Regulatory Guide 272 states that ASIC will use its power to intervene if it believes a product could cause detriment to consumers, regardless of whether product providers have complied with legal requirements around disclosure, product design and distribution.
The intervention power applies to all products regulated under the National Credit Act and those under the Corporations Act and ASIC Act that could be acquired by retail investors.
If ASIC believes the problem is specific to one entity, it would issue an individual product intervention order. If it believes the problem is systemic to a particular class of product, it would issue a market-wide intervention order, which takes the form of a legislative instrument.
Individual orders can apply to the effect that a person not engage in specified conduct in relation to a product, and ASIC can attach specific conditions to the order. Individuals do not need to hold a financial services licence to be subject to an intervention order.
Examples given by the regulator of intervention orders in the guidance are that a product only be offered to specific classes of consumers, that it must have personal advice attached, or that marketing of the product be restricted or banned.
Intervention orders can only be applied prospectively, ASIC said.
In terms of ASIC’s interpretation of ‘consumer detriment’, the regulator said this could include products that were likely to harm consumers financially or were inappropriate for their needs.
“In considering if a product is likely to result in significant consumer detriment, we will consider all of the circumstances, including … matters such as the extent and operation of any conflicts of interest; the complexity or opacity of the product and the circumstances of its sale; [and] evidence or risk of consumer confusion or misunderstanding,” the regulator said.
Similarly to the financial services licensing regime, ASIC said it would consult the individuals affected by the order prior to issuing it, setting out why the regulator believed it was necessary to intervene. Depending on the case, it could present a number of intervention options to the individual.
However, in the case of product intervention orders the regulator would also publicly consult on the intervention order through publishing a document on the ASIC website.
Affected individuals would also have the right to appeal to the AAT for review of ASIC’s decision.
One issue I see with this: it would require ASIC to actually understand the products/facilities and advice. They seem to have a lot of “Analysts” working for them with little to no understanding of the industry, let alone the strategies and products within it. For several years I know of a group (not working together) of Advisers who’ve been trying to explain several Structured Products and associated strategies to ASIC and they still don’t understand any of it. This causes them to flag and even seek banning orders assuming it’s not in the clients’ best interests when recommended. Although the clients seem to understand it perfectly and more so than the regulator. They need to at some point collaborate rather than persecute.