ASIC's response: Helping investors, not testing them

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After less-than-positive feedback on the proposed investor test, Greg Medcraft wrote to the Australian Financial Review to clarify his intent.

On 13 December, ASIC chairman Greg Medcraft told the AFR about a proposed test to replace Product Disclosure Statements.

“If you know that people aren’t reading it, then you have to think more creatively to make sure that people actually know what they are buying,” Medcraft said.

He sent a letter to the editor on 18 December, saying he was “not in favour of mandating any sort of investor test.”

He said he wanted to encourage product issuers to use the ‘e-learning module’ as a tool to present information to investors, to help them get to grips with the risks of complex products such as ETFs and CFDs.

“I want to encourage issuers to use these tools as best-practice to help them help the investors assess whether a product is best for them.”

Complex products with higher yields could look more attractive but come at greater risks and greater potential losses, said Medcraft.

“Issuers are likely to pay for investors’ losses to either protect their reputation or due to legal action.”

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