The Association of Financial Advisers wants to defer the proposed self-reporting of breaches regime amid concerns it will be impossible for small financial advice firms to comply with.
The AFA outlined its concerns about Commissioner Kenneth Hayne's recommendation that in order to help protect consumers, AFSL holders must follow breach-reporting regulations when representatives engage in misconduct.
Hayne recommended that significant breaches and investigations relating to suspected breaches must be reported within 30 days, and that criminal penalties should be increased for failure to report as and when required.
ASIC should publish breach report data annually not only aggregated by breach type but also by individual licensee, Hayne suggested.
|Sponsored by Eaton Vance|
Responsible Fixed-Income Investing with Calvert
One main issue the AFA highlighted is that the law deviates from the concept of significant breach reporting and will involve "an exponential increase in the number of breaches that need to be reported and many of these will be of a largely administrative nature".
One AFA licensee partner, which reported four breaches in 2020, would equate to 198 reports under the new regime.
"Their feedback suggests that the exclusion of civil penalty matters for the failure to deliver an FSG and a PDS would only marginally decrease the number of breaches that would need to be reported," the AFA wrote in its submission.
Another concern is the new law states that record-keeping breaches are subject to maximum jail term of five years, and would therefore be automatically caught, despite being largely administrative in nature.
Gadens chair Paul Spiro said with the introduction of at least seven overlapping and time-sensitive mandatory reporting regimes by 5 October 2021, organisations need to seriously consider how they will prepare for and respond to the impending changes.
The regtech has identified the serious need for financial institutions to evaluate their reporting preparedness and risk position with the new regulation.
"While there was a myriad of developments to come out of the Hayne Royal Commission, new oversight regimes and more stringent regulatory breach reporting are some of the key areas affecting the financial services sector, exposing institutions and their senior executives personally to the prospect of liability for non-adherence," he said.
Hayne's recommendation comes off the back of a 2017 ASIC Enforcement Review Taskforce, which pushed for self-reporting of contraventions by financial services and credit licensees should be carried into effect.