Financial product providers must comply with new laws to improve design and distribution obligations or else face civil or criminal penalties.
The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2019 passed both Houses of Parliament overnight.
Providers must determine the target market for financial products on offer and make this known to the public. They must also develop a plan to review target market determinations and specify distribution information.
"Distributors are prohibited from distributing a product unless a current target market determination is in place," the Bill states.
If consumers make a complaint about the product and distribution, distributors have to relate the number and nature of complaint to the provider.
Part of the new legislation gives ASIC powers to enforce the new arrangements and impose civil and criminal penalties.
It also has the ability to request information, issue stop orders where there is a suspected contravention of the law and to make exemptions and modifications to the new arrangements.
MySuper products, margin lending facilities, securities issued under an employee share scheme and fully-paid ordinary shares are exempt from the new regime.
The Financial System Inquiry first recognised shortcomings of financial product disclosures in 2013, recommending the introduction of a targeted and principles-based product design and distribution obligation.
The Government accepted this recommendation to introduce design and distribution obligations on 20 October 2015.