Treasury has released draft legislation that imposes new obligations on product providers that can be enforced by the corporate regulator.
The draft legislation stems from recommendations made by David Murray's 2014 Financial System Inquiry (FSI) that were taken up by the Turnbull government in October 2015.
Under the proposed law, financial services issuers will be required to identity target markets for their products and select "appropriate distribution channels", according to a statement by Minister for Revenue and Financial Services Kelly O'Dwyer.
Distributors of financial products (i.e. financial advice groups) must put in place "reasonable controls to ensure products are distributed in accordance with the identified target markets" and comply with "reasonable requests" for information from the issuer in relation to the product's review.
ASIC will be granted new powers to intervene in the distribution of a product where the regulator perceives "significant consumer detriment".
Specifically, ASIC will be empowered to require the amendment of product marketing and disclosure materials, impose consumer warnings and labelling changes, restrict how a product is distributed and ban products.
ASIC will also have the power to ban aspects of remuneration practices where there is a "direct link between remuneration and distribution of the product".
Any intervention by ASIC will be put in place for a period of up to 18 months, according to Ms O'Dwyer.
"During this time, the government will consider whether the intervention should be made permanent," she said.
"In addition to these stand-alone measures recommended by the FSI, the total ambit of ASIC's enforcement powers and penalties for corporate misconduct have been reviewed by the ASIC Enforcement Review Taskforce, the findings of which are being considered by the government."
Submissions to Treasury on the draft legislation are open until 9 February 2018.
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