ASIC releases breach reporting consultation

ASIC’s Consultation Paper 340 and draft Regulatory Guide 78, released on Wednesday, provide further clarification of what constitutes a reportable situation for licensees under the extended breach reporting obligations, which are a response to a number of recommendations within the royal commission.

According to the regulatory guide, reportable situations include breaches of “core obligations”, such as a licensee’s ability to be financially solvent, breaches of obligations under the Corporations Act, and investigations into possible breaches of these obligations.

They also include additional reportable situations such as conduct constituting gross negligence or serious fraud, and reportable situations that licensees become aware of other AFSLs.

Licensees must lodge a report with ASIC within 30 days when they become aware of the reportable situation, or face potential civil or criminal penalties if they fail to do so.

The regulator said it expected a “significant increase” in the volume of breach reports it would receive as a result of the reforms, which were due to come into force on 1 October, but reiterated that licensees were not required to report “every instance of non-compliance or trivial breaches”.

“We support the reform goals to promote consistent, timely and high-quality reports,” ASIC deputy chair Karen Chester said.

“The Financial Services Royal Commission expressed concern about prolonged and repeated failures by large entities to make breach reports required by the law.

“Breach reporting is a core component of Australia’s financial services and credit regulatory framework. The reforms will better position us to act decisively to disrupt misconduct and escalating harms and identify patterns of non-compliance across industry.”

Comments from industry on the consultation paper are due on 3 June.