Financial Services Regulations, An Australian Legal Research Paper

The Word Count for this paper was 7,891.

I INTRODUCTION

Around the globe, there is a growing focus on strengthening consumer protection in financial services regulation. In Australia, the pre-existing regulatory framework, which was founded on the 1997 Wallis Inquiry recommendations,1 focused on disclosure, financial advisors’ competency and financial literacy.2 Whilst there are advantages in a disclosure-centric regime, such as mitigating the information imbalance and allowing comparability,3 it has proven to fall short.4 It follows that, like several other jurisdictions around the world, the Australian Government has implemented a new consumer-centric regulatory strategy. The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 introduces Design and Distribution Obligations (‘DDO’) upon financial product issuers and distributors, and Product Intervention Powers (‘PIP’) for the Australian Securities & Investments Commission (‘ASIC’).5

This paper provides an overview of the Australian DDO and PIP, including the background, tests and requirements that will be imposed on financial product issuers and distributors. As part of this overview, the paper will make comparisons to the United Kingdom’s (‘UK’) product governance regime. By drawing from the UK experience, and submissions made by industry players in response to the Australian proposal, the paper will explore the practicalities and potential shortcomings in the Australian regime as it currently stands.

The broad structure of the article is as follows: Section II outlines the background of both Australian and UK regimes; Section III and Section IV analyses the Australian DDO and PIP regime with the UK equivalent; Section V considers an alternative approach to product governance in the Singaporean regime; Section VI summarises the paper and highlights potential areas of improvement in the Australian regime.

References

1. Stan Wallis et al, Financial System Inquiry (Final Report, March 1997). ↩︎

2. Andrew Worthington, ‘Consumer Outcomes of the 2014 Financial System Inquiry’ [2015] (1) The Australasian Journal of Applied Finance 57,

   58. ↩︎

3. Dimity Kingsford Smith, ‘Financial Services Regulation and the Investor as Consumer’ in Geraint Howells et al (eds), Handbook of research

   on international consumer law (Edward Elgar Publishing, 2018) 431, 453-454. ↩︎

4. See, eg, David Murray et al, Financial System Inquiry (Final Report, November 2014) 199, 202, discussing “Storm Financial” and “Opes Prime”

   case studies. ↩︎

5. Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Power) Act 2019 (Cth). ↩︎

If you would like to discuss this paper further, please reach out!