The Australian Securities and Investments Commission (ASIC) will avoid heavy-handed enforcement of a swathe of reforms taking effect in October as financial services firms grapple with the extensive changes amid the COVID-19 pandemic and lockdowns.

Design and distribution obligations, anti-hawking rules, the deferred sales model for add-on insurance and updated internal dispute resolution requirements are due to commence from October 5. A new breach reporting regime and reference checking reforms will also take effect from the start of the month.

“While these reforms have been in the pipeline for some time, ASIC recognises they require significant changes to businesses’ systems and processes and take effect at the same time industry is facing other challenges, including from COVID-19 and renewed lockdowns,” Chairman Joe Longo said today.

“We therefore recognise there will be a period of transition as industry finalises implementation of additional compliance measures, and ASIC will take a reasonable approach in the early stages of these reforms provided industry participants are using their best efforts to comply.”

The regulator will take account of the context firms are operating in, including the scale of the changes, challenges arising from the current operating environment and the fact that final guidance on two measures will be received by industry relatively close to the start date.

“ASIC’s initial approach extends to technical or inadvertent breaches, where firms have systems changes underway and act quickly to address problems as they arise,” Mr Longo said. “However, where firms are not acting in good faith or where we detect conduct causing actual harm, we will not hesitate to enforce the law.”

Mr Longo says ASIC wants to ensure the reforms are successfully implemented, and that means working with industry and building on the preparation efforts of associations and individual licensees.

The reforms, which follow the Hayne royal commission and other inquiries, aim to provide consumers with long-term protection and close regulatory gaps.

ASIC says breach reports, complaints data and information available under the design and distribution obligations will also provide more visibility on issues, allowing it to identify problems earlier and address them more quickly, with less reliance on disclosure to address harms.

“These changes will support fairer outcomes for consumers and a stronger financial system for all Australians,” Mr Longo said.

“The benefits will increase over time as consumer outcomes become the focus and experience accrues.”