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Australia adopted a new product intervention law

Apr 09, 2019

Under the new law, the Australian Securities and Investments Commission (ASIC) is gaining the same powers ESMA has in Europe, but it might be limited in using those for the next two years.

The Design and Distribution Obligations and Product Intervention Powers Bill or simply Treasury Laws Amendment has recently passed both houses of Australian Parliament.

A new bill is going to essentially change the domestic regulatory environment for retail brokers. The aforesaid document requires product issuers to make sure that products are oriented and offered to the right customers, and the ASIC, in turn, would be able to step in when unsuitable products are allocated.

Product intervention powers will affect the financial products offered to the retail sector and are likely to be implemented at the beginning of 2021. The ASIC is now empowered to contemplate what kind of restrictions it will impose on the market participants.

The changes caused by the new regulatory framework are similar to those already adopted in the EU, Japan, and the US. Taking into account the move of retail forex traders from Europe to Australia, there is a high chance of regulatory harmonization amongst the two. The basis for the above-mentioned amendments was the great number of complaints received by the regulator. Uncontrolled firms have approximately two years in order to comply with the new rules.

As you already may understand, the purpose of the bill is to enable the ASIC to intervein when a distribution of related products may be harmful to retail clients. As stated in the document, Financial products in Australia are expected to be sold to the “right consumers”.

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