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BFCSA: ASIC's new powers to include ciggie-style warnings

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Labor royal commission will explore options for attacking serious fraud

Australian Financial Review Apr 18 2016 11:45 PM

Tony Boyd

ASIC's new powers to include ciggie-style warnings

Australian Financial Review Apr 19 2016 6:00 AM

Patrick Durkin

 Investor warnings could be slapped on a host of risky and complex financial products in the same way as the graphic warnings on cigarette packets, under a grab-bag of new powers expected to flow to the corporate regulator.

Federal cabinet met late on Monday to approve a range of measures to boost the powers and resources of the Australian Securities and Investments Commission. It is understood, however, that a previously mooted inquiry by ASIC into the banks, was not in the final package.

The changes, flagged last Friday by The Australian Financial Review, could be announced as early as Tuesday and are in response to a capability review the government commissioned following the financial services inquiry by David Murray.

The changes include restoring some or all of the $120 million ASIC lost in the Abbott government's 2014 budget and introducing a tougher regime of civil penalties.


But among the measures, which are designed to head off Labor's calls for a royal commission into the banks, it would be ASIC's ability to ban financial products and enforce product design and distribution obligations that has regulators most excited.

ASIC could use the far-reaching power to impose conditions on risky investment products such as restricting access for self-managed super funds, requiring retail investors to obtain financial advice before they could invest or slapping warnings on product disclosure statements and prospectuses for example telling investors, "Your capital is at risk".

It could apply to products including contracts for difference, agribusiness schemes, insurance products and payday lending advertisements.

Britain's regulator has been granted a similar product intervention power and in 2014 restricted the distribution of contingent convertible instruments known as "CoCos".

"ASIC would be able to undertake a range of actions, including simple 'nudges', right through to product bans," Greg Medcraft, who has firmed to be reappointed as ASIC chairman until after the election, said about the proposed new powers.

"I know that some commentators have been worried that ASIC would use its powers to ban products . . . banning products would be very rare and would only occur in the most extreme circumstances," he said.

"Most interventions would likely fall well short of product banning. For example, we might be able to require amendments to marketing materials, or additional warnings.

"In more extreme cases, we might be able to require a change in the way a product is distributed or, in rare cases, ban a particular product feature," Mr Medcraft said.

Cabinet also discussed introducing a user-pays funding model on Monday, in which those that require the greatest level of regulation, such as banks, pay more to fund the regulator which has long been advocated by Mr Medcraft.

This would raise between $250 million and $300 million a year while the government will provide some base funding. The previously announced desire to privatise ASIC's $3 billion registry was also on the cabinet agenda.


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  • organza
    organza Tuesday, 19 April 2016

    Banning risky products will be very rare if left up to ASIC. As for ciggie style warnings - it's not April Fool's Day is it?

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