FAE · ASIC Financial Adviser Exam
Lesson 1 of 3 in Conduct, breach reporting and complaints
How to decide whether something is a reportable situation, when the 30-day report to ASIC falls due, when you must report another licensee's adviser, and the separate duties to notify, investigate and pay affected clients.
Financial advice regulatory and legal obligations10 min read9 sections
Checked against: Corporations Act 2001 (Cth), compilation No. 149 (19 Sep 2026): ss769B(3), 912A(1)(a), 912A(5A), 912D, 912DAA, 912DAB, 912DAD, 912EA, 912EB, 912EC, 1100A, 1311(1), 1317E and Sch 3 (s912DAA(1)); Corporations Regulations 2001, compilation No. 214 (1 Sep 2026), reg 7.6.02A(2); ASIC Corporations and Credit (Breach Reporting—Reportable Situations) Instrument 2024/620, compilation No. 2 (12 Sep 2025): ss5, 6, 6A, 7, 9; ASIC RG 78 Breach reporting by AFS licensees and credit licensees (reissued December 2023, last updated 21 October 2026): RG 78.23, 78.38, 78.48-78.49, 78.55, 78.63, 78.73-78.74, 78.80-78.84, 78.92-78.96, 78.98-78.102, 78.105, 78.124-78.128; ASIC Financial adviser exam: Exam preparation guidance v6.0 (Sept 2026).. Independent prep, not endorsed by ASIC.
This lesson serves three of ASIC's learning outcomes in the regulatory and legal obligations area of the curriculum (Exam preparation guidance v6.0, Sept 2026):
On the reading list it draws on Part 7.6 Division 3 (obligations of financial services licensees) and RG 78, Breach reporting by AFS licensees and credit licensees. ASIC's guidance says the exam supplies relevant statutory extracts with questions, so you need to apply the sections, not recite them.
A scenario question here asks you to decide whether something is a reportable situation, when the report is due, who else must be told, and what clients who may have lost money are owed. Our practice questions drill each decision.
The duty sits with the AFS licensee but covers conduct by every representative, including authorised representatives and employees (s912D(1); RG 78.28).
| Type | What triggers it | Section |
|---|---|---|
| Significant breach of a core obligation | The licensee or a representative has breached a core obligation in a way that is significant | s912D(1)(a) |
| Likely significant breach | The licensee or a representative can no longer meet a core obligation, and the coming breach would be significant |
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Case study FAE-C11, question 2 of 5: Meridian's switching problem. Meridian Financial Pty Ltd is an AFS licensee in Brisbane with 28 employed advisers, all relevant providers, and about 4,200 retail clients. Its compliance manager, Jo Tran, runs the file audit programme. Meridian's policy promises an audit of every adviser's files each year, but the files of one adviser, Carl Webb, 41, were last audited 18 months ago. On 2 June, in a routine audit, Jo reviews Carl's files. Over the past 12 months Carl recommended that 34 clients, most of them retirees aged 62 to 78, switch their investments, averaging A$310,000 each, into a managed account platform. The files contain no comparison with the clients' existing products. Several SOAs say the switch would 'reduce fees', when total fees in fact rose from about 0.9% to 1.6% a year. On 9 June Jo concludes that there are reasonable grounds to believe Carl breached the best interests duty and made misleading statements, and that some clients have lost money they could recover from Meridian. She briefs the CEO, Graham, the same day. Graham wants to 'finish a full review of all 34 files before telling anyone outside the firm', which he expects to take about three months. Carl says his clients 'were happy at the time'. Jo's first estimate is that at least 20 of the 34 clients paid higher fees that they could recover from Meridian. Graham suggests waiting to see which clients complain. What must Meridian do for the clients who may have recoverable losses?
| s912D(1)(b) |
| Long investigation, and its outcome | An investigation into a possible significant breach runs more than 60 days; a finding of no breach is also reportable | s912D(1)(c)-(d) as modified by Instrument 2024/620 s6A |
| Additional reportable situation | Gross negligence in providing a financial service, or serious fraud, by the licensee or a representative | s912D(2) |
Core obligations include the general obligations in s912A (such as providing services efficiently, honestly and fairly) and s912B, and compliance with the financial services laws in this Act and the ASIC Act (s912D(3)).
Deemed significant. Before weighing anything, test s912D(4). A breach is taken to be significant if it is an offence punishable by at least 3 months' jail (dishonesty) or 12 months (otherwise), a civil penalty contravention not prescribed out by reg 7.6.02A(2), a contravention of s1041H(1) or ASIC Act s12DA(1), or likely to cause material loss to clients. Only if none applies do you weigh the s912D(5) factors: how often similar breaches occur, the impact on the licensee's ability to provide its services, and what the breach shows about its compliance arrangements (RG 78.32).
ASIC's relief. Instrument 2024/620 s6 removes deemed significance for two kinds of minor breach: misleading conduct affecting one client (or joint holders) with no financial loss; and a breach affecting no more than 10 clients, with total loss of A$1,000 or less, rectified (including remediation) within 60 days.
