AFA News 12 August 2021. On Thursday 5 August 2021, the Government issued the regulation that principally defines the civil penalty provisions that will be exempted from being reported to ASIC under the new significant breach reporting regime that commences on 1 October 2021.
The AFA has been very vocal with respect to our concerns that the new breach reporting regime will involve a significant increase in the number of breaches that need to be reported to ASIC, when many of them will be minor and involve no consumer detriment. In the absence of this regulation, all breaches of civil penalty provisions would be reportable. A list of civil penalty provisions can be obtained by reviewing Section 1317E of the Corporations Act.
We have been consulting with Treasury on the reasons why additional civil penalty provisions should be excluded from the deemed significant category as part of the new breach reporting regime. We are pleased that Treasury has added a number of additional sections as a result of this consultation.
The list of sections that are exempted from the reportable breach regime and are relevant to financial advice are set out in the following table. It is noted that this includes all the FDS related civil penalty provisions other than charging a fee after an arrangement has terminated (Section 962P) and arranging for deduction of ongoing fees without consent (Section 962R). this is particularly important, given that otherwise, any breaches involving late FDSs or incorrect amounts or services would have needed to be reported to ASIC. This is an important outcome and will reduce the regulatory impact on licensees. Exempt Sections:
| Corporations Act Section | Description |
| subsection 922M(5) | Failing to comply with obligation to notify ASIC |
| subsection 941A(3) | Obligation on financial services licensee to give a Financial Services Guide if financial service provided to person as a retail client |
| subsection 941B(4) | Obligation on authorised representative to give a Financial Services Guide if financial service provided to person as a retail client |
| subsection 962G(4) | Annual requirement to give fee disclosure statement |
| subsection 962S(5) | Fee recipient must not arrange for deduction of ongoing fees without consent or accept such deductions |
| subsection 962S(8) | Fee recipient must not arrange for deduction of ongoing fees without consent or accept such deductions |
| subsection 962U(3) | Variation or withdrawal of consent |
| subsection 962V(3) | When consent ceases to have effect |
| subsection 1012A(5) | Obligation to give Product Disclosure Statement–personal advice recommending particular financial product |
| subsection 1012B(6) | Obligation to give Product Disclosure Statement–situations related to issue of financial products |
| subsection 1012C(11) | Obligation to give Product Disclosure Statement–offers related to sale of financial products |
| subsection 1021E(8) | Preparer of defective disclosure document or statement giving the document or statement (whether or not known to be defective) |
The remaining key driver of significant breaches under the new breach reporting obligation will be breaches of the Best Interests Duty. We are still awaiting the finalisation of the Regulatory Guide by ASIC and will provide a further update when this is available.
Please click here to see the new regulation. Please click here to see the explanatory statement on this new regulation.
For any questions on the new breach reporting regime, please email policy@afa.asn.au.
