A review of recent ASIC, ACCC and Austrac enforcement actions shows that compliance breaches (and unsatisfactory consumer outcomes) usually start at the product and service level whether through inadequate design, lack of skills or experience, unlawful contracts, defective marketing, or lack of licensing authorisation.
Risk management consultants talk about the three lines of defence (or 3 lines of risk, starting at the operational level, monitored by risk specialists and culminating with internal audits) while governance consultants talk about the governance and compliance frameworks and the links between them (ending with board supervision).
But if the product or service being provided to consumers does not match the features and benefits promised in advertising or is not suitable to the target market then the product or service will eventually fail and could result in regulatory action.
It is obvious, but often ignored, that to deliver a product as advertised the organisation needs the required resources and expertise including technical support.
Failure to provide those resources is a licensing breach.
What are the assumptions behind the product?
What will happen if those assumptions are not met?
The Financial Accountability Regime contains accountability obligations that require entities in the banking, insurance and superannuation industries and their directors and senior executives to conduct their business with honesty and integrity, and with due skill, care and diligence.
The Regime’s proposed Minister’s Rules sets out 13 responsibilities and positions that cause a person to be an accountable person of an accountable entity that is an ADI, general insurer, life company, private health insurer or an RSE licensee.
All of these responsibilities are an aspect of ensuring compliant product delivery and maintenance by the organisation.
And whether appropriate action is taken in response to non-compliance, or suspected noncompliance, in relation to a matter, will be relevant to any penalty later imposed.
A significant failure could lead to substantial penalties for the organisation and the loss of part of an accountable employee’s variable remuneration.
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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
