Ahead of the effectiveness of significant law reform for the broader financial services industry, ASIC Chairman Joe Longo stated that:
“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 (ASIC) recognise there will be a period of transition as the industry finalises implementation of additional compliance measures, and ASIC will take a reasonable approach in the early stages of these reforms provided that industry participants are using their best efforts to comply.”
October Reforms for Financial Services Providers
The reforms set to commence in October 2021 include:
b) Anti-Hawking Provisions
The Anti-hawking provisions reinforce and extend the law on cold-calling and other unsolicited offers of financial products to retail clients.
c) Deferred Sales Models for Add on Insurance Products
Owing to the significant consumer detriment created by the industry for add on insurance products at the point of sale, the law has been reformed to introduce a mandatory four-day pause between the sale of a product or service and the offer of add-on insurance connected. The law also prohibits other poor practices in the industry such as where those add on insurance products are not fit-for-purpose.
d) Internal Dispute Resolution Standards
Updated standards applying to financial services firms dealing with retail clients including, reduced timeframes for providing responses to complainants, a broader definition of ‘complaint’, mandatory record-keeping and systemic issue escalation and reporting.
e) Breach Reporting
The ASIC Breach Reporting framework has been significantly reformed to ensure clearer and more timely reporting to ASIC, with the introduction of the ‘reportable situation’ and a far broader scope of circumstances and contraventions that will become reportable to ASIC. The framework will also extend to credit licensees. ASIC’s regulatory guidance on the breach reporting framework has not yet been finalised in RG 78.
f) Reference-checking and Information Sharing Requirements
Through the reference checking and information sharing requirements, ASIC will have more transparency around mortgage brokers and financial advisers’ misconduct in relation to their consumers.
Concluding comments
Largely borne out of the key findings and recommendations of the Hayne Royal Commission, the reforms, whilst undeniably burdensome for financial services firms, will provide ASIC with invaluable transparency into the conduct of businesses in the space, their dispute resolution with clients, key feature of firms’ products and above all, the more equitable treatment of consumers of financial products and services.
ASIC will be far more equipped to identify and respond to contraventions and instances of consumer detriment quickly and efficiently.
Should you need assistance or have any questions in preparing for the framework, please reach out to our Compliance Solutions Team on +61 2 8916 6115.
This update is general in nature. It is not legal advice and as such, it should not be relied upon for any reason.