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ASIC outlines record-keeping obligations for BID compliance

by Charbel Kadib6 minute read

The corporate regulator has outlined the documentation it expects mortgage brokers to store as means to demonstrate their compliance with the best interests duty.

Last week, the Australian Securities and Investments Commission (ASIC) published its draft regulatory guide on best interests duty obligations imposed on mortgage brokers under the Financial Sector Reform (Hayne Royal Commission Response – Protecting Consumers [2019 Measures]) Bill 2019).

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ASIC’s Consultation Paper 327 Implementing the Royal Commission recommendations: Mortgage brokers and the best interests duty (CP 327) – which is open for consultation over a four-week period – contains “high-level, principles-based” guidance around the steps a broker should take to ensure compliance with the best interests duty.

The steps are structured around the gathering of information, the consideration of product options, the presentation of the options to the consumer, and the final recommendation.


ASIC also outlined its expectations regarding a mortgage broker’s record-keeping obligations, which it said would ensure that brokers can demonstrate compliance with the best interests duty.

“As a mortgage broker, we expect you to keep records of how you have acted when providing credit assistance,” ASIC noted.

“This includes records of inquiries you make into the consumer’s circumstances, and the consideration, investigation and assessment of the products you recommend.”

Specifically, ASIC has recommended that brokers keep records of the following:

  • a copy of the responsible lending assessment, which may be provided to the consumer, or the documents and information that would be used to prepare the assessment if it is requested;
  • a copy of the credit guide that was provided to the consumer;
  • information provided to the credit provider as part of the application process;
  • outcomes of credit applications;
  • relevant conversations with the consumer;
  • information showing that a broker acted in the best interests of the consumer (including records of efforts made to educate the consumer);
  • the options and ultimate recommendation you gave and the reasons why (including a detailed description of your decision-making process); and
  • any potential conflict of interest that brokers have identified, and the actions brokers have taken to prioritise the interests of the consumer over the broker’s own interests or those of a related party.

ASIC acknowledged that the types of records a broker keeps may vary depending on the recommendations and assistance provided to a borrower.

The regulator added that records “may take various forms, and do not have to be paper-based”, and may include informal documentation such as file notes and records of conversations with clients.

ASIC also noted that its expectations for how long records should be kept may depend on factors such as the loan term, interest-only period and whether the consumer has refinanced.

“You should use your judgement to consider the nature of the credit product and determine whether documents should be kept for a longer period,” ASIC added.

“It is necessary for you to keep records that clearly show that you have complied with the best interests obligations.

“Good records will help you to demonstrate that you have complied with these obligations.”

Speaking to The Adviser, Mortgage Choice CEO Susan Mitchell stressed that the absence of documentation may be deemed a breach of compliance obligations, irrespective of whether the broker had acted in their client’s best interests – as evidenced by developments in the financial planning space.    

“I think most brokers already do the right thing and act in [a customer’s] best interests, but it’s really important for the documentation to be there so that on a future date, you can go back and prove the process that you went through with your customer and that you did act in their best interests,” she said.

“That’s where a lot of the remediation is coming from in the [financial] planning world, which is, they may have acted correctly for their customer, but there’s no documentation on what happened. 

“A lot of the time in regulatory land, if you can’t document, the assumption is that it didn’t happen.” 

Ms Mitchell concluded by noting that aggregators would also need to provide solutions to guide brokers through the compliance process.

ASIC is seeking public comment on the draft guidance by 20 March 2020 and intends to publish final guidance before the obligations commence on 1 July 2020.

[Related: ASIC releases draft BID guidance]

ASIC outlines record-keeping obligations for BID compliance
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Charbel Kadib

Charbel Kadib


Charbel Kadib is the news editor on The Adviser and Mortgage Business.


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