The Australian Securities and Investments Commission (ASIC) recently proposed additional relief measures to assist financial services and credit licensees in complying with the reportable situations regime. These changes have sparked a range of opinions within the industry, particularly regarding their potential impact on different types of breaches and licensees. Here, we explore some key perspectives on the proposed changes.
Impact on BID and Appropriate Advice Breaches
One of the primary concerns is the feasibility of resolving breaches related to the Best Interests Duty (BID) and Appropriate Advice within the proposed 30-day timeframe and with losses under $500. These breaches often require extensive investigation and remediation, making it challenging to meet such tight deadlines. The complexity and thoroughness needed to address these issues mean quick resolutions may not be possible.
Misleading and Deceptive Conduct
There is a belief that the proposed changes might be more relevant to cases of misleading and deceptive conduct. However, it is noteworthy that such conduct rarely results in direct client compensation. Most outcomes in this area fall under BID or Appropriateness. Nonetheless, findings against advisers can encompass misleading conduct and BID/Appropriateness, adding complexity to the resolution process.
Impact on Licensees
The proposed changes are likely to have varying impacts on different licensees. Smaller licensees may face significant challenges due to limited resources, making it harder to comply with the new requirements. On the other hand, larger licensees and super funds with advice capabilities might find the relief beneficial. These entities often have more complex processes for identifying, investigating, and remediating breaches, and the additional relief could streamline their compliance efforts.
Timeframe for Reporting
An interesting aspect of the proposed changes is the language specifying the timeframe from when the breach occurred rather than when the licensee became aware of it. This subtle shift could have significant implications. It may lead to earlier reporting and quicker remediation efforts, but it also places a greater onus on licensees to have robust detection mechanisms in place. Ensuring the timely identification of breaches is crucial for compliance under the new regime.
While ASIC’s proposed changes aim to provide relief and streamline compliance for licensees, their effectiveness will largely depend on the specific circumstances of each licensee and the nature of the breaches they encounter. Smaller licensees may struggle with the new requirements, whereas larger entities might benefit from the additional relief. The focus on earlier reporting could drive quicker remediation but will require strong detection systems.
As the industry continues to adapt to these changes, it will be essential to monitor their impact and ensure they achieve the goals of enhancing compliance and protecting clients.
ASIC proposes further relief for licensees under the reportable situations regime | ASIC
