When the Regulator Comes Knocking — Are You Ready?

In the Australian financial services industry, regulatory attention isn’t a matter of if but when.

When the regulators come knocking, trying to avoid a notice — or delivering an inadequate or poorly planned response — might lead to ongoing surveillance and action. 

ASIC and AUSTRAC are the two regulators fund managers are most likely to interact with at some point. When this happens, you must have a clear, actionable plan for handling regulator notices and requests. 

Here’s how to get started.

A Notice Isn’t Always Bad News

Regulators issue thousands of requests yearly. Receiving a notice doesn’t automatically mean misconduct. It could be for several reasons, including: 

• Part of routine monitoring. 
• General fact-finding and data collection.
• A tip-off or follow-up.
• A broader investigation.

While it’s natural to worry, remember that a notice itself isn’t necessarily cause for concern. 

Voluntary vs. Compulsory Requests: What’s the Difference?

Regulators send voluntary and compulsory requests, each requiring a different handling strategy. You'll usually receive a voluntary request via informal email or phone call. These requests have no statutory notice attached. Compulsory or statutory notices are formal. They come with a legal obligation to comply, with penalties for non-response or for misleading or false responses.

Here’s how to handle both:

Responding to a Voluntary Request

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• Take it seriously: Don’t ignore informal inquiries. Put your regulatory response plan (RRP) into action. 
• Assess the issue: Consider past and current events that may have triggered the request. 
• Get advice early: Avoid making assumptions, such as “I haven’t done anything wrong.”
• Acknowledge it fast: Requesting a formal notice to secure legal protections is often safer. While it’s tempting to maintain an informal dialogue, you often benefit from the protections and processes of a more formal notice.

Dealing With a Statutory Notice

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• Enact your RRP: If you have one, do this as soon as reasonably possible.
• Consider motives: Explore the scope and basis for the notice. The regulator will outline its reasons for contacting you in a statutory notice and will specify what statutory power they are relying on to require a response. 
• Seek legal counsel: Secure expert legal advice for managing risks, limiting exposure and maintaining privilege.
• Check timeframes: Consider negotiating timeframes or scope if they seem unreasonable. Do this early in the process rather than apply for an extension or modification late in the timeline.
• Formulate a response: Respond fully, honestly and without waiving privilege. Answer just the questions asked.

Why Planning Matters

When you receive a voluntary or compulsory request, following up with a fast, considered response helps demonstrate that you have a strong compliance framework. On the other hand, an incomplete or rushed response can trigger deeper, prolonged scrutiny by the regulator.

A solid RRP is your contingency plan that helps protect your business, people and reputation.

Start Preparing Now

Regulators will come knocking. Whether it’s voluntary or statutory, it’s inevitable. The best way to manage requests is by preparing in advance, having a clear RPP and knowing when it’s time to bring in expert support.

Planning for a thorough response today can protect your business tomorrow. If you need support developing a diligent RRP, get in touch with PMC Legal.

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