ASIC does not prescribe the format or content of board compliance reports for AFS licensees. However, boards should receive reporting that enables them to oversee compliance risks, assess the effectiveness of governance and make informed decisions. Effective reporting focuses on risk, trends, controls and accountability rather than simply listing compliance activities.
Expanded Answer
ASIC expects AFS licensees to maintain governance arrangements that support compliance with their licence obligations. Board reporting is a key mechanism through which directors oversee the effectiveness of the compliance framework and challenge management where necessary. Reports should provide sufficient information to enable directors to understand the organisation’s compliance risks, determine whether controls are operating effectively and monitor whether identified issues are being resolved.
Effective board reporting goes beyond counting breaches or completed compliance tasks. It should explain the organisation’s highest compliance risks, emerging regulatory developments, compliance monitoring results, advice quality trends, complaints, breach investigations, remediation progress, control effectiveness and resource adequacy. Reporting should also identify significant changes to the risk profile, explain the root causes of recurring issues and outline management’s proposed actions.
Key elements:
- Report the most significant compliance risks and emerging trends.
- Explain whether key controls are operating effectively.
- Summarise breaches, complaints, remediation and outstanding actions.
- Highlight recurring issues, root causes and management responses.
- Provide directors with sufficient evidence to challenge and oversee management.
Board reporting is most effective when it supports informed discussion and documented decision-making. Reports that focus only on activity metrics or compliance summaries may not provide directors with enough information to exercise effective oversight or identify emerging governance risks. For further guidance, see Who is accountable for AFSL compliance?.
Why it matters
Effective board reporting enables directors to identify emerging compliance risks, oversee management’s response and demonstrate active governance. Clear, evidence-based reporting also helps an AFS licensee show that compliance oversight is embedded in its governance framework rather than treated as a periodic reporting exercise.
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Practical guidance
- Present compliance reports that explain risks, trends, control effectiveness and management actions rather than reporting activities alone.
- Include evidence supporting significant compliance issues and the progress of remediation activities.
- Review board reporting regularly to ensure it reflects changes in the business, regulatory environment and risk profile.
Further reading
Who is accountable for AFSL compliance?
What does a defensible compliance framework look like for AFSL and credit licensees?
From samples to signals: a smarter approach to AFSL surveillance