The government has put the final regulatory arrangements in place for the commencement of the stricter compliance breach reporting regime on October 1, which will introduce breach reporting for credit licensees.
It has released Financial Sector Reform (Hayne Royal Commission Response – Breach Reporting and Remediation) Regulations 2021 and ASIC Corporation and Credit (Breach Reporting – Reportable Situations) Instrument 2021/716.
These latest regulatory updates prescribe civil penalty provisions and provide a list of contraventions that are not significant.
The Hayne royal commission recommended that breach reporting rules be strengthened because of concerns about the application of the test for whether a breach or likely breach is “significant and therefore reportable”, which is how the current regime operates.
Hayne said financial services licensees are left to make a judgement about which compliances breaches are significant and this made reporting inconsistent across the industry.
And under the current rules credit licensees are required to lodge annual compliance certificates, rather than breach reports. Hayne’s concern was that the information in these certificates was “high level” and did not detail specific breaches.
From October 1, credit licensees will have the same breach reporting obligations as financial services licensees.
Under the new rules, licensees will have to report to ASIC if there are reasonable grounds to believe reportable situations have arisen in relation to financial advisers operating under another financial services licence. Credit licensees will be required to report serious compliance concerns about individual mortgage brokers operating under another licence.
Licensees will need to report any investigation into whether a significant breach has occurred if the investigation lasts for more than 30 days.
The rules will specify some breaches that must be reported, such as gross negligence, serious fraud and misleading or deceptive conduct.
ASIC must publish data on breach reports by licensees.