Australia: Part II: Lessons learned from ASIC Report 515: Taking reasonable steps to ensure your representatives comply with the financial services laws.

This is the second part of a two-part blog series on the outcome and the lessons learned from ASIC's Report 515. (To read the first blog, and to read our first 3 lessons, click here.)

Lesson 4 – Consider these factors when auditing advisers:

ASIC reviewed a sample of files that had been subject to the licensee's "business as usual" audit. ASIC observed a wide variety of adviser audit processes – sometimes even between licensees within the same institution. Overall, ASIC's review showed that there were deficiencies in the effectiveness of the licensee's audit processes. ASIC found that the audit process was effective in only 18% of files reviewed – that is, the findings by the licensees' auditors aligned with ASIC's own file review.

ASIC observed that the auditor often failed to identify advisers who had not (a) demonstrated compliance with the best interests duty or satisfied the safe harbour steps (b) provided advice that was appropriate for the customer; and (c) prioritised the customer's interests over those of the adviser or related parties.1

ASIC also observed that auditors commonly assessed advisers as demonstrating compliance with the best interests' duty and related obligations, despite the customer file containing incomplete documentation.2

What you can do:

Review Appendix 3 of the Report which contains a checklist which sets out the factors for advice licensees and compliance consultants to consider when auditing advisers to determine whether they have demonstrated compliance with the best interests' duty and related obligations when providing personal advice.

Lesson 5 – Report breaches in a timely manner:

ASIC directed that each institution identify the advisers about whom they had compliance concerns. As part of the project, the institutions notified ASIC of 149 advisers. However, out of this number, 73 advisers had not been the subject of a breach report or other notification to ASIC. Where breach reports were provided, they were often late.

Not every instance of adviser non-compliance will trigger the need to lodge a breach report with ASIC. However, when adviser non-compliance is identified, and results in a significant breach or likely breach of the licensee's obligations, it must be reported to ASIC in a timely manner.3 ASIC is concerned that any delay may affect the breach report to ASIC and increase the risk of customer loss or detriment.

What you can do:

Establish a healthy breach reporting environment. In a healthy compliance culture, you'll find lots of breaches that have been identified and handled properly. If you identify a breach and that breach is 'significant' according to the test in s912D of the Corporations Act, you need to report it to ASIC as soon as practicable, and no later than 10 business days, after the licensee becomes aware of the breach, or likely breach.

Also keep in mind that ASIC's Enforcement Review Task Force is currently reviewing breach reporting requirements generally, with a view to appropriate regulatory reform being considered.

Lesson 6 – Communicate clearly about remediation:

ASIC engaged with each of the institutions to oversee the development and implementation of a customer review and remediation framework consistent with the principles in RG 256 Client review and remediation conducted by advice licensees. Since July 2015, ASIC held regular meetings with each of the institutions to oversee the development and implementation of their review and remediation framework and provide feedback. During this phase of the project ASIC consistently found that there was room for improvement in the quality of the communications with customers. Common areas in which ASIC required improvement included being clear about the purpose of the communication and setting out clearly the steps the customer can take to assist the progress of their remediation assessment.

What you can do:

Consider developing a customer information brochure to be sent with the initial customer communication. ASIC has been encouraging each of the reviewed institution to develop this as part of their finalised customer communication documents.

Lesson 7 – Culture is key:

Finally, ASIC is concerned about culture because it is a key driver of conduct within the AFS licensees it regulates. It is an issue that ASIC has highlighted for the financial services industry in general, and not just for large banking and financial services institutions.4 Where there are systemic failures in an organisation, the culture of that organisation is very likely to have been a contributing factor. This is because ASIC sees culture as a driver of conduct.

All of the institutions reviewed publicly stated that their core values included being customer focused, 'doing what is right' for customers, and acting with integrity.5 ASIC however found that despite these stated values, cultural factors in the institutions contributed to the failures it observed.

ASIC recognises that there is no single measure or action that will raise standards and improve culture across the financial advice industry. Rather, it is the combination of broad industry reforms as well as the work within advice firms that will improve consumer trust and confidence.6

What you can do:

A key starting point for a good compliance culture is developing your firm's values, and ensuring that these are implemented in practice. Decisions about an organisation's values begin at the top. Leaders need to ensure that firm values are understood throughout the organisation, and are "lived" by employees as part of their day to day roles.7

Next steps:

It is likely that ASIC will in future refer back to this Report when engaging with licensed advisers, with a view to identifying the extent to which advisers have taken on board the key messages ASIC has sought to deliver. So make sure that you are prepared by reading the Report and using the checklists and guidance to develop and improve your processes.


1 Para 272, Report 515.

2 Para 273, Report 515.

3 Para 166, Report 515.

4 Para 64, Report 515.

5 Para 68, Report 515.

6 Para 71, Report 515.

7 Corporate culture, corporate values and ethics, an edited version of ASIC Chairman, Greg Medcraft's speech at the launch of the Inaugural Governance Institute Ethics Index.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Laura Sullivan
Grant Holley
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.