Speaking to InvestorDaily, Mr Ireland said ASIC’s call for a ‘flexible regulatory toolkit’ in relation to product intervention powers – something the regulator raised in its second submission to David Murray’s Financial System Inquiry (FSI) – would in fact be an extension of its current intervention powers.
As evidence, Mr Ireland pointed to ASIC’s recent review of the unlisted property sector, in which the corporate regulator expressed its “disappointment” with the sector for failing to comply with ASIC’s benchmarks.
Specifically, in March 2012, ASIC introduced benchmarks that unlisted property schemes are required to address on an ‘if not, why not’ basis.
The benchmarks address issues such as the scheme’s gearing policy, interest cover policy, related party transactions and distribution practices.
“Those benchmark requirements are, in my mind, of the style of product intervention,” Mr Ireland said.
“They [ASIC] are coming in and they’re saying these particular features of a product have to be reported on or explained on an ‘if not, why not?’ basis,” he said.
As a result, product design in the unlisted property sector will be catered to ASIC’s requirements, Mr Ireland said.
ASIC’s FSI submission also makes reference to the UK regulatory practice of restricting some complex financial products to the wholesale market.
“I don’t think there’s enough clarity at the moment about what this kind of product intervention could look like,” Mr Ireland said.
The current proposal put forward by ASIC, if adopted, could “put a whole swathe of products out of the market”, he said.
“[It could] create a defensive attitude in the industry, stifle innovation, and create a more conservative attitude towards product design so that manufacturers play towards the centre of the pack rather than providing ranges of different options for consumers,” Mr Ireland said.
“So there’s a bit of a tipping point here. If it does go towards ASIC having too much discretionary power that’s retrospectively imposed then it could go too far,” he said.