Answer: D. Notify them and begin investigating within 30 days, then give the outcome within 10 days of finishing
Answer: Notify them and begin investigating within 30 days, then give the outcome within 10 days of finishing. Sections 912EA and 912EB make remediation proactive where personal advice was given to retail clients, a significant breach is reasonably believed and recoverable loss is reasonably suspected.Why not the others:• Wait until each client complains…: waiting for complaints puts the burden on clients, which the regime is designed to avoid.• Wait to notify them until ASIC…: ASIC does not confirm breaches or approve letters first, and the 30-day clocks run regardless.• Pay each client a standard amount…: a flat payment does not replace the investigation the section requires, which must identify the conduct and quantify the loss.Rule: The licensee must take reasonable steps to notify affected clients in writing within 30 days (s912EA(2)), start investigating within 30 days, identify the conduct and quantify the loss (s912EB(2)–(3)), and tell each client the outcome within 10 days of finishing (s912EB(5)).Source: Corporations Act 2001 (Cth) ss912EA, 912EB (compilation No. 149, 19 Sep 2026)
Case study FAE-C176, question 8 of 8: Bellbird's lapsed fee consents. Bellbird Financial Pty Ltd is an AFS licensee in Hobart with 14 employed advisers and about 2,100 retail clients. Nadia Kerr is its compliance manager. Owen Pryce, 49, a relevant provider authorised by Bellbird Financial Pty Ltd, looks after 160 clients on ongoing fee arrangements with Bellbird. The fees are deducted monthly from the clients' investment platform accounts and paid to Bellbird. Early in 2026 Owen sent his clients their annual renewal consent forms but did not follow up. Forty-six clients never signed. Owen told the administration team to 'keep the fees running, they'll sign eventually', and the platform kept deducting fees after each client's renewal period ended. A typical affected couple Clients: Margaret Haines, 71, and Doug Haines, 74, retired teachers, Launceston Income: account-based pensions, about A$62,000 a year combined Assets: home A$780,000 (no debt), joint platform account A$640,000, term deposits A$45,000 Ongoing fee: A$4,400 a year, still being deducted Risk profile: moderately conservative Goal: steady income and a yearly review with Owen Timeline 14 July 2026: the platform emails Nadia an exception report headed 'Deduction consent ceased, fees continuing', listing 46 of Owen's accounts. Nadia reads the heading, realises it probably means fees are being charged without consent, and decides to leave the report until a system migration ends. 18 August 2026: Nadia reviews the report and Owen's files and concludes that there are reasonable grounds to believe Bellbird has been charging fees under arrangements that had terminated. 1 September 2026: Bellbird's board approves a report to ASIC. The minutes of the 1 September board meeting record two points about the report to ASIC. Decide whether each statement correctly completes this sentence: 'The board noted that Bellbird …' (i) may lodge the report by telephone, provided Nadia keeps a detailed file note of the call. (ii) must report even though it was Owen, not the board, who decided to keep the fees running.
Answer: C. (i) False, (ii) True
Answer: (i) False, (ii) True. The report must be lodged in writing in the prescribed form, and a representative's breach is the licensee's reportable situation.(i) False. Section 912DAA(2) requires the report to be lodged with ASIC in writing in the prescribed form, so a phone call and a file note do not meet it. Failing to report is an offence of strict liability (s912DAA(1), (4)) and a civil penalty provision (s912DAA(7)).(ii) True. A reportable situation includes a significant breach by the licensee or by a representative of the licensee (s912D(1)(a)), so who made the decision does not matter. Bellbird is also the fee recipient that charged the fees, so the s962Z breach is Bellbird's own, and Owen's instruction as its representative forms part of the same reportable situation.Rule: A licensee must report significant breaches by itself or its representatives to ASIC in writing in the prescribed form within 30 days.Source: Corporations Act 2001 (Cth) ss912D, 912DAA, 962Z (compilation No. 149, 19 Sep 2026)
Ashgrove Advice gives retail clients personal advice on superannuation, life insurance and investments. Its complaints policy covers only investment advice, and its breach procedure says reports go to ASIC 'within 10 business days'. On 1 May it finds a significant breach. To comply with the Corporations Act, Ashgrove must … (i) lodge its report with ASIC within 10 business days after 1 May. (ii) extend its IDR procedure to complaints about its superannuation and insurance advice.
Answer: C. (i) False, (ii) True
Answer: (i) False, (ii) True. Reports are due within 30 days, not 10 business days, and IDR must cover every financial service the licence covers.(i) False. Section 912DAA(3) allows 30 days after the licensee first knows that, or is reckless about whether, there are reasonable grounds to believe a reportable situation has arisen. Reporting sooner is allowed, but 10 business days was the old regime's deadline, not a current requirement.(ii) True. The IDR procedure must cover retail clients' complaints about all the financial services covered by the licence (s912A(2)(a)(ii)), so a policy limited to investment advice falls short for Ashgrove's superannuation and insurance advice.Rule: A reportable situation must be reported within 30 days, and a licensee serving retail clients needs a dispute resolution system with IDR covering all licensed services and AFCA membership (s912A(1)(g), (2)).Source: Corporations Act 2001 (Cth) ss912A, 912DAA (compilation No. 149, 19 Sep 2026)
