Breach reporting rules corroding financial services sector
The enhanced breach reporting regime has been rough on the financial services industry, according to a report, as the industry contends with a hawkish Australian Securities and Investments Commission (ASIC) and new civil and criminal penalties.
The research was conducted by CoreData Research and commissioned by legal technology company Lawcadia and leading law firm Gadens, following the introduction of new mandatory breach reporting obligations in October 2021.
The report considered the legislation as “overly excessive”, and not achieving the goals Commissioner Hayne had in mind in recommending the changes.
Lawcadia co-founder, Sacha Kirk, said the new reporting measures were also taking a significant toll on the mental health and wellbeing of staff in the sector.
“The research highlights there is a high level of stress and anxiety being experienced by legal, risk and compliance professionals, who have been tasked with planning, implementing and administering the requirements – regulatory design seems to be a factor here,” she said.
Kirk said the report, based on survey results of 160 staff from Australian financial services organisations and a multiple in-depth interviews, also found the sector had low confidence in the new reporting regime.
Around half of survey respondents did not believe ASIC could administer the new regime effectively and fairly across all financial services providers.
Gadens partner, Liam Hennessy, said the research was valuable because it provided an insight into the quantitative and qualitative trends of breach reporting, ahead of ASIC’s plans to publicly release data comparing organisations.
Hennessy said this would be “ritualistic public shaming”.
“Breach reporting has very markedly increased, and the main pain points are around misleading and deceptive conduct, advice failures and conduct issues. Misleading and deceptive conduct isn’t a big surprise – an incorrect fee on a bank statement technically triggers a report, which is asinine and a waste of organisations’ and ASIC’s time,” he said.
Hennessy said the report showed that the industry at large was struggling to prepare for and maintain the onerous compliance demands, and that a combination of policy amendments scaling back the more onerous features of the regime and technology adoption was the answer.
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