Breaking: Australian Parliament Passes Product Intervention Law
- The ASIC is getting the same powers ESMA has in Europe but it might take two years before it can use them
After months of deliberations in the Australian parliament, a new bill that is going to materially change the local regulatory environment for retail brokers is only pending formal approval before becoming law. The Treasury Laws Amendment, also called the Design and Distribution Obligations and Product Intervention Powers Bill, enables ASIC to change the face of the local retail market.
Product intervention powers will relate to financial products offered to retail clients and are likely to be implemented from early 2021. The ASIC is now free to deliberate what kind of limitations it will introduce into the market.
Considering Australia’s commitment to the G-20 financial regulatory synchronization regime after the Great Financial Crisis of 2008, the changes are likely to be similar to those already in place in the EU, Japan, and the US. Considering the flow of retail forex traders to Australia from Europe, the likelihood of regulatory harmonization is significant.
Product Intervention Powers
The amendment is pending a so-called Royal Assent procedure. The bill will be sent to the governor-general's residence by the house in which it originated, who will then sign it and forward it to the president of the Senate and the speaker of the House of Representatives.
The goal of the bill is to enable the Australian regulator, ASIC, to intervene in cases when the distribution of certain products is harmful to consumers. According to the document, Financial products in Australia are supposed to be sold to the “right consumers.”
The commitment to this bill has originated from a Financial System Enquiry which concluded in 2015. The product intervention power of ASIC takes effect on the day after the Royal Assent which is merely a formality.
Aside from retail brokers, the Australia financial regulator is also likely to have a look at credit practices. According to the legislation, ASIC's consideration on whether the use its newly minted product intervention powers is going to take into account any potential financial harm to consumers from using certain products.
While the harmonization with other regulatory frameworks is likely, to date there is no official position on the part of the ASIC about how it will use its new powers. As it is widely known, the ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of the EU financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, as well as enhancing investor protection. ESMA fosters supervisory convergence among securities regulators and financial sectors through its work with other EU supervisory authorities. ESMA is independent; there is full accountability towards the European Parliament, where it appears before the Economic and Monetary Affairs Committee, at their request for formal hearings. What Functions Does ESMA Perform?The purpose of assessing risks to investors, markets, and financial stability is to spot emerging trends, threats, and vulnerabilities, and where possible opportunities in a timely fashion so that they can be responded to. ESMA uses its unique position to identify market developments that threaten financial stability, investor protection, or the orderly functioning of financial markets. ESMA’s risk assessments build on and complement risk assessments made by others. The purpose of compiling a single rulebook for European financial markets is to enhance the EU Single Market by creating a level playing field for investors and issuers across the EU. ESMA’s four activities are linked. Insights gained from risk assessment feed into the work on the single rulebook, supervisory convergence, and direct supervision, and vice versa. European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of the EU financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, as well as enhancing investor protection. ESMA fosters supervisory convergence among securities regulators and financial sectors through its work with other EU supervisory authorities. ESMA is independent; there is full accountability towards the European Parliament, where it appears before the Economic and Monetary Affairs Committee, at their request for formal hearings. What Functions Does ESMA Perform?The purpose of assessing risks to investors, markets, and financial stability is to spot emerging trends, threats, and vulnerabilities, and where possible opportunities in a timely fashion so that they can be responded to. ESMA uses its unique position to identify market developments that threaten financial stability, investor protection, or the orderly functioning of financial markets. ESMA’s risk assessments build on and complement risk assessments made by others. The purpose of compiling a single rulebook for European financial markets is to enhance the EU Single Market by creating a level playing field for investors and issuers across the EU. ESMA’s four activities are linked. Insights gained from risk assessment feed into the work on the single rulebook, supervisory convergence, and direct supervision, and vice versa. Read this Term in Europe took the initiative pretty far, both banning some products and limiting leverage on others.
Implementation Term
According to some sources with knowledge of the legislation, firms might have about two years to implement the measures. A spokesperson for industry think-tank, The CFD Trading & Compliance Forum in London said: “The new product intervention powers is a defining response by the authorities and will shift the landscape for Australia’s growing financial services sector."
The reason for the changes is once more a long list of clients that complained to the local regulator. "Too many complex and risky products have been mis-sold to consumers where there is a discrepancy & imbalance in their risk profile and requirements," elaborated the top industry professional.
In the views of the spokesperson for the CFD Trading & Compliance Forum in London, the new legislation that supports an enhanced suitability and appropriateness framework will strengthen the operating environment and reduce the potential detriment that most vulnerable consumers face.
