Speaking to InvestorDaily, Minter Ellison partner Michael Lawson said institutional product manufacturers will be “far better able” to manage the transition to a new regulatory regime than start-ups.
In its response to the Financial System Inquiry report, the federal government said it would “consult on [the] development of accountabilities for issuers and distributors of financial products and ASIC product intervention powers” by mid-2016.
“We’re really shifting from a disclosure regulation model to a lot more prescriptive ‘How do you design the product?’ system,” Mr Lawson said.
“Once there’s a change in the regulatory model, there is no doubt that that starts to impact on the ability to bring new and different products while the fund managers and other portfolio managers get on top of the new system,” he said.
ASIC has had “a lot to say” about complex products (such as hedge funds and structured products), but the new rules could apply to all products, Mr Lawson said.
The corporate regulator is also far more engaged in new asset classes such as peer-to-peer lending, ETFs and volatility-themed products, he said.
“[ASIC] now have a framework with which they can now go back to the manufacturers and say: take us through – have you stress tested it? how does it operate in this particular economic environment?” Mr Lawson said.
The product obligations, which already exist in the UK, will definitely create additional hurdles “to bring innovation to the market”, he said.
New obligations related to the way products are distributed are also expected.
“If you’re a start-up boutique looking to bring a product to market, that presents far more challenges than to an established institutional fund manager who already not only has the processes to test the product but also has developed the distribution channel,” Mr Lawson said.
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