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ARTICLE · 18 FEBRUARY 2025

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Reportable situations regime – ASIC's insights for 2023-24

Sophie Grace Pty Ltd
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ASIC has released its 3rd report into the reportable situations regime, highlighting some key action items for AFS & credit licensees.

AustraliaFinance and Banking
Victoria Lombardo
Victoria Lombardo
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ASIC has released its third report into the reportable situations regime, highlighting some key action items for Australian Financial Services ("AFS") and credit licensees ("Licensees").

Key Findings and Observations in report 800

ASIC's key insights, along with Sophie Grace's key considerations and action items for Licensees, have been summarised in the table below:

Insight 1: Volume of reports and nature of lodgers
Key Insights Considerations

  • There has been a decrease in the volume of reports received from the previous reporting period due to:


  • an increase in Licensees grouping similar, related or identical breaches in one report; and

  • a decrease in reportable situations relating to misleading or deceptive conduct and false and misleading statements as a result of ASIC Instrument 2023/589.


  • AFS licensees are reporting more than credit licensees.

  • Licensees with greater customer impact had higher volumes of reporting due to the size and scale of their business.
  • Licensees should have robust systems and processes in place for identifying and grouping similar, related or identical breaches.

  • If there are reasonable grounds to believe that a reportable situation has arisen, licensees of any size must lodge a report with ASIC.
Insight 2: Subject of reports and root causes of breaches
Key Insights Considerations

  • 82% of reports lodged with ASIC impacted a financial service, credit activity or product line of the business.

  • There has been an increase in reports relating to superannuation products, particularly, breaches of superannuation accounts.

  • Staff negligence and error was the most common cause of breaches.
  • Licensees should ensure staff are adequately trained and understand their obligations as an employee of a licensee, especially in relation to breaches and escalating any incidents.

  • Licensees should consider if there are any other underlying root causes or broader failures in their systems, policies or processes that may be contributing to staff negligence and error.

  • All communications with consumers should accurately represent the products and services the Licensee offers and must not be misleading or false in substance, or in the impression the communication gives. Training on false and misleading conduct should be provided to staff on a regular basis.
Insight 3: Identification and investigation of breaches
Key Insights Considerations

  • A majority of breaches were identified through staff and business unit reports as opposed to internal compliance or customer complaints.

  • Breaches identified from internal compliance reviews have decreased by 5%. This means that a greater proportion of reports were identified from external sources compared to the previous reporting period.

  • 28% of reports that involved financial loss were identified by customers through internal and external dispute resolution.

  • There was an increase in the time taken for Licensees to identify, commence and investigate breaches. The average time taken to:


  • identify the breaches was 415 calendar days; and

  • investigate breaches was 59 calendar days.


  • Breaches that impacted a larger number of customers took Licensees longer to investigate.
  • Licensees should ensure there are adequate systems in place to identify breaches and report these internally.

  • Clear lines of responsibility should be implemented, to ensure that staff members understand their role in the breach reporting process.

  • Licensees should ensure that their risk and compliance function is adequately resourced to investigate and, where required, report breaches to ASIC.

  • Licensees should review and strengthen their internal risk management activities so that breaches are proactively identified and reported to ASIC.

  • Licensees should review their breach identification processes and take steps to reduce the timeframe to commence an investigation.
Insight 4: Customer impact, remediation and rectification
Key Insights Considerations
  • There was a decrease in breaches that impacted consumers both financially and non-financially. 17 million customers were impacted in the 2023-24 period as opposed to 28 million in the previous reporting period.

  • In 25% of reports, customers faced financial loss of $10,000 or more.

  • There was a 13% decrease in reports where a single customer was impacted as a result of ASIC Instrument 2023/589. This removes the obligation for licensees to report breaches of certain misleading or deceptive conduct provisions if the breach:


  • gives rise to one reportable situation:

  • impacts one person; and

  • does not result in financial loss or damage.


  • Licensees are taking less time on average to remediate affected customers (16 days in comparison to 24 days in the previous reporting period).

  • Licensees had rectified significant breaches in 84% of reports lodged with ASIC.

  • Staff training on internal policies and procedures was the most common selection by Licensees in rectifying a breach.
  • Prompt action should be taken to investigate a breach and remediate any consumers affected.

  • Whilst training staff is one effective method of rectifying breaches, Licensees should also consider putting in place preventative measures to reduce the likelihood of similar breaches occurring.

  • Licensees should rectify breaches effectively and within a reasonable timeframe to minimise further harm to consumers, especially where there has been a loss suffered by consumers.

Background

Under section 912DAD of the Corporations Act 2001 (Cth) and section 50D of the National Consumer and Credit Protection Act 2009 (Cth), ASIC must publish information about breach reports lodged by licensees each financial year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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