Australian regulator eases reporting obligation for AFS license holders

Australian Securities and Investments Commission (ASIC) recently decided to amend the legal obligations under the reportable situations regime for the holders of the Australian Financial Services (AFS) license.

The looser requirements will also have a positive impact on Australian credit licensees, according to recent reports.

ASIC is amending the existing rules

The ASIC decided to exclude some breaches related to deceptive or misleading conduct, as well as false or misleading representations, from being automatically reportable as major breaches. Further, AFS licensees will now have up to 90 days to report situations similar to the ones previously filed with the regulator, rather than 30, which has been the case until now.

The changes were described in the ASIC Corporations and Credit (Amendment) Instrument 2023/589, and they came into effect yesterday, October 20, 2023.

The reportable situations framework that is in place currently requires licensees to notify ASIC when they identify something that might be deemed a significant breach of core obligations. As for what the core obligations include, ASIC has provided a list under section 912D of the Corporations Act 2001 and the National Consumer Credit Protection Act 2009’s section 50A.

The new amendment will modify the requirement by removing some of the breaches from the list. The breaches in question are mostly related to deceptive or misleading conduct, as well as false or misleading representations. The change will mean that they won’t be automatically reportable as “significant breaches” moving forward.

What kinds of breaches will be excluded?

In order to fall into these categories, the breach will need to satisfy certain conditions, such as the limited impact on only a single person or jointly held products, whether those are credit products or financial products. Next, the breach must have no likelihood of leading to a financial loss, and finally, it must not give rise to other reportable situations in order to be considered not significant.

Apart from that, there is another important change worth noting — the extension of the time limit for reporting situations that require it. If the situation has the same underlying circumstances as previously described, or at least similar enough, licensees will have a period of up to 90 days to file their reports. As mentioned, until now, the period for reporting them was only 30 days, but now, ASIC has decided to extend the period in order to remove a portion of the pressure from the licensees.

The amendments are a part of the effort to streamline regulatory compliance and at the same time, ensure consumer protection and market integrity. The ASIC opted to do it by narrowing the scope of what falls under the category of a reportable breach, which will allow it to focus its supervisory efforts on infringements that are more severe instead of having to deal with anything that may be reported under a stricter set of rules.