ASIC calls for product intervention powers


By Elizabeth Somerville

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The corporate regulator has called for product intervention powers to boost its toolkit and allow it to better meet industry expectations.

During a panel discussion at a Centre for International Finance and Regulation event in Sydney last week, ASIC deputy chair Peter Kell said the regulator supported recommendations made by the Financial System Inquiry (FSI) that would provide it with product intervention powers.

“We agree with the FSI’s conclusions that if well designed, this power ought to enable ASIC to be more proactive and to allow for more targeted and timely intervention,” Kell said.

“If you can have a regulatory tool that really allows you to focus in the areas that are really causing the most problems or the most risk, rather than applying the same sort of requirements right across the board on everyone irrespective of their compliance levels, you can often get much better results at lower cost.”

Such a power would also provide ASIC with regulatory options beyond disclosure, which the report identified as having distinct limitations within the retail sector, he said.

“In some ways, we’ve placed too much burden on generic disclosure requirements without considering the possible views of other regulatory tools,” he said.

Product intervention powers would allow ASIC to more readily consider regulatory actions that address market-wide problems as opposed to focusing on individual entities or single transactions, he said, adding that was currently a limitation of the regulator’s powers.

“That would help us to make better decisions around the impact of competition in our regulatory enforcement work,” he said.

Further, he said that under those proposed powers, banning a product would be a rare occurrence, but one that was still necessary for a regulator to have.

“As a regulator having a ‘big stick’, even if it’s rarely, if ever used, is very helpful to encourage better market outcomes,” he said.

“ASIC’s view is that in most circumstances where you’d be considering these sorts of powers, you could address market failures without going down a banning route.”

In addition to that, the FSI suggested there would be a need for appropriate accountability mechanisms around such powers, should they be granted; a measure ASIC agreed with, he said.

“If we have some of these new powers coming into play to give the regulators greater discretion and flexibility, it’s reasonable to expect that accountability will also be looked at in the equation,” he said.

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