In this Funds Update for 3 November 2023:

  1. ASIC releases more insights re reportable situations regime
  2. HSF article on DDO developments

ASIC releases more insights re reportable situations regime

On 31 October 2023, ASIC released its second publication (REP 775) on information lodged under the reportable situations regime.

ASIC has concluded that REP 775 shows that little improvement has been made in key areas of concern for ASIC since the release of REP 740 on insights from the regime last year, which we reported on in our funds update of 4 November 2022.

The key findings of REP 775 include:

  • the proportion of the licensee population lodging reports remains low, which ASIC considers indicates that some licensees may not be complying with the regime. Since the commencement of the revised regime in October 2021, 11% of the licensee population has lodged a report;
  • many licensees are taking a long time to identify and investigate certain breaches. In 17% of the reports received, the licensee took more than one year to identify and commence an investigation;
  • a significant number of remediation activities took a long time to complete. In 247 reports (8% of the total reports involving compensation to customers), licensees indicated that they had taken, or estimated to take, more than one year to finalise compensation; and
  • ASIC considers that there remain opportunities to improve the identification and reporting of root causes of breaches. As the most commonly identified root cause of breaches (66%) was staff negligence or error, ASIC is concerned that licensees are not identifying the underlying root causes for breaches, eg determining the underlying reasons for repeated staff negligence or error.

HSF article on DDO developments

HSF has published an article, available here, in relation to expected developments in relation to the design and distribution obligations (DDO) regime in light of the indications that ASIC has shifted its focus from target market determination scrutiny to broader product and distribution governance under the DDO regime.

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.