After months of deliberations in the Australian parliament, a new bill that is going to materially change the local regulatory environment for retail brokers is only pending formal approval before becoming law. The Treasury Laws Amendment, also called the Design and Distribution Obligations and Product Intervention Powers Bill, enables ASIC to change the face of the local retail market.
Product intervention powers will relate to financial products offered to retail clients and are likely to be implemented from early 2021. The ASIC is now free to deliberate what kind of limitations it will introduce into the market.
Considering Australia’s commitment to the G-20 financial regulatory synchronization regime after the Great Financial Crisis of 2008, the changes are likely to be similar to those already in place in the EU, Japan, and the US. Considering the flow of retail forex traders to Australia from Europe, the likelihood of regulatory harmonization is significant.
Product Intervention Powers
The amendment is pending a so-called Royal Assent procedure. The bill will be sent to the governor-general's residence by the house in which it originated, who will then sign it and forward it to the president of the Senate and the speaker of the House of Representatives.
The goal of the bill is to enable the Australian regulator, ASIC, to intervene in cases when the distribution of certain products is harmful to consumers. According to the document, Financial products in Australia are supposed to be sold to the “right consumers.”
The commitment to this bill has originated from a Financial System Enquiry which concluded in 2015. The product intervention power of ASIC takes effect on the day after the Royal Assent which is merely a formality.
Aside from retail brokers, the Australia financial regulator is also likely to have a look at credit practices. According to the legislation, ASIC's consideration on whether the use its newly minted product intervention powers is going to take into account any potential financial harm to consumers from using certain products.
While the harmonization with other regulatory frameworks is likely, to date there is no official position on the part of the ASIC about how it will use its new powers. As it is widely known, the ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of the EU financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, as well as enhancing investor protection. ESMA fosters supervisory convergence among securities regulators and financial sectors through its work with other EU supervisory authorities. ESMA is independent; there is full accountability towards the European Parliament, where it appears before the Economic and Monetary Affairs Committee, at their request for formal hearings. What Functions Does ESMA Perform?The purpose of assessing risks to investors, markets, and financial stability is to spot emerging trends, threats, and vulnerabilities, and where possible opportunities in a timely fashion so that they can be responded to. ESMA uses its unique position to identify market developments that threaten financial stability, investor protection, or the orderly functioning of financial markets. ESMA’s risk assessments build on and complement risk assessments made by others. The purpose of compiling a single rulebook for European financial markets is to enhance the EU Single Market by creating a level playing field for investors and issuers across the EU. ESMA’s four activities are linked. Insights gained from risk assessment feed into the work on the single rulebook, supervisory convergence, and direct supervision, and vice versa. European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of the EU financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, as well as enhancing investor protection. ESMA fosters supervisory convergence among securities regulators and financial sectors through its work with other EU supervisory authorities. ESMA is independent; there is full accountability towards the European Parliament, where it appears before the Economic and Monetary Affairs Committee, at their request for formal hearings. What Functions Does ESMA Perform?The purpose of assessing risks to investors, markets, and financial stability is to spot emerging trends, threats, and vulnerabilities, and where possible opportunities in a timely fashion so that they can be responded to. ESMA uses its unique position to identify market developments that threaten financial stability, investor protection, or the orderly functioning of financial markets. ESMA’s risk assessments build on and complement risk assessments made by others. The purpose of compiling a single rulebook for European financial markets is to enhance the EU Single Market by creating a level playing field for investors and issuers across the EU. ESMA’s four activities are linked. Insights gained from risk assessment feed into the work on the single rulebook, supervisory convergence, and direct supervision, and vice versa. Read this Term in Europe took the initiative pretty far, both banning some products and limiting leverage on others.
Implementation Term
According to some sources with knowledge of the legislation, firms might have about two years to implement the measures. A spokesperson for industry think-tank, The CFD Trading & Compliance Forum in London said: “The new product intervention powers is a defining response by the authorities and will shift the landscape for Australia’s growing financial services sector."
The reason for the changes is once more a long list of clients that complained to the local regulator. "Too many complex and risky products have been mis-sold to consumers where there is a discrepancy & imbalance in their risk profile and requirements," elaborated the top industry professional.
In the views of the spokesperson for the CFD Trading & Compliance Forum in London, the new legislation that supports an enhanced suitability and appropriateness framework will strengthen the operating environment and reduce the potential detriment that most vulnerable consumers face.