ASIC Regulations - Breach Reporting: What You Need to Know


Contact us 1300 817 662


Regulatory Changes Effective October 2021

ASIC NewsGreg Ashe

Regulatory Changes Effective October 2021

Brokers may have been hearing from a variety of sources about a raft of reforms and law changes that come into effect in October 2021. At CompliFast and QED Risk Services, we believe that as long as you have been running your business efficiently and effectively, these changes shouldn't have a big impact on your processes.

Here is a summary of the issues being raised:


Reference Checking

There are updated requirements coming in for how Licensees manage brokers flowing between one group and another.  Generally, there are numerous checks that you could take to research someone's background:

  • Employment history - get references, see below
  • Credit checks
  • Bankruptcy checks
  • ASIC banned & disqualified checks - there is a public register for this
  • Educational qualifications
  • Professional memberships
  • Directorships - this will show up in credit checks
  • Proof of work rights

Obviously, you are not going to subject every single person to all of the above.  You need to apply some logic and reason about which checks you will apply to whom depending on their role in your business.

That said, there are some specific requirements in the new legislation concerning reference checks when applied to "credit active" people, whether as employees or as Credit Reps:

  1. The "onboarding" Licensee must gain the consent of the incoming broker to seek the reference
  2. Checks must cover the previous 5-year period
  3. There are templates for the reference request and for the reference itself
  4. The reference must be provided within ten business days of the request.


Breach Reporting

Since the beginning of Australian Financial Services Licensing, there has been a requirement under s912A of the Corporations Act for AFS Licensees to report "significant" breaches of their obligations to ASIC.  No such requirement has been in place in the NCCP Act until now.

The concept of "significant" under the Corporations Act is a BIG DEAL. Under the Credit Act, all guidance points to the core obligations, those being Responsible Lending, Best Interests Obligations and s47 General Conduct Obligations, which include:

  • Your credit process in its entirety
  • Compliance management
  • Risk management
  • Cash flow forecasting
  • HR planning
  • IT planning and security
  • Managing conflicts of interest
  • Managing outsourced activities
  • Supervision and training
  • Complaints management
  • Appropriate professional indemnity insurance.

The majority of these would, by themselves, surely not constitute something so significant that it was worthy of reporting to ASIC.  However, if a Licensee was systematically breaching some of these requirements over a period of time, that may cross the line into "significant".

Regarding responsible lending and BID, there are MANY places here where a broker could slip up to the point that it may become significant.  If you are habitually providing Credit Guides too late, for example, that would likely be reportable.  If you really stuff up in your assistance to an individual client to the point that they suffered financial damage or significant stress because you did a bad job, that could be an individual case of a significant breach.


Design and Distribution Obligations and Target Market Determination

DDO and TMD is, we believe, primarily a lender issue.  Lenders designing credit products are required to determine who the products are suitable for.  How will they design the product; how will they distribute the product; what is the target market for whom this product is designed to reach?

The MFAA has been publishing its thoughts on this quite a lot recently, and have intimated that Treasury has agreed - off the record so far - that these requirements were never intended to apply to brokers. As far as we can tell, the most a broker will ever have to do is to read the TMD that goes with the product and ensure that it describes the consumer to which the broker is about to match the product.


Complaint Handling

Some years ago, Standards Australia changed the definition of a complaint.   At the time, ASIC didn't notice, however this is now updated in its Regulatory Guide.  The definition has changed from " expression of dissatisfaction in relation to a company product or service..." to " expression of dissatisfaction made to or about your products or services...". 

Fortunately, ASIC has come to our rescue on this topic and limited the "about" part to social media that YOU control.  If someone voices their dissatisfaction on your Facebook page, then you are required to address it and manage it as a complaint made directly to you.

Other changes are that complaints must be managed inside your internal systems within 30 days, previously 45 days, initial acknowledgement of the complaint must be made within one business day, and now "minor grievances" must also be recorded in your complaints register even if they don't need to have the full complaints management process applied to them.


Pressure Selling of Insurance Add-Ons

Whilst this is not an issue for the average reader of this article, we are aware that some brokers do make some business out of selling insurances.

The answer here is pretty simple - if you get involved in insurance add-ons, STOP it now!


Anti-Hawking Reforms

This does not specifically apply to credit products.  However, what it refers to is cold-calling consumers to sell them financial products.

Even though it doesn't apply to credit products, what good mortgage broker involves themselves in actively cold-calling people to sell them a mortgage?  It's grubby.  Don't do it.


So, there you have it - "Oktoberfest" in a nutshell. 

Enquiry Form

Please contact me with more information on how QED can help my business.




Keep in contact

1300 817 662
31 Ardentallen Rd, Enoggera QLD 4051