ASIC Regulatory Guide 267: ‘Oversight of the Australian Financial Complaints Authority’ (RG 267) came into effect on 1 November 2018. Prior to this, the ASIC approved External Dispute Resolution (EDR) schemes had obligations under ASIC Regulatory Guide 139 ‘Approval and oversight of external dispute resolution schemes’ to, identify, refer and report systemic issues and instances of serious misconduct.
Under RG 267 AFCA is required to identify, refer and report systemic issues, serious contraventions and other reportable breaches.
A systemic issue is one which has been raised in a complaint or several complaints, or is identified by information obtained by or provided to us, which is likely to affect a class of persons beyond any person who lodged a complaint or raised a concern.
Several complaints of the same type or a single complaint may raise a systemic issue, provided that the effect of the issue may clearly extend beyond a single complainant.
AFCA’s role in systemic issues
We identify systemic issues that have implications beyond the immediate actions and rights of the parties to a complaint. Where we do so, we assess and refer the issues to the relevant financial firm for an initial response. Upon review of the response and where we consider the issue/s to be systemic we must report the systemic issue/ to ASIC, APRA, the ATO or other appropriate body, in accordance with our Rules and our obligations under the Corporations Act 2001 and ASIC Regulatory Guide 267.
We are not a regulator of the financial services industry. Any regulatory action that arises from a systemic issue is appropriately addressed by the relevant regulator.
Our approach will be to work collaboratively with financial firms to resolve any issues. This includes financial firms implementing controls to avoid recurrence of the issue where appropriate.
The AFCA Rules and guidelines to the Rules explain how we comply with our systemic issues obligations.
Our process for dealing with a systemic issue
If we consider a complaint raises a possible systemic issue for the financial firm involved, we will write to them:
- detailing the possible systemic issue raised by the complaint,
- seeking further information, and
- requesting that the financial firm respond to the issues raised.
When we receive the financial firm’s response, we will consider the information provided and decide whether the issue is definitely systemic in nature.
An AFCA decision maker is generally involved in making this decision.
Where we determine an issue is definitely systemic in nature, we work with the financial firm to ensure all parties impacted are identified and appropriately compensated for any financial loss, and appropriate action is taken to prevent the problem from recurring.
If a regulator is also overseeing the remediation of the systemic issue, we will liaise with the regulator to facilitate a coordinated approach.
We will also operate as an avenue of redress for affected customers or fund members, who remain dissatisfied with the outcome of their issue handled under a financial firm’s remediation program.
Serious contraventions and other reportable breaches
RG 267 defines a serious contravention as:
“A serious contravention of any law (relevant to the circumstances of a complaint under the AFCA scheme) which may have occurred.
A contravention will be considered serious if:
- There are sufficient facts or information to found an objectively reasonable belief that it is serious; or
- AFCA in good faith forms that a serious contravention of the law may have occurred.”
RG 267 defines other reportable breaches as:
- A contravention of the governing rules of a regulated superannuation fund or an approved deposit fund may have occurred;
- A breach of the terms and conditions relating to an annuity policy, a life policy or an RSA may have occurred.
- A party to a complaint may have refused or failed to give effect to a determination made by AFCA;
- If the parties to a complaint made under the AFCA scheme agree to settlement of the complaint and AFCA thinks the settlement may require investigation.
Our process for dealing with a serious contravention or other reportable breach
Our process for dealing with serious contraventions and other reportable breaches is the same as the way we deal with systemic issues. The only difference is that these issues have a lower threshold of reporting requirement to the appropriate regulator.
We are obliged to report identified systemic issues to regulatory and other bodies within 15 days of deeming the matter definitely systemic. The primary purpose of this reporting requirement is to enable and assist the regulator or other appropriate body to consider whether regulatory or other action is required.
Serious contraventions or other reportable breaches must be reported to the appropriate regulator within 15 days of identifying there may be an issue.
Financial firms are identified in the reporting to the appropriate regulator. AFCA will contact the financial firms in almost all instances prior to notifying the appropriate regulator.
AFCA also has periodical reporting requirements to regulators.