Licensees reporting serious instances of misconduct to ASIC should also be named and shamed in an annual report, a government taskforce has proposed.
The ASIC Enforcement Review Taskforce released the ‘Self-reporting of contraventions by financial services and credit licensees’ paper yesterday, which proposes a set of reforms that are intended to improve transparency and accountability in the financial services sector.
One of these includes requiring ASIC to publish an annual report of its breach reporting data at the licensee level.
“The taskforce’s initial view is that this reporting should be confined to significant breaches, and should be at the licensee level, but could extend to identifying the operational area of the licensee’s organisation in which the breach occurred,” the paper states.
“This would assist in enabling industry and consumers to identify areas where significant numbers of breaches are occurring and provide licensees with an incentive to improve their compliance outcomes in those areas.”
This proposal follows the Coleman report from the House of Representatives standing committee on economics, which recommend the establishment of a public breach reporting system that named the individuals involved.
This reporting at the individual level, however, was not supported by the taskforce.
“In the taskforce’s opinion, the primary purpose of the existing breach reporting regime is to enhance ASIC’s intelligence and better enable it to carry out its functions, including investigating reports of wrongdoing and taking appropriate action,” the paper states.
“Premature public disclosure of issues and naming of individuals may impede ASIC action by publicising the fact that ASIC is or may be investigating – for example, by resulting in the destruction of evidence before ASIC can fully implement its investigative processes and place people on non-disclosure orders to limit tipping and collusion about evidence.”
Other proposed reforms in the report include clarifying the “significance test” in the Corporations Act and unambiguously oblige licensees to report significant misconduct by an employee or representative.
Further, the paper proposes requiring licensees to report breaches within 10 business days “from the time the obligation to report arises”.
It also contains reforms that introduce new and heightened penalties for non-reporting, giving ASIC greater flexibility to impose a range of penalties in response to a failure to report, and enhance accountability for licensees, and their employees and representatives, by expanding the class of reports that must be made to expressly include misconduct by individual advisers and employees.
The consultation paper comes after ASIC announced the findings of its review into how financial advice institutions have dealt with non-compliant advisers.
ASIC said it found licensees failed to notify the regulator about serious non-compliance concerns regarding adviser conduct. It also found significant delays between the institution first becoming aware of the misconduct and reporting it to ASIC.
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