Misaligned advisor interests.  Consumer disengagement.  Low financial literacy in the face of complex documents.

These themes echo throughout the revised Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Power) Bill (Bill) released by the Australian Government in late July 2018.  These issues have also been recently ventilated in the Banking Royal Commission. Key changes to the Bill include expanding the scope of regulated products and criminal penalties have been increased for certain breaches.

While the protection of consumers lies at the heart of this Bill, it poses real challenges for issuers and distributors.  In particular, the Government’s power to stop distribution of financial products raises significant practical difficulties.  Moreover, the increased criminal penalties are indicative of the seriousness with which breaches will be treated.  While the changes will not come into force for at least two years, distributors and issuers should begin preparing for the implications of this Bill now.

Elise Hamblin also contributed to this piece.