Doubling of breach reports
The Financial Planning Association (FPA) has welcomed a reported increase in the number of breach of licence notifications received by the corporate regulator from the financial services industry.
The Australian Securities and Investments Commission (ASIC) yesterday reported that since the start of the 2005-06 financial year, it had received 690 breach notifications, double the number received before the October 2004 publication of its guide to reporting breaches.
Fifty per cent of reported breaches were received from licensees providing financial planning advice and general insurance products. Superannuation trustees accounted for 25 per cent of total breach notifications, and operators of various types of managed investment schemes also represented a large proportion of notifications.
“Where our members are involved, the FPA is pleased that our members are reporting their breach notifications, because it’s an FSR [Financial Services Reform] obligation and they’re required to do so, but also because it gives ASIC a chance to have a look at what issues people are coming across,” a spokesman for the FPA said.
Under FSR, Australian financial services licensees are required to report any significant breaches, or likely breaches, to ASIC within five business days of becoming aware of the breach. The maximum penalty for failing to meet these requirements is $5,500 and/or one-year imprisonment for an individual, and $27,500 for a company.
The FPA spokesperson said the increase in breach reports showed advisers had developed a greater understanding of the requirements of FSR.
ASIC claimed it showed licensees were taking their obligations more seriously.
Most of the notifications involved disclosure obligations, financial viability, incorrect fees and charges, Statements of Advice and unit pricing.
The regulator reported that in 431 cases, the licensee had already resolved the problem.
In 63 cases, ASIC continued to monitor licensees’ progress, while 30 licensees remained under surveillance, and 25 reported breaches were the subject of further investigations.
ASIC executive director of compliance Jennifer O’Donnell said life insurers would be more closely examined after fewer reports were received from life insurers compared with the number of complaints ASIC and the Financial Industry Complaints Scheme received about life insurance.
“We are also checking the procedures of 100 licensees who have not yet lodged a breach notification,” she said.
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