Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (135 of 2020)
Schedule 11 Breach reporting and remediation
Corporations Act 2001
5 Section 912D
Repeal the section, substitute:
912D What are reportable situations ?
(1) There is a reportable situation in relation to a financial services licensee if one of the following paragraphs is satisfied:
(a) the financial services licensee or a representative of the financial services licensee has breached a core obligation and the breach is significant;
(b) the financial services licensee or a representative of the financial services licenseeis no longer able to comply with a core obligation and the breach, if it occurs, will be significant;
(c) the financial services licensee or a representative of the financial services licenseeconducts an investigation into whether there is a reportable situation of the kind mentioned in paragraph (a) or (b) and the investigation continues for more than 30 days;
(d) an investigation described in paragraph (c) discloses that there is no reportable situation of the kind mentioned in paragraph (a) or (b).
(2) There is also a reportable situation in relation to a financial services licensee if:
(a) in the course of providing a financial service, the financial services licensee or a representative of the financial services licensee has engaged in conduct constituting gross negligence; or
(b) the financial services licensee or a representative of the financial services licensee has committed serious fraud; or
(c) any other circumstances prescribed by the regulations for the purposes of this paragraph exist.
(3) Each of the following is a core obligation :
(a) an obligation under section 912A or 912B, other than the obligation under paragraph 912A(1)(c);
(b) the obligation under paragraph 912A(1)(c), so far as it relates to provisions of this Act or the ASIC Act referred to in paragraphs (a), (b), (ba) and (c) of the definition of financial services law in section 761A;
(c) in relation to financial services, other than traditional trustee company services provided by a licensed trustee company - the obligation under paragraph 912A(1)(c), so far as it relates to Commonwealth legislation that is covered by paragraph (d) of that definition and that is specified in regulations made for the purposes of this paragraph;
(d) in relation to traditional trustee company services provided by a licensed trustee company - the obligation under paragraph 912A(1)(c), so far as it relates to Commonwealth, State or Territory legislation, or a rule of common law or equity, that is covered by paragraph (d) or (e) of that definition.
(4) For the purposes of this section, a breach of a core obligation is taken to be significant if:
(a) the breach is constituted by the commission of an offence under any law and the commission of the offence is punishable on conviction by a penalty that may include imprisonment for a maximum period of:
(i) if the offence involves dishonesty - 3 months or more; or
(ii) in any other case - 12 months or more; or
(b) the breach is constituted by the contravention of a civil penalty provision under any law, other than a civil penalty provision prescribed by the regulations for the purposes of this paragraph; or
(c) the breach is constituted by a contravention of subsection 1041H(1) of this Act or subsection 12DA(1) of the ASIC Act (misleading or deceptive conduct in relation to a financial product or a financial service); or
(d) the breach results, or is likely to result, in material loss or damage to:
(i) in the case of a managed investment scheme - a member or members of the scheme; or
(ii) in the case of a superannuation entity - a member or members of the entity; or
(iii) in all cases - a person or persons to whom the financial services licensee or a representative of the financial services licenseeprovides a financial product or a financial service as a wholesale or retail client; or
(e) any other circumstances prescribed by the regulations for the purposes of this paragraph exist.
(5) Otherwise, for the purposes of this section, a breach of a core obligation is significant having regard to the following:
(a) the number or frequency of similar breaches;
(b) the impact of the breach on the financial services licensee's ability to provide financial services covered by the licence;
(c) the extent to which the breach indicates that the financial services licensee's arrangements to ensure compliance with those obligations are inadequate;
(d) any other matters prescribed by regulations made for the purposes of this paragraph.
912DAA Obligation to lodge a report - reportable situations in relation to the financial services licensee
Reporting a reportable situation to ASIC
(1) If there are reasonable grounds to believe that a reportable situation has arisen in relation to a financial services licensee:
(a) the financial services licensee must lodge a report in relation to the reportable situation with ASIC; and
(b) the report must be lodged in accordance with this section.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
Report must be in the prescribed form
(2) The report must be lodged with ASIC in writing in the prescribed form.
Period within which report must be lodged
(3) The report must be lodged with ASIC within 30 days after the financial services licensee first knows that, or is reckless with respect to whether, there are reasonable grounds to believe the reportable situation has arisen.
Strict liability applies in relation to paragraphs (1)(a) and (b)
(4) Strict liability applies in relation to paragraphs (1)(a) and (b).
If report is received by APRA
(5) A report that a financial services licensee is required to lodge under this section in relation to a reportable situation is taken to have been lodged with ASIC if:
(a) the licensee is a body regulated by APRA; and
(b) the licensee has given a report to APRA that contains all of the information that is required in a report under this section in relation to the reportable situation.
