Australian Parliament to expand ASIC intervention powers

April 5, 2019, | AtoZ MarketsThe Australian Parliament plans to expand the Australian Securities and Investments Commission (ASIC) intervention powers in cases where the distribution of certain products is harmful to consumers. The updated regulatory authority is likely to be implemented from the beginning of 2021.

ASIC gains intervention powers after new bill approval

According to the local press, the new bill of the Australian Parlament will significantly change the local regulatory framework for retail brokers. At the moment, however, the law is pending approval.

The amendment to the treasury laws also called the draft law “On design and distribution obligations and product interventions”, enables ASIC to change the face of the local retail market. After bill approved the ASIC will be free to discuss what restrictions it introduces to the market.

Australia adapts to the global regulatory framework

After the financial crisis of 2008, Australia seeks to adhere to the G-20 financial regulatory regime. Financial experts suggest that changes in local financial legislation will be similar to those that already exist in the EU, Japan, and the United States.

One of the reasons for harmonizing regulation of the local market with European is the increasing flow of retail forex traders to Australia from Europe.

Although harmonization with other regulatory frameworks is likely, ASIC today has no official position on how it will use its new powers. As is widely known, ESMA in Europe took the initiative quite far, banning some products and limiting the levers of influence on others.

The new bill’s approval procedure in a brief

The new amendment expects a so-called royal consent procedure. The bill will be sent to the residence of the Governor-General. After the signing, the document will be sent to the President of the Senate and the Speaker of the House of Representatives. The ASIC intervention powers take effect the day after the royal consent, which is merely a formality.

Main purposes and reasons for the new bill

The main purpose of the bill, as the Australian lawmakers emphasize,  is to enable the ASIC to intervene in cases where the distribution of certain retail products is risky to consumers. As the document states, financial products in Australia should be sold to the “right consumers.

In accordance with the legislation, ASIC is considering whether the use of its newly minted authority to intervene in a product is going to take into account the potential financial damage to consumers from using certain products.

One of the reasons for changes in the regulatory framework of Australia is numerous customer complaints to the local regulator. While discussing the current state of the retail market in Australia a leading industry expert stated :

“Too many complex and risky products were sold incorrectly to consumers, where there are a mismatch and imbalance in their risk profile and requirements”.

The adoption of the new law may be delayed

According to law experts, firms may need about two years to implement the measures. A spokesperson for the CFD Trading & Compliance Forum in London stated:

“The new powers to intervene in products are the decisive response of the authorities and will change the situation in Australia’s growing financial services sector. These measures will mean that Australia is no longer seen as an easy target for global providers who seek to circumvent or circumvent leverage restrictions elsewhere”

According to the London CFD Trade and Compliance Spokesperson in London, the expansion of the ASIC intervention powers will strengthen the operating environment and reduce the potential damage faced by the most vulnerable consumers.

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