ASIC Corporations (Basic Deposit and General Insurance Product Distribution) Instrument 2015/682

Overview

The ASIC Corporations (Basic Deposit and General Insurance Product Distribution) Instrument 2015/682 was enacted to address a gap in consumer protection when it comes to the distribution of certain banking and insurance products by parties other than authorised representatives of a financial services licensee. The legislation was introduced under the Corporations Act 2001, with the Australian Securities and Investments Commission (ASIC) as the enacting body. The primary policy objective is to ensure that consumers are provided with adequate information and access to dispute resolution mechanisms when dealing with financial products such as basic deposit products, general insurance products, and bundled consumer credit insurance products. The instrument modifies the application of Part 7.6 of the Corporations Act 2001, ensuring that financial services licensees take reasonable steps to inform clients about the availability of dispute resolution systems and any potential remuneration or benefits received by distributors. This legislative instrument thus aims to enhance transparency and protect consumers in the distribution of specified financial products.

Scope and Application

The ASIC Corporations (Basic Deposit and General Insurance Product Distribution) Instrument 2015/682 applies to financial services licensees and their authorised distributors in relation to certain financial products, specifically basic deposit products, risk insurance products, general insurance products, and bundled consumer credit insurance products. The instrument is made under the authority of the Corporations Act 2001 and modifies the application of Part 7.6 of the Act to these products when they are distributed by entities other than the licensee's authorised representatives. This legislative instrument applies nationally across Australia and is designed to ensure transparency and compliance in the distribution of specified financial products by entities authorised to provide financial services on behalf of a licensee. The modifications ensure that distributors must inform clients about the availability of dispute resolution systems and disclose any remuneration or benefits they may receive from the distribution of these products. The instrument does not apply to authorised representatives of the licensee or to transactions not involving the specified products. Subordinate instruments may further define or clarify the application of this legislative instrument.

Key Provisions

The ASIC Corporations (Basic Deposit and General Insurance Product Distribution) Instrument 2015/682 (the Instrument) modifies the application of certain provisions of the Corporations Act 2001 (the Act) to financial services licensees and their authorised distributors. Specifically, Part 7.6 of the Act, which pertains to financial services, is modified to include definitions and conditions regarding product distributors (section 5). A "product distributor" is defined as a person other than an employee of the licensee, who is authorised in writing by the licensee to provide financial services in relation to a basic deposit product or a risk insurance product (section 5(1)(a)). This definition is inserted into the Act, alongside the existing definitions of "representative" (section 5(1)(b)). The Instrument also adds conditions under which a financial service can be provided by a distributor (section 5(1)(c)). The obligations imposed by the Instrument on financial services licensees and their authorised distributors include ensuring that distributors are properly authorised in writing to provide certain financial services, and that they draw the attention of clients to the licensee's dispute resolution system and provide information about the distributor's relationship with the licensee and any remuneration or benefits they may receive (section 5(2)). The licensee must also take reasonable steps to ensure that these obligations are met when the distributor provides services to retail clients (section 5(2)). Failure to comply with the requirements of the Instrument may result in regulatory action by the Australian Securities and Investments Commission (ASIC). While the Instrument itself does not explicitly detail specific offences, penalties, or civil/criminal consequences, breaches of the Corporations Act 2001, which the Instrument modifies, can result in significant penalties. For example, under the Corporations Act 2001, individuals who contravene certain provisions may face fines of up to $210,000, while corporations may face fines of up to $1,050,000. Additionally, in more serious cases, individuals may face imprisonment. The exact penalties depend on the specific provisions of the Act that are contravened and the circumstances of the breach.