ASIC breach guidance leaves room for subjectivity



The corporate regulator’s guidance on the incoming breach reporting regime leaves for subjective assessments of breaches by Australian financial services (AFS) licensees, according to the Australian Institute of Superannuation Trustees (AIST).
In its submission to the Government on breach reporting, AIST said while the scope of breaches or likely breaches of core obligations in the draft guidance had a level of objectivity there was room for subjective assessment.
“There is a risk that a lack of more granular guidance on what must be reported to ASIC [the Australian Securities and Investments Commission] may result in licensees inadvertently breaching their obligations as they may interpret guidance differently to how ASIC might do so,” the submission said.
“A breach or likely breach of a core obligation captures a wide range of scenarios and includes any contravention of a civil penalty provision.
“Considering the scope of civil penalty provisions and what may amount to trivial breaches, AIST considers that high-level guidance does not provide sufficient objectivity to assist AFS licensees determine if a breach or likely breach of a core obligation is a reportable situation. AIST supports measures that enhance breach reporting but notes that there is scope in Draft RG 78 for additional and targeted guidance on what constitutes ‘core obligation’.”
AIST said there needed to be guidance on how to determine whether a breach or likely breach of a core obligation was “significant”.
“Significance’ is not defined, and although we welcome the intent of objectivity by the introduction of ‘deemed significance’, the broad scope of civil penalty provisions leaves room for specific examples or case studies using one of the many civil penalty provisions outlined in the Corporations Act,” AIST said.
“In relation to ‘deemed significance’, we acknowledge its objective application to investigations that take more than 30 days, but would welcome further clarity and guidance on the ‘material loss or damage’ aspect, in particular more examples of what constitutes ‘material loss or damage’ both in financial and non-financial terms given that any such loss could result in a breach being deemed significant.”
Recommended for you
The new financial year has got off to a strong start in adviser gains, helped by new entrants, after heavy losses sustained in June.
Michael McCorry, chief investment officer at BlackRock Australia, has detailed how investors are reconsidering their 60/40 portfolios as macro uncertainty highlight the benefits of liquid alternatives.
Having reset its market focus to high-net-worth advisers, Praemium’s administration solution has been selected by Bell Potter in a deal that increases the platform's funds under administration by $6 billion.
High transition rates from financial advisers have helped Netwealth’s funds under administration rise by $3.7 billion in the fourth quarter of FY25.