Home / Life Insurance / Advisers call for ‘further analysis’ of breach reporting regime
19 April 2021
Financial advisers have “serious concern” with the new breach reporting regime that will be introduced in October, warning the legislation in its present form could lead to increased operating costs that may have to be passed on to consumers.
The Government should consider deferring the commencement of the regime and undertake a “further analysis” of the potential ramifications, the Association of Financial Advisers (AFA) says in a submission to Treasury.
AFA says the new breach reporting regulations are likely to lead to an exponential increase in the number of matters that need to be reported and that many of these will be of a largely administrative nature.
“In the context of what has been rapidly rising costs for financial advisers and their licensees over recent years, we are motivated to ensure that the cost impact of this reform is not excessive,” AFA says.
“It is important to note that licensees will need to carefully review each potential breach and for licensees that lack in-house lawyers or compliance resources, they will need to seek external guidance before deciding to report a breach.
“It is this cost, along with the extra management time and oversight that will be necessary, that will have a very material impact on the cost of financial advice. Ultimately clients will end up paying for this.”
The breach reporting regime, a reform proposal made by the Hayne royal commission, requires financial services licensees and credit licensees to report serious compliance concerns about financial advisers, according to Treasury.
AFA says the industry supports the self-reporting of significant breaches but the changes that come with the new regime represent “a substantial increase in the scale and complexity” of compliance obligations that many small financial advice licensees will have difficulty understanding.
The peak body says its experience preparing the submission highlights the potential struggles facing advisers should the Government go ahead with the proposed new regime.
“This is very complex legislation and it has very deep and broad implications,” AFA says.
“We have completed the analysis below to the best of our understanding, however we acknowledge that it is quite possible that we have misunderstood key issues and the implications.
“It is, however, perhaps very relevant that if we have misunderstood key issues, then there will be many others who will either be oblivious to these issues or will equally misunderstand their application.”
Click here for more on the AFA submission.