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16 Feb 2012

ASIC sets out 2012 agenda for financial services industry

by Matthew Daley

ASIC's 2012 priorities for the financial services sector are advertising, Strong Super, and shorter PDS disclosure.

ASIC delivered its own Valentine's message – of sorts – to the financial services sector. Instead of roses and chocolates, ASIC Commissioner Peter Kell set out the regulator's priorities for 2012 at the ASFA NSW February Luncheon Briefing on Tuesday 14 February, with a particular emphasis on advertising of financial products and services.

ASIC's main priority: "clear, accurate and balanced information about a financial product or service"

According to Commissioner Kell, "a key lesson from the last few years is that a proactive regulatory approach improves market resilience and reduces the risk of investor losses compared to reactive regulation".

This emphasis on proactive regulation will mean, in part, greater scrutiny of the financial sector's advertising, including online and mobile advertising.

A major element is the new RG 234 Advertising financial products and advice services: Good practice guidance, which was released on Tuesday.

Some of the other key elements are:

  • a focus on the way that risk is explained in advertising, particularly with words such as "guaranteed", "secure", "free", etc;
  • ASIC's plans to work with the industry, starting with a forum in the first half of this year; and
  • a thorough review of financial services advertising in rural and regional areas, across all channels.

Future of Financial Advice (FOFA) reforms

ASIC is waiting for the FOFA legislation to be finalised before it releases draft regulatory guidance, although its consultations are already underway. The forthcoming regulatory guidance will cover best interests duty, conflicted remuneration, ASIC’s amended licensing and banning powers, and scaled advice.

The last issue, scaled advice, will be a particular priority, with draft legislation on intrafund advice expected in the next few weeks.

Stronger Super

Reforms to disclosure laws are expected, so ASIC says it will "take a keen interest in how disclosure will be made to members and potential members about the features of MySuper products, including fees and insurance… We are looking at consistency of approach between our disclosure requirements and the APRA data collection standards. This means industry can anticipate further regulatory guidance from ASIC with regard to disclosure."

Shorter PDS disclosure

The shorter PDS disclosure regime will be fully implemented by 22 June 2012, but the Government is still bedding down some aspects of the shorter PDS regime. It will conduct further consultation with industry and consumer groups to determine whether platform products and multifunds should be completely out of the shorter PDS regime (which they currently are), or in the regime but with modified content requirements.

As part of this ASIC says it will provide relief so they can, at the discretion of the provider, be included in the shorter PDS regime.

It will also be dealing with some issues arising from the reforms affecting complex products, interpretation, and the definition of "simple MIS", and working to integrate the Standard Risk Measures disclosure (the ASFA/FSC guidance) into the shorter PDS regime.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.