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Self-reporting and the ostrich

At a recent Parliamentary Joint Committee, ASIC signalled that it intends to focus on licensees who are not reporting breaches of licence conditions, sending a clear message to self-report if there is any doubt of compliance with licence conditions.

Insights Self-reporting and the ostrich
Friday, 22 March 2013

In this post, I add my insights into this complicated issue of engaging with regulators, taken from my experience as a Senior Consultant at KordaMentha Forensic and a former Senior Executive Leader of Deterrence at ASIC.

Self-reporting to a regulator can be difficult. There are a number of subjective and complex considerations in determining whether an issue requires reporting, including whether:

  • the conduct or omission amounts to a significant breach or likely breach

  • the services are being provided efficiently, honestly and fairly

  • there are adequate resources to provide the services and carry out proper supervision of representatives to ensure compliance

  • the conditions of the licence are being met, including compliance with the Corporations Act.

There are potential serious consequences for failing to self-report, including criminal sanctions for licensees.

Our experience is that it’s better to adopt a pro-active approach by getting to the bottom of the problem. Sometimes this may require you to conduct an investigation. 

If your internal investigation concludes there was a breach, self-reporting to the regulator will place you in a better position to engage with the regulator and mitigate any adverse outcomes. 

Internationally, self-reporting strategies have been successful in dealing with regulators. Last year we wrote an article on Morgan Stanley receiving a declination after self-reporting violations of the US Foreign Corrupt Practices Act. You can read more about this here.

Companies who adopt the ‘ostrich approach’ by putting their head in the sand and hoping the problem goes away run the risk of serious repercussions, particularly if a regulator gets wind of the problem and commences an investigation itself. 

No two situations are the same. Engagement with regulators is complex and has the potential to de-rail. It is important to engage timely expert advice to assist in negotiating the regulatory maze.

Click here to read our article on strategically engaging with Financial Regulators.