The guide provides an overview of the product intervention power and explains ASIC’s view of the scope of the power, when and how ASIC may exercise the power to make a product intervention order (PIO) and how a product intervention order is made.
In Cigno Pty Ltd v Australian Securities and Investments Commission  FCA 479 Justice Stewart found ASIC had wide powers in making a PIO and had validly exercised them. He said:
“the product intervention power contemplates that a financial product or class of financial products might be likely to cause significant detriment because of the particular circumstances in which it is issued or offered, and not because of something inherent in the product or the products in the class of product concerned. Thus, significant detriment indirectly caused by the product or the class of product is sufficient to enliven the power….”.
ASIC can intervene in relation to a broad range of products and activities under its regulatory powers including:
(a) financial products regulated under the Corporations Act;
(b) credit products regulated under the National Credit Act; and
(c) financial products, as defined by the Australian Securities and Investments Commission Act 2001.
Types of orders
ASIC can make an individual product intervention order that a specified person does not engage in specified conduct in relation to a product (or class of products) entirely or except in accordance with certain conditions.
When an order can be made
ASIC may make a product intervention order if it is satisfied that a product (or class of products) has resulted, will result or is likely to result in significant consumer detriment.
ASIC says what would constitute significant consumer detriment may depend on the circumstances of each particular case. Each time it consults on a proposal to use the product intervention power, it will usually describe the significant consumer detriment that it thinks has resulted, will result or is likely to result.
RG 272 Table 1 sets out the factors to be taken into account in considering whether a product (or class of products) has resulted, will result or is likely to result in significant consumer detriment. It is of the view that significant consumer detriment can arise throughout the life cycle of a product.
ASIC says it can exercise the product intervention power in relation to a product (or class of products) regardless of whether there has been a breach of the law. For example, it says it could exercise the power even if a person has complied with the disclosure requirements in Ch 6D or Pt 7.9 of the Corporations Act and the design and distribution obligations in Pt 7.8A of the Corporations Act.
The product intervention power will be used to complement ASIC’s other regulatory tools.
Notice of the order
ASIC will publish an order on its website. It can also require a specified person, in the product intervention order, to notify affected consumers of the terms of the order and specify requirements in relation to giving those notifications.
What the order is not
ASIC explains that the product intervention power is not intended to be used for pre-approval of products.
It also says that the product intervention power is also not designed or intended to prevent all monetary losses or eliminate all risk from the financial markets (e.g. market risk). It is not a prudential tool and will not necessarily prevent product failures or firm collapses.
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Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.