ASIC expects AFS licensees to manage client data on third-party platforms by ensuring confidentiality, security, and compliance with privacy obligations. Licensees must assess the platform’s controls, limit data sharing to what is necessary, and retain responsibility for protecting client information, including oversight of how data is stored, accessed, and used.
Expanded Answer
ASIC expects AFS licensees to maintain adequate systems to protect client information, including when data is handled by third-party providers. This includes complying with privacy laws, ensuring data is only used for its intended purpose, and implementing controls to prevent unauthorised access, misuse, or loss. Responsibility for data protection remains with the licensee, even where services are outsourced or platform-based.
In practice, this requires conducting due diligence on third-party platforms, including reviewing their security frameworks, data storage locations, access controls, and incident response processes. Licensees should ensure that contractual arrangements clearly define data-handling responsibilities, confidentiality obligations, and breach notification requirements. Data sharing should be minimised to what is necessary for the service, and sensitive information should be protected through encryption and access controls.
Regulatory scrutiny increases when client data is exposed due to weak controls, inappropriate use of offshore providers, or unclear accountability. ASIC focuses on whether licensees understand where client data resides and how it is protected. Failures in data governance and third-party oversight are a growing enforcement risk, as outlined in a comprehensive guide to data governance in Australian financial services and cybersecurity compliance: protecting client data.
Why it matters
Poor data management exposes AFS licensees to privacy breaches, client harm, and regulatory enforcement. Regulators assess whether licensees maintain control over client information, regardless of where or how it is processed.
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Practical guidance
- Assess third-party platforms for security, privacy compliance, and data handling practices before use
- Limit client data shared to what is necessary and implement access controls and encryption
- Document data flows and maintain oversight of how client information is stored, accessed, and protected
Further reading
A comprehensive guide to data governance in Australian financial services
Cybersecurity compliance: protecting client data