AUSTRALIA Law and Practice Contributed by: Michael Lawson, Nicole Brown, Lizzie White and Tamaryn Leach, MinterEllison
If an AFSL is obtained, the licensed entity will be subject to ongoing statutory duties and obliga - tions, including, for example, to: • provide their services efficiently, honestly and fairly; • manage conflicts of interest; and • report “reportable situations” to ASIC. Alternatively, if a relevant exemption was being relied upon, the conditions of that exemption would need to be complied with on an ongoing basis. For example, sufficient equivalence relief includes certain reporting requirements for ASIC. Please refer to 2.3.3 Local Regulatory Require- Investor protection rules concerning financial services for wholesale clients primarily empha - sise adherence to the conditions set by the Australian Financial Services Licence (AFSL) under which the financial services are provided (including compliance with relevant provisions of the Corporations Act, which encompasses restrictions against misleading and deceptive conduct). Investor protection rules for financial services offered to retail clients include compliance with the abovementioned matters, as well as addi- tional regulations aimed at safeguarding retail clients. These include requirements for member - ship in an alternative dispute resolution system and more detailed product disclosure rules. Since October 2021, persons issuing and dis - tributing financial products to retail clients have been subject to provisions of the Corporations Act known as the financial product “design and ments for Non-local Managers . 2.3.10 Investor Protection Rules
distribution obligations” (DDO). This has been a significant focus of the industry in recent times. Under the new obligations, to ensure that their products are designed and distributed appropri - ately, issuers must make a target market deter - mination (TMD) for each product that identifies, among other things, the intended class of con - sumers. They are then required to take “reason - able steps” that will (or are reasonably likely to) result in the financial product being distributed in a manner consistent with the TMD. Issuers are obliged to conduct reviews of the TMD peri - odically and keep certain records. Where there are significant dealings in the financial product that are inconsistent with the TMD, issuers are required to notify ASIC. Distributors are also subject to certain obliga - tions under the DDO – specifically to: • not engage in retail product distribution unless they reasonably believe a TMD has been made or is not required to be made; • take “reasonable steps” that will (or are rea - sonably likely to) result in distribution being consistent with the TMD; • notify the issuer of significant dealings that are inconsistent with the TMD; and • keep certain records. 2.3.11 Approach of the Regulator ASIC plays an active role as the non-prudential regulator of the Australian financial services (AFS) industry. It conducts surveillance and enforcement of the industry and facilitates regu - latory development and implementation. ASIC’s position on a range of regulatory mat - ters is publicised via the ASIC website and other communication channels. Documents issued
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