As ASIC looks to publish firm-level data on the internal dispute resolution (IDR) regime, a compliance professional has warned it could lead to unintended consequences.
The corporate regulator recently announced it had released a consultation paper on its plans to publish two dashboards containing reportable situations and IDR data in the second half of 2025.
This would see firm-level data go public, ASIC stated, including businesses’ names and Australian Financial Services Licence (AFSL) numbers.
The publication of the dashboards aims to boost transparency, drive improved performance, and help deliver better consumer outcomes – ultimately encouraging firms to “lift their game”, said ASIC commissioner Alan Kirkland.
However, Assured Support managing director Sean Graham cautioned this “name and shame” approach could have a counterintuitive effect where AFSLs actually under-report breaches and complaints.
“I think it’s going to lead to under-reporting because people know that it’s going to be public. If you’re a participant, would you want to be identified as being top of the box for complaints?” he told Money Management.
“If you’re worried about under-reporting, publishing their names is not going to encourage them to come forward. There’s not a prize at the end of the year that they’re going to get or get more clients or anything.”
A key concern is how consumers will interpret this publicly accessible data, Graham explained. For example, a consumer may not understand that larger financial firms will naturally generate a higher number of breaches due to the sheer size of their customer base.
“If you’re dealing with a huge organisation, of course they’re going to get more complaints. A leaderboard with numbers devoid of any context is terrible. The raw numbers without context would be problematic and will probably lead to under-reporting,” he argued.
From an advice licensee’s perspective, the managing director said some may experience unintended feelings of shame or judgement for potentially having a higher number of complaints even though they are encouraged to report by the regulator. As a result, AFSLs may be less inclined to report complaints to the fullest extent, he said.
“If participants think that the purpose of the public listing, for example, is to discipline or shame or embarrass – it might have that effect. Then they’re unlikely to do it. That’s just human nature.”
Including other key measures such as speed of complaint resolution, breach outcomes, and percentage of complaints that progress to the Australian Financial Complaints Authority (AFCA), however, could provide a more contextualised and fuller picture.
“In principle, what we’re saying is good and it could be effective, as long as it avoids some of those framing devices which might discourage people from actually reporting or satisfying client complaints. They should be focusing on the speed to resolution, the outcomes, what percentage go to AFCA – that’s useful element to be looking at.
“But the moment you start to identify someone or criticise them or expose them – whether it’s valid or not – it will cause people to look at ways to avoid that type of censure. That will probably lead to under-reporting and a whole range of other factors. It will discourage people from complaining in the first place.”
The managing director’s concerns echo those of law firm Hall & Wilcox. Last December, Hall & Wilcox partner Selina Nutley said this approach could potentially deter proactive self-reporting in favour of caution.
“The industry is really concerned about how that reporting is going to take place, whether there’s going to be appropriate contextualisation around the actual reportable situation that’s detailed and the number [of breaches],” she said at the time.
According to Graham, the dashboards would need to be constructed with nuance and sophistication to avoid the possibility of under-reporting.
“The data has to be looked at in context and the way it’s published and shared can have unintended consequences, which might undermine the effectiveness of the regulatory regime and the good intent of the policy.”
Feedback on the proposals is open until 14 May 2025, with initial publication of the dashboards anticipated between September and December this year.
