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the Government on breach reporting, AIST said while the scope of breaches or likely breaches of core obligations in the draft guidance had a level of objectivity there was room for subjective assessment.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.

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“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.”




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Is it just me or has ASIC and the Government been eerily silent on guidance on all the new requirements about to hit us in the second half of this year? Yeah, we'll work it out somehow and then spend all our energies defending ourselves. They must have the same people running this as the big boys did with the shambles called lookback. If it wasn't for our clients, why would we bother?

I hear you Duke. We seem to spend about 60% of our time trying to meet the laws with documents and processes and not much on actually looking after clients and helping people. Is that what the government really want? It certainly appears so. No wonder everyone is leaving to find a far less stressful job.

This will be great. Either licensees (who only want to protect themselves) will err on the side of caution and report everything, regardless of how minute, or be subject to a 10 year look back with penalties if they don't report, due to lack of guidance from ASIC.

Agreed......the bulk of adviser time, effort and expertise is now spent on filling out "ACM's" (i.e. Arse Covering Memo's)

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