Treasury consults on Breach Reporting Regulation

AFA News 18 March 2021. In December last year, the Parliament passed the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020, which included the introduction of new mandatory reference checking requirements and a new breach reporting regime, with related investigation and remediation obligations.

We are concerned about the implications of this new breach reporting and remediation regime, as we expect that it will significantly increase the number of breaches that need to be reported to ASIC.  It also includes the requirement for licensees to report breaches by advisers from other licensees. The new regime includes a requirement to report all civil penalty provisions, other than those that are exempted by regulation. The civil penalty provisions in the Corporations Act include the Best Interests Duty and Related Obligations, all FDS breaches, SoA and replacement product provisions, and the requirement to provide an FSG and a PDS. Licensee audit processes will inevitably generate a number of issues that need to be reported. We expect an exponential increase in breaches reportable to ASIC.

Treasury are currently consulting on a draft regulation that in the current form will provide limited exemptions for cases of failing to provide an FSG or a PDS.  In our view this does not go far enough, and these FSG/PDS matters would represent a small percentage of civil penalty breaches.  We believe that the exemption of civil penalty provisions should be extended to the BID and Related Obligations and FDS breaches as a minimum.  Serious matters will still be reported to ASIC through other elements of the breach reporting regime.

We have until 9 April 2021 to make a submission and we encourage all licensees to make submissions to Treasury, seeking an extension to the civil penalty provisions that are to be exempt.

For any feedback on the new breach reporting requirements email

Issued 18.03.2021. AFA Policy & Education Update