requirements]