ASIC modifies licensees’ obligations

In a statement on Thursday, the Australian Securities and Investments Commission (ASIC) confirmed it has amended the reportable situations regime so that licensees do not have to submit notifications about certain reportable situations from 20 October 2023.

Under the current regime, Australian Financial Services (AFS) licensees are automatically required to submit notifications to ASIC about some reportable situations, which include those deemed “significant” breaches of “core obligations”.

The introduction of the ASIC Corporations and Credit (Amendment) Instrument 2023/589 modifies this requirement to exclude certain breaches of the misleading or deceptive conduct provisions in subsection 1041H(1) of the Corporations Act or subsection 12DA(1) of the Australian Securities and Investments Commission Act 2001 (ASIC Act) and the false or misleading misrepresentations provision in s12DB(1) of the ASIC Act from being deemed significant breaches of a core obligation and therefore automatically reportable.

To qualify for the exclusions, the relevant breach must:

• Only impact one person or, if it relates to a financial product, credit product, consumer lease, mortgage or guarantee that is, or is proposed to be, held jointly by more than one person, those persons.
• Not result in, and be unlikely to result in, any financial loss or damage to any person (regardless of whether that loss or damage has been, will be or may be, remediated).
• Not give rise, and be unlikely to give rise, to any other reportable situation.

According to the regulator, an example of such a breach is a staff member incorrectly advising a customer about the amount of daily external transfer that they are permitted to make during a phone call and correcting the error on the same call in circumstances where there is no actual or anticipated financial loss to the consumer.

Moreover, from 20 October 2023, licensees also have up to 90 days (from 30 days) to report a reportable situation that has underlying circumstances that are the same or substantially similar to an earlier reportable situation.

In the explanatory statement, ASIC said: “The first purpose of the amendment instrument is to reduce the regulatory burden for licensees arising from reportable situation reports that offer limited or no regulatory intelligence value for ASIC and meet certain criteria”.

The second purpose, it noted, is to “further reduce the regulatory burden for licensees arising from reportable situation reports by permitting licensees up to 90 days to report a reportable situation that has underlying circumstances that are the same as, or substantially similar to, underlying circumstances of an earlier reportable situation that the licensee has reported to ASIC”.

On the latter purpose, ASIC expects that the additional time should contribute to better reporting by licensees and enable licensees to address and rectify breaches more quickly.

The instrument also modifies subsection 912D(3) of the Corporations Act to reflect the amended paragraphs of the “financial services law” definition that the Treasury Laws Amendment (2023 Law Improvement Package No. 1) Act 2023 inserts. The purpose of this modification is to “correct a missed consequential amendment” of that subsection that the Improvement Package Act should have made.