The Financial Advice Association Australia (FAAA), alongside other industry groups, have responded to ASIC’s proposed relief under the reportable situations regime with several recommendations.
Last month, the corporate regulator proposed additional relief for Australian Financial Services licencees (AFSLs) under the reportable situations regime.
It sought to reduce the reporting burden on the financial services industry while ensuring ASIC still receives reports of high regulatory value.
“We are inviting feedback on our proposal to give relief from reporting certain breaches of the misleading and deceptive conduct provisions, and certain contraventions of civil penalties,” the regulator stated.
This will apply in four scenarios where:
- The breach has been rectified within 30 days from when it first occurred (this includes paying any necessary remediation).
- The number of impacted consumers is not more than five.
- The total financial loss or damage to all impacted consumers resulting from the breach is not more than $500 (including where the loss has been remediated).
- The breach is not a contravention of the client money reporting rules, and clearing and settlement rules.
ASIC sought feedback on the proposed changes until 11 March 2025.
In joint submission from the FAAA, Chartered Accountants Australia and New Zealand (CAANZ), CPA Australia, Institute of Public Accountants and the SMSF Association, the industry bodies responded that they support the objective to provide relief from lodging reports that provide very little intelligence.
The relief should also strike an appropriate balance between “reducing the unnecessary regulatory burden” on AFSLs, the submission stated, and preserving the purpose of the regime.
“The resources of ASIC should be focused on identifying and addressing emerging trends of serious non-compliance, including those that could lead to material consumer financial detriment. They should not be consumed on minor compliance breaches which are currently flooding the system, which is a concern for the sector given ASIC is funded via an industry funding model,” it wrote.
The bodies also recognised the obligation to make reportable situation reports to ASIC requires a significant amount of work and cost from licensees, particularly those on the smaller end, often in the form of expensive legal or compliance advice.
“This effort and cost represent a significant waste for these businesses, particularly if the matter is immaterial and not something that ASIC has any interest in pursuing.”
The joint submission recommended that the first proposed parameter be amended to the breach has been rectified within 30 days from when it is first identified, rather than when the breach occurred.
Secondly, the bodies suggested the threshold should be increased from $500 to $1,000, and consequently the maximum number of clients is also increased from the proposed five to 10.
“We believe that this provides a sensible balance between what is reported to ASIC, the associated costs and the value of the information to ASIC,” the submission continued.
“Should this recommendation not be accepted, we recommend that the $500 threshold is at least annually indexed to ensure that it remains effective in reducing low intelligence breaches being reported on mass.”
The submission also recommended that ASIC should report on the effectiveness of the proposed relief after 12 months from implementation and continue to consider any additional opportunities for relief.
