ASIC Product Intervention Orders (PIOs): the power explained
ASIC can make Product Intervention Orders to prohibit features of financial or credit products that cause consumer detriment. Here are the conditions, the duration limits, and the recent uses.
What a PIO is
A Product Intervention Order (PIO) is a tool available to the Australian Securities and Investments Commission (ASIC). It can be made under section 1023D of the Corporations Act 2001, relating to financial products, and section 301 of the National Consumer Credit Protection Act 2009, relating to credit products.
ASIC can use a PIO to either prohibit the offer of a product or to place conditions on its offer. This action is taken when ASIC is satisfied that the product has caused, or will or is likely to cause, significant consumer detriment.
ASIC Regulatory Guide 272 provides further explanation regarding how ASIC exercises this power.
How a PIO is made
A Product Intervention Order (PIO) is made by the Australian Securities and Investments Commission (ASIC). Before issuing a PIO, ASIC undertakes a consultation process. This involves seeking input from the industry that will be affected by the order, as well as other regulatory bodies.
Once made, the PIO is published on the ASIC website. The order is legally binding on the specific individuals or entities named as addressees.
Breaching a PIO constitutes a separate contravention of the law. This can result in civil penalty consequences and may be enforced through stop orders or action taken in the Federal Court.
Duration limits
A Product Intervention Order (PIO) has a maximum duration of 18 months. This timeframe operates unless Parliament approves an extension.
Extending a PIO beyond this initial period requires formal consent from Parliament. This consent is achieved through regulations or other legislative processes.
ASIC’s use of PIOs has generally been as a temporary measure. They are often employed as a short-term solution, functioning as a circuit breaker while more permanent regulatory or legislative reforms are developed and implemented.
Recent uses
ASIC has deployed Product Intervention Orders to address concerns regarding specific financial products. These orders have focused on short-term credit and continuing-credit contracts, with the aim of preventing product features identified as causing consumer detriment. Similarly, PIOs have been issued concerning binary options and certain margin foreign-exchange products targeted at retail clients.
The power of a PIO extends beyond formal orders. The potential for ASIC to issue a PIO has, on occasion, prompted businesses to redesign their products proactively. This demonstrates the preventative influence of the regulatory framework.
- Product redesign has occurred without a formal PIO being issued.
Frequently asked
How long can a Product Intervention Order last?
Up to 18 months without legislative confirmation. To extend a PIO beyond 18 months, Parliament must consent through regulations or other legislative steps.
When can ASIC make a PIO?
Where ASIC is satisfied a financial or credit product has resulted in, or will or is likely to result in, significant consumer detriment. ASIC must consult before making the order, and the order is published on the ASIC website.