By Jim Bulling and Anabelle Weinberg
1. ASIC enforcement and regulatory update reveals areas of focus
ASIC has published their enforcement and regulatory update outlining the key actions taken between 1 July and 30 September 2022 (REP 753).
The report highlights the following action taken by ASIC:
- ASIC issued its first design and distribution obligations (DDO) stop order in July 2022 with 21 DDO stop orders being issued to date.
- Key outcomes from ASIC surveillance programs included calling on superannuation trustees to review their internal dispute resolution arrangements and urging fund managers to ensure investment performance representations in their marketing materials were appropriate.
- ASIC oversaw remediation for consumers subject to harmful sales and retention practices, with over $5.6 billion returned to an estimated seven million Australian consumers in the six years to September 2022.
REP 753 follows ASICs announcement of their strategic priorities earlier this year showing their continued focus on DDO and consumer protection with an emphasis on superannuation products, managed investments and financial advice.
2. ASIC publishes target market determination (TMD) guidance
ASIC has published a report (REP 754) regarding small amount credit lenders compliance with DDOs.
Although the report relates to small amount credit lenders, it also specifies more broadly the recent action that ASIC has taken in relation to TMDs and provides guidance on how TMDs can be amended to meet ASIC’s expectations.
ASIC’s key areas of concern include:
- Product descriptions – ASIC has stated that product definitions are insufficient at describing key features and attributes of the specific product.
- Defining target markets – ASIC considers that descriptions of consumer classes that were too broad to be meaningful. Issuers will be in breach of their obligations if they do not provide enough detail in describing their target markets.
- Excluding consumers from the target market – ASIC expects that issuers identify groups of consumers who should also be excluded from the target market.
- Setting trigger reviews – review triggers were found to be too broad and unlikely to lead to reviews of TMDs where a review would be appropriate, and were therefore ineffective.
Financial service providers should review their TMDs to address ASIC’s areas of concern in order to avoid disruptive enforcement action.