New Breach Reporting Regime from October 2021

AFA News 15 April 2021. The Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 was passed in both Houses of the Federal Parliament on 10 December 2020 and received Royal Assent one week later.  This Bill contains a range of measures, including the new mandatory reference checking obligation and the new breach reporting regime, both of which will commence from 1 October 2021.

The new breach reporting regime will involve a significant increase in the number of matters that need to be reported to ASIC.  This is due to the fact that additional requirements have been added for reporting, including all breaches of what is known as civil penalty provisions and criminal offence provisions with a maximum jail term above a certain threshold.  Civil penalty provisions are matters where fines apply, however they are also distinguished from criminal offences by different processes and standards of proof.

The law provides a mechanism for the exclusion of certain civil penalty provisions from the reporting regime and Treasury have recently issued a draft regulation for consultation.  This is an important opportunity to ensure that the new breach reporting regime is more manageable for licensees and causes less complications for financial advisers.

For context on civil penalty provisions, any breach of the Best Interests Duty or Related Obligations is a civil penalty provision, as is a breach of the key FDS and Opt-In obligations.  The inclusion of BID breaches, which could simply be a matter of lack of documentation, was an obvious area where we sought an expansion of the exemptions that were proposed.  The Treasury draft had only excluded failures to provide FSGs and PDSs from the civil penalty breach reporting requirements, and these matters would only be a fraction of total civil penalty provision breaches. We have proposed a number of other civil penalty obligations be added to the exempt list.

The AFA has been working closely with Treasury and a number of licensees on our concerns with this new breach reporting regime. We have also raised our concerns about the implications of this with the Government, highlighting the significant increase in work and cost that would flow.  This is also an important issue for advisers, as all breaches reported to ASIC would need to be included in a reference check, and this would not be appropriate where it was purely an administrative matter.

Please click here for a copy of the AFA submission to the Treasury on breach reporting.

If you have any questions with respect to the breach reporting obligations, then please contact the AFA at Issued 15.04.2021.

Issued 15.04.2021. AFA Policy & Education Update