(6) Subsection (1) does not apply to a financial services licensee in relation to a reportable situation if:
(a) the licensee is a body regulated by APRA; and
(b) the auditor or actuary of the licensee gives APRA a written report about a matter to which the reportable situation relates; and
(c) the report is given before, or within 10 business days after, the licensee first knows that, or is reckless with respect to whether, there are reasonable grounds to believe that the reportable situation has arisen.
Civil penalty provision
(7) A person contravenes this subsection if the person contravenes subsection (1).
Note: This subsection is a civil penalty provision (see section 1317E).
912DAB Obligation to lodge a report - reportable situations in relation to other financial services licensees
Reporting a reportable situation to ASIC
(1) A financial services licensee (the reporting licensee ) must lodge a report with ASIC in accordance with this section if there are reasonable grounds to believe that:
(a) a reportable situation has arisen in relation to another financial services licensee of the kind mentioned in:
(i) paragraph 912D(1)(a) or (b) (significant breach or likely breach of a core obligation); or
(ii) subsection 912D(2) (gross negligence or serious fraud); and
(b) one of the following is an individual who has engaged in conduct that forms part of the reportable situation:
(i) the other financial services licensee;
(ii) an employee of the other financial services licensee or of a related body corporate of the other financial services licensee, acting within the scope of the employee's employment;
(iii) a director of the other financial services licensee or of a related body corporate of the other financial services licensee, acting within the scope of the director's duties as director;
(iv) another representative of the other financial services licensee acting within the scope of the representative's authority given by the licensee; and
(c) the individual provides personal advice to retail clients in relation to relevant financial products.
Report must be in the prescribed form
(2) The report must be lodged with ASIC in writing in the prescribed form.
Period within which report must be lodged
(3) The report must be lodged with ASIC within 30 days after the reporting licensee first knows of, or is reckless with respect to, the circumstances mentioned in paragraphs (1)(a), (b) and (c).
If the reportable situation already reported to ASIC
(4) Subsection (1) does not apply in relation to a reportable situation if there are reasonable grounds to believe that ASIC is aware of:
(a) the existence of the reportable situation; and
(b) all of the information that is required in a report under this section in relation to the reportable situation.
A copy of the report must be given to the other financial services licensee
(5) The reporting licensee must give a copy of any report that the reporting licensee is required to lodge with ASIC under subsection (1) to the other financial services licensee within 30 days after the reporting licensee first knows of, or is reckless with respect to, the circumstances mentioned in paragraphs (1)(a), (b) and (c).
(6) A financial services licensee has qualified privilege in relation to a copy of a report given under subsection (5).
(7) A financial services licensee who has qualified privilege under subsection (6) in respect of conduct is also not liable for any action based on breach of confidence in relation to that conduct.
Civil penalty provision
(8) A person contravenes this subsection if the person contravenes subsection (1) or (5).
Note: This subsection is a civil penalty provision (see section 1317E).
912DAC Obligation to give notice - participants in licensed market or licensed CS facility
(1) If a financial services licensee becomes a participant in a licensed market or a licensed CS facility, or ceases to be such a participant:
(a) the financial services licensee must lodge written notice of that fact with ASIC; and
(b) the notice must be lodged in accordance with this section.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(2) The notice must say when the event happened and identify the market or facility.
(3) The notice must be given as soon as practicable after the event happened.
(4) A person contravenes this subsection if the person contravenes subsection (1).
Note: This subsection is a civil penalty provision (see section 1317E).
912DAD ASIC must publish details of certain reports
(1) ASIC must, for each financial year, publish information about:
(a) reports lodged with ASIC during the financial year under section 912DAA in relation to reportable situations of the kind mentioned in paragraphs 912D(1)(a) and (b) (breaches and likely breaches of core obligations); and
(b) reports lodged with APRA during the financial year, as described in subsections 912DAA(5) and (6), in relation to reportable situations of the kind mentioned in paragraphs 912D(1)(a) and (b) (breaches and likely breaches of core obligations); and
(c) the entities in relation to which those reports are lodged with ASIC or APRA.
(2) The information must:
(a) be published within 4 months after the end of the financial year; and
(b) be published on ASIC's website; and
(c) include the information (if any) prescribed by the regulations, which may include personal information (within the meaning of the Privacy Act 1988) in relation to a financial services licensee who is an individual; and
(d) if the regulations prescribe how the information is to be organised - be organised in accordance with the regulations.
(3) The regulations may prescribe circumstances in which information need not be included in the information published by ASIC under this section.
(4) ASIC may correct any error in, or omission from, information published under this section.