Reporting rules weigh on the financial services sector

As of October 1, AFSL and ACL holders are legally required to self-report specific issues to ASIC and face civil and criminal penalties if they fail to do so.

Recent research, conducted by CoreData Research and commissioned by legal technology firm Lawcadia and law firm Gadens, found that financial services regulatory and compliance teams face overwork, stress and anxiety as a direct result of new compliance and reporting rules.

“The research highlights the high level of stress and anxiety felt by legal, risk and compliance professionals, who have been tasked with planning, implementing and administering the requirements – the regulatory design seems to be a factor here,” Lawcadia co-founder Sacha Kirk explained.

According to the report, based on a survey of 160 employees of Australian financial services organizations, those responsible for implementing the obligations report a cumbersome and often very manual process of incident identification, investigation and determination. of those who must report.

Additionally, 67% of respondents said the new breach reporting requirements distracted or diverted resources from other important areas of work and compliance issues.

Interestingly, in terms of the types of issues generating reports of breaches under the new regime, the largest proportion of reports stem from advice-related issues (23%), suggesting that the provision of “advice general” and “personal advice” is a particular problem in the financial services sector.

“Reporting of violations has increased dramatically, and the top issues are misleading and deceptive behavior, failed counseling and conduct issues,” said Gadens partner Liam Hennessy.

“Mmisleading and misleading conduct is no big surprise – an incorrect charge on a bank statement technically triggers a report, which is stupid and a waste of time for organizations and ASIC,” he said.

Unsurprisingly, respondents indicated that they now report behaviors or events under the new regime that they would not have reported before October 1, 2021.

“Previously, we did not have these obligations. None of our incidents have ever been deemed reportable. If we had serious problems, [we] may have had conversations about whether we thought it was worth discussing with ASIC,” said one compliance and conduct officer interviewed.

“Now every incident that we look at, we will look at it with that lens, that consideration and that assessment. And also, our number of incidents has increased because we now require things that weren’t considered incidents before, to be considered incidents and reported as incidents…only so they can be assessed for view. of their report.

The report also revealed that the sector had low confidence in the new regime.

About half of survey respondents (51%) said they did not believe ASIC could administer the new regime in an efficient and fair manner for all financial service providers.

In comparison, only about one in seven (15%) think the regulator will be fully effective.

In terms of their level of understanding of the enhanced breach reporting regime, about half (51%) of respondents rated their level of awareness as medium, low or very low.

The greatest lack of clear understanding of obligations was found among financial advisers who are employed in advisory firms that do not have their own AFSL, where nearly three-quarters (74%) rated their understanding as moderate or lower.

Additionally, about a quarter (24%) of advisors operating under company authorized representative arrangements said they were not sufficiently trained or briefed by their AFS licensee to monitor violations.

Reporting rules weigh on the financial services sector

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Last update: May 03, 2022

Posted: May 03, 2022

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