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ASIC’s approach to new laws reforming the financial services sector

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In a recent update, the Australian Securities and Investments Commission (ASIC) confirmed that six reforms stemming from the recommendations of the Royal Commission on Misconduct in Banking, Pensions and Financial Services (Royal commission) and further surveys will begin in October 2021.

ASIC provided the following information on the new laws:

1. Reforms to reference checks

ASIC released the ‘ASIC reference control and information protocol‘which introduces compliance obligations for AFS licensees and credit license holders. The requirements for reference checks and information sharing are intended to promote better information sharing on the conduct of financial advisers and mortgage brokers, with an emphasis on compliance, conduct and management of financial advisers and mortgage brokers. risks. Start date: October 1, 2021.

2. Reporting violations and “notify, investigate and remedy” obligations

ASIC has now released its updated Regulatory Guide 78 Reports of Violations by AFS Licensees and Credit Licensees (RG 78) to address the new breach reporting regime for Australian financial services and credit licensees effective October 1, 2021. The new reforms introduce a wider range of breaches that will be subject to reporting and expand for the first time times the obligations to report violations to credit license holders. ASIC said the intent of the reforms is to promote “consistent, timely and high-quality” reporting of violations and to enable ASIC to identify and address emerging trends of non-compliance in the industry. industry.

ASIC also released Fact Sheet 259 Comply with notification, investigation and redress obligations (INFO 259) which applies to AFS licensees who are financial advisers and credit licensees who are mortgage brokers. These licensees will be required to investigate the nature and extent of certain violations and to notify and remedy affected customers. Start date: October 1, 2021.

3. Design and distribution obligations

Design and distribution obligations require issuers of financial products to design financial products that meet consumer needs and to distribute their products in a more targeted manner. The bonds were passed by Parliament in 2019 following a recommendation from the Financial System Survey. Design and distribution obligations aim to help consumers obtain appropriate financial products by requiring issuers and distributors to take a consumer-centric approach to product design and distribution. Start date: October 5, 2021.

4. Falcon

The peddling reforms will give consumers greater control over the circumstances in which they are offered products and prevent consumers from being approached with unwanted products through cold calls or through other unsolicited contact. . Reforms include applying the ban to all financial products, introducing a definition of “unsolicited contact” which extends any “real-time interaction of the nature of a conversation or discussion” without consumer consent and new consumer consent obligations. Start date: October 5, 2021.

5. Deferred sales model

The deferred sales model for supplemental insurance products introduced a mandatory four-day pause between the sale of a primary product or service and the sale of supplemental insurance. The deferred selling model aimed to address many issues in the supplemental insurance market, including low value products, unfair sales practices and results, and negative claims outcomes compared to other insurance markets. . Start date: October 5, 2021

6. Internal dispute resolution

Updated standards and requirements for internal dispute resolution in ASIC Regulatory Guide 271 Internal Dispute Resolution (RG 271) will help improve the timeliness of complaints handling, clearer messages to consumers and consistent recording of complaints. The updates also clarify the applicability of ASIC’s IDR standards and ensure that companies identify systemic issues resulting from complaints. Start date: October 5, 2021.

Implementation of new laws

While these reforms have been under consideration for some time, ASIC has recognized that the scale of the new laws will require significant changes in business systems and processes, and will come into effect against the backdrop of other significant challenges facing the industry. industry is facing, especially from COVID-19. and renewed containments. As a result, ASIC noted that it would take a “reasonable approach in the early stages of these reforms, provided industry participants do their best to comply.” However, ASIC has also made it clear that while its initial approach may extend to technical or accidental violations, it will not hesitate to apply the law when companies do not act in good faith or when ASIC detects conduct causing actual harm.


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