Product suitability and intervention powers one step closer

Treasury released its public consultation paper on the proposed introduction of product suitability obligations and intervention powers for ASIC in December, bringing the reforms recommended by the Financial System Inquiry one step closer to reality. The consumer protection measures will require issuers and distributors of insurance (and other financial) products to ensure products are suitable for their target market and give ASIC powers to intervene in product design and distribution arrangements to proactively guard against "significant" consumer detriment.

The consultation paper details the proposed new obligations and powers:

• Design and distribution obligations: The proposed obligations include that product issuers and/or distributors must: identify target and non-target markets for their products (based on investment needs, risk and consumers' ability to understand the product); select appropriate distribution channels and marketing approaches; and