The government’s ASIC Enforcement Review Taskforce has released a new position and consultation paper outlining proposed changes to the breach reporting regime for financial services entities.
The report seeks to remove the ambiguity from the current ASIC breach reporting requirements.
At present, Australian financial services licensees are required to apply an objective ‘reasonableness’ test in order to decide if a compliance breach is sufficiently ‘significant’ to be reported to ASIC.
The paper recommends that the significance test be retained, but that significance should be determined in reference to an objective standard.
The ASIC Enforcement Review Taskforce also discussed whether breach reports ought to be made public – an issue raised by the ongoing House of Representatives Review of the Four Major Banks.
In a series of public hearings in March 2017, the chief executives of CBA, Westpac and NAB rejected the public airing of breach reports and the naming of relevant executives. ANZ Shayne Elliott was the only chief executive to give in principle support to the idea.
The paper noted that the breach reporting regime was not established as a mechanism for determining the guilt or innocence of individuals accused of misconduct.
“To use it as such would risk undermining fundamental principles of procedural fairness and due process for individual staff or representatives of licensees who may be named,” said the paper.
“Even where a licensee reports an actual breach of obligations, further investigations are often necessary after the licensee reports the breach to ASIC to determine, amongst other things, the individuals involved, the extent of their role in the relevant events, the full impact on the licensee and/or consumers,” it said.
However, the ASIC taskforce did “see some merit” in the Recommendation 9 of the first report of the Review of the Four Major Banks – namely, the annual publishing of breach report data at a licensee level.
The paper also recommends the introduction of more flexible penalties for ASIC when it comes to breach reporting failures.
Submissions on the paper close on 12 May 2017.
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