Hayne implementation: ASIC to adopt a 'reasonable approach' to implementation of upcoming reforms

2 minute read  18.08.2021 Kate Hilder, Siobhan Doherty, Mark Standen

The Australian Securities and Investments Commission (ASIC) has provided a brief update on its approach to compliance with six significant Hayne reforms due to commence in October 

Six reforms due to commence in October

Six significant Hayne related reforms – 1) design and distribution obligations (DDO); 2) restrictions on the unsolicited selling of financial products (hawking); 3) a deferred sales model for add-on insurance products; 4) new reference checking and information sharing requirements for financial advisers and brokers; 5) new requirements around how breaches are reported to ASIC; and 6) new requirements around how disputes are managed internally - are due to come into effect in October 2021. 

In light of this, the Australian Securities and Investments Commission (ASIC) has issued a short statement briefly outlining the reforms, and its approach to compliance during the early stages of implementation. 

ASIC to take a 'reasonable approach'

ASIC makes clear that it does not intend to take a hard line approach, provided that firms are 'acting in good faith' to implement the changes.  ASIC states: 

'we recognise there will be a period of transition as industry finalises implementation of additional compliance measures, and ASIC will take a reasonable approach in the early stages of these reforms provided industry participants are using their best efforts to comply...ASIC’s initial approach extends to technical or inadvertent breaches, where firms have systems changes underway and act quickly to address problems as they arise…We want to ensure the reforms are successfully implemented – and that means we will continue to work with industry, and build on the efforts by industry associations and individual licensees in preparing for these reforms.' 

Having said this, the statement also underlines ASIC's willingness enforce compliance where it is judged necessary to do so.  ASIC states:

'where firms are not acting in good faith or where we detect conduct causing actual harm, we will not hesitate to enforce the law'.  

In adopting this approach, ASIC states that it will take into account the context in which firms are operating including: the scale of reforms, 'challenges arising from the current operating environment' and the fact that industry will not receive the final guidance on two measures (including breach reporting measures) until relatively close to the start date.

Welcome news for the advice sector

In a statement, the Stockbrokers and Financial Advisers Association (SAFAA) welcomed ASIC's announcement, especially in light of the scale of the changes and the ongoing challenges facing SAFAA members in the current operating environment. 

SAFAA CEO Judith Fox commented: 

'SAFAA has been warning government and ASIC about the impact of this regulatory blizzard for some time.  We are particularly pleased that ASIC acknowledges the regulatory reforms require significant change to business systems and processes and take effect at the same time industry is facing other challenges including those resulting from COVID-19 and renewed lockdowns…Our member firms have had to implement significant system changes to accommodate these reforms, which in turn have raised questions of resource constraints.   Firms have limits to their capacity to expand their technology teams, both financial and human resource-related….Our members are doing all they can to prepare for these changes but the impact of lockdowns on their capacity to meet these legislative deadlines is weighing heavily on them'.  

[Sources: ASIC media release 12/08/2021; SAFAA media release 12/08/2021]

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