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22-214MR ASIC’s approach to breach reporting: implementation of reportable situations regime
As part of its 2022-23 priorities, ASIC will focus on improving the operation of the reportable situations regime.
The new regime, which applies to Australian Financial Services (AFS) Licensees and Credit Licensees, commenced on 1 October 2021.
The lodgement of reports by licensees under the reportable situations regime provides a critical source of intelligence to enable ASIC to identify emerging trends of non-compliance in the industry. It also allows detection of significant non-compliant behaviours early, facilitating prompt regulatory action where appropriate.
ASIC Commissioner Sean Hughes said, ‘We are aware that the regime has led to a number of implementation challenges. However ASIC remains committed to the successful implementation of this regime and we have developed a comprehensive plan of work to ensure that it meets its objectives for ASIC, industry and consumers.’
Engaging with industry and setting expectations
ASIC will continue to engage with industry on reporting practices adopted by licensees to further understand any issues that are placing unnecessary compliance burden on industry. ASIC will communicate clear expectations for compliance with the new regime and design solutions to ensure the consistency and quality of reporting meets the policy objectives of the regime, as well as improve the efficiency of ASIC’s data collection and analysis.
Mr Hughes added, ‘We will be working with stakeholders to find common-sense solutions. ASIC will consider whether enhancements are required to the approved form on the Regulatory Portal for lodging reports. We will also consider whether further practical guidance should be developed to assist licensees in meeting their obligations.’
ASIC will continue to engage with Treasury on how the regime is meeting its policy objectives. In undertaking this work, ASIC acknowledges the significant investment made across industry in the implementation of the reforms to date and will seek to minimise further impacts.
ASIC is obliged to report annually on information that is provided under the reportable situations regime. Amongst other things, this reporting is intended to assist consumers identify where significant breaches are occurring. ASIC’s first public report, due to be published in October 2022, will include high-level insights into trends observed across the reports lodged by licensees during the period 1 October 2021 to 30 June 2022.
This report will not name licensees nor refer to the nature or number of reports lodged by specific licensees.
Given that ASIC will not be publishing data or insights at a licensee level in this first report, ASIC will not consult with stakeholders on the information to be published in this first year of public reporting.
ASIC’s approach to reporting will evolve over time, as implementation of the regime matures and allows for greater granularity of reporting. ASIC will consider its approach to the 2023 public report early next year, including whether that report should include a list of all licensees who have reported to ASIC during the period. ASIC will consult with stakeholders in advance of the commencement of licensee-level granular public reporting (likely in 2024).
Under the regime, AFS and credit licensees must report all reportable situations to ASIC in writing, including:
- significant breaches or likely significant breaches of ‘core obligations’
- investigations into whether there is a significant breach or likely breach of a ‘core obligation’ if the investigation continues for more than 30 days
- the outcome of such an investigation if it discloses there is no significant breach or likely breach of a core obligation
- conduct that constitutes gross negligence or serious fraud
- reportable situations about other licensees.
A number of situations are deemed to be significant and therefore reportable (for example, a contravention of a civil penalty provision).
AFS and credit licensees are required to notify ASIC of reportable situations within 30 calendar days after the licensee first knows that there are reasonable grounds to believe a reportable situation has arisen. For more information see Reportable situations for AFS and credit licensees.