AUSTRALIA Trends and Developments Contributed by: Michael Lawson, Nicole Brown, Lizzie White and Tamaryn Leach, MinterEllison
has indicated that it will continue to take regula - tory action for contraventions of the DDOs where warranted, including where there is a high risk of consumer harm. ASIC’s initial DDO enforcement action centred on Target Market Determination content requirements; however, the regulator’s recent focus has been in relation to the “reason - able steps” obligation. In simple terms, the DDO regime requires issuers of financial products to “retail” clients to design their products to meet consumer needs and for distributors of those products to distribute them in a more targeted manner. The intervention by ASIC can be quite disruptive, impacting opera - tions and the continuity of products. A product issuer’s reputation is also at risk, given that ASIC’s approach is to publicly announce its reg - ulatory findings, including the issuance of stop orders, which are typically picked up quickly by the financial press. Accordingly, product issuers must ensure they have appropriate product governance arrange - ments in place through each stage of the product life cycle, including during product design, dis - tribution, monitoring and review. ASIC expects that product governance arrangements would, among other things, include: • an assessment of products against the likely objectives, financial situation and needs of the class of consumers for whom the product is intended; • analysis of distribution methods; • product testing; • consideration of how consumer outcomes will be measured and monitored when the prod - uct is being distributed; • a risk product distribution risk assessment; and
• regular monitoring and review of product performance and distribution. ASIC has shown through its actions that where it identifies financial product issuers and dis - tributors which, in its view, are not adopting a consumer-centric approach, it “will take quick action under DDO to disrupt poor conduct and prevent potential consumer harm”. ASIC has published a number of reports shar - ing their observations from the surveillance and enforcement activity, including the following reports: • ASIC Report 754: Target market determina - tions for small amount credit contracts (Dec 2022); • ASIC Report 762: Design and distribution obligations: Investment products (May 2023); • ASIC Report 770: Design and distribution obligations: Retail OTC derivatives (Sep 2023); and • ASIC Report 795: Design and distribution obligations: Compliance with the reasonable steps obligation (Sep 2024). ESG and greenwashing Further to ASIC publishing INFO 271 in 2022, the regulator continued its focus on ESG and green - washing in 2023 and 2024. INFO 271 continues to provide a stringent framework of disclosure principles and standards to prevent greenwash - ing of financial services and products, with this framework leading to enforcement action by ASIC. From 1 July 2022 to 30 June 2024, ASIC has initiated several civil penalty proceedings in the Federal Court against issuers deemed to have engaged in potentially misleading dis - closures. During this period, there have been a total of 60 corrective disclosure outcomes and 19 infringement notices issued.
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