Thank you for the opportunity to comment on the revised exposure draft of the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 (the revised Bill) and explanatory materials.
We continue to strongly support the introduction of the Design and Distribution Obligations (DADOs) and Product Intervention Powers (PIP) for the reasons outlined in our previous submissions. The recent examples of misconduct revealed by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Sector (the Royal Commission) have provided even further evidence of the need to improve product design and distribution, and enhance the enforcement powers of regulators.
We reiterate recommendations outlined in our previous submissions on the proposed DADOs and PIP to the extent that they have not been addressed in the revised Bill. In particular, we maintain our position that the DADOs and PIP should apply to ‘financial products’ as defined in the Australian Securities and Investments Commission Act 2001 (ASIC Act). This would reduce regulatory gaps and incentives for firms to engage in regulatory arbitrage, a major problem that has also been highlighted at the Royal Commission, and which had been flagged in submissions to the Financial System Inquiry (FSI). Importantly, it would ensure that regulated and unregulated consumer credit are captured by these reforms.
We note that the revised Bill has weakened the regime in several key respects, which risks undermining the policy intent behind the regime. In preparing our submission, we returned to the original objectives of the PIP and DADO recommendations in the FSI Final Report. These objectives are more pertinent than ever in an environment of declining consumer confidence in financial services providers and should inform consideration of any exemptions or weakening of obligations.180815 Joint Submission - Revised exposure draft PIP DADO