ASIC details financial advice breach reports in FY24
ASIC has shared the percentage of breach reports related to financial advice in FY24 as it breaks down the total volume submitted by licensees.
The reportable situations regime requires licensees to submit reports of any breaches and is used by ASIC to identify any emerging trends and detect non-compliant behaviour.
During the period of FY24, licensees submitted 12,298 reports, which is a decrease of 27 per cent from the previous corresponding period.
This decrease is due to a greater uptake by licensees in grouping similar breaches into one report and a decrease in reportable situations relating to misleading or deceptive conduct provisions and the false or misleading statements provision.
This is divided by 913 AFSLs that lodged 8,636 reports, and 161 credit licensees that submitted 4,088 reports.
Some 7 per cent of the reports related to financial advice, unchanged from the previous period, and 4 per cent related to investments, up from 3 per cent in the previous year.
Some 8 per cent of reports were about false or misleading statements. This is a decrease of 6 percentage points compared to the previous reporting period. This decrease is primarily due to the release of ASIC Corporations and Credit (Amendment) Instrument 2023/589. The next most common issues were related to general licensee obligations (19 per cent) and lending (17 per cent).
The number of licensees that lodged at least one report increased by 10 per cent from the previous reporting period to 1,024 licensees.
ASIC noted it has seen increased reporting from smaller licensees, with AFSLs with less than $50 million, which represent 10 per cent of the AFSL population, submitting 739 reports.
“While it is still mostly the larger licensees that are reporting under the regime, we expect all licensees, regardless of size, to have robust systems and processes in place to ensure timely detection and reporting of any non-compliance. If there are reasonable grounds to believe that a reportable situation has arisen, it is a legal obligation for licensees of any size to lodge a report with ASIC.”
Staff negligence is the most common root cause of breaches, but declined slightly from 68 per cent to 60 per cent. However, this is far higher than the second most common reason, which is policy or process deficiency at 9 per cent.
ASIC reminded licensees that they should ensure there are no other underlying reasons or broader failures beyond staff negligence that may be contributing to breaches.
Almost half of reports were identified by staff reports, followed by internal compliance functions. A customer complaint via the internal dispute resolution mechanism accounted for 15 per cent of reports.
When it came to time taken to identify and commence investigations into breaches, the median time taken by a licensee was 73 calendar days. In one in five cases, licensees took more than a year to identify and commence an investigation, and this tended to have a correlation with a higher number of customers being impacted.
AUTHOR
Laura Dew
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