Financial services regulation
PROPOSED PENALTIES
WHAT SHOULD BUSINESSES BE DOING IN 2019?
Contravention of the obligation under the proposed regime will include both civil penalties and criminal offences. There will be maximum criminal penalties of up to AUD 42,000 or imprisonment for 5 years or both. Following the commencement of the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth), maximum civil penalties of AUD 1.05 million or three times the benefit derived and detriment avoided because of the contravention for an individual andfor a corporation, the greater of (based on current value of AUD 210 per penalty unit): –– AUD 10.5 million; –– three times the value of the benefit derived from the contravention; and –– 10% of the company’s annual turnover, capped at AUD 525 million. In addition, it is proposed that a person who suffers loss or damage because of contravention of the obligations under the Product Design and Distribution Bill (including where an entity fails to make a target market determination) may be able to recover that loss by civil action.
The product design and distribution obligations will take effect in April 2021, following a two year transitional period. During the transitional period, financial product issuers and distributors will have to review their current product design, distribution frameworks, and product target markets in light of the proposed obligations. There are no grandfathering provisions for existing products so consideration of the appropriate target market will also be required for products that are already on the market. Existing product disclosure obligations will continue in force so insurers and insurance distributors will need to comply with multiple sets of consumer protection obligations in dealing with retail insurance products going forward.
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