On 17 November 2021, ASIC released draft updated guidance on consumer remediation for all AFS licensees, Australian credit licensees and retirement savings account providers. The draft guidance is attached to Consultation Paper 350 Consumer remediation: Further consultation (CP 350).

This article considers the key features of the draft guidance with a particular focus on significant points of departure from ASIC Regulatory Guide 256: Client review and remediation by advice licensees (RG 256), as well as some key implications and gaps – particularly for the superannuation and insurance industries.

ASIC remediation guidance to date

Currently, ASIC’s views on designing and implementing customer remediation programs are set out RG 256. RG 256 is narrow in focus, being aimed at AFS licensees who provide personal advice to retail clients. Despite this, ASIC has encouraged licensees to apply this guidance to other remediation contexts.[1] However, as we have noted previously, there are situations in which RG 256 principles do not apply or are not appropriate.

One of ASIC’s key objectives in updating the guidance in RG 256 is to ensure that “all licensees are empowered to take a consistent, efficient, honest and fair approach to remediating consumers”.[2] This is indicative of ASIC’s strong focus on the obligation to provide financial services efficiently, honestly and fairly, and its use of this wide-ranging obligation to derive remediation (and other) outcomes.

The release of CP 350 follows ASIC’s earlier consultation through Consultation Paper 335 Consumer remediation: Update to RG 256 (CP 335). ASIC received 7 confidential and 31 non-confidential responses to CP 335, including submissions from the Insurance Council of Australia, AFCA, the Consumer Action Legal Centre, the Financial Services Council, and three of the “big 4 banks” (Westpac, ANZ and NAB). ASIC also held 20 informal workshops with AFS licensees, credit licensees, professional service industry associations, the ATO and APRA. The draft guidance is said to have been directly informed by the issues raised by stakeholders during first round consultation process.[3]

Changing the game plan: Key features and departures from RG 256

A consolidated list of key remediation principles

The draft guidance sets out nine remediation principles which ASIC says licensees should take into account when conducting a remediation:[4]

  1. Return affected customers to the position they would have otherwise been in.
  2. Understand the nature, extent and impact of the misconduct or failure.
  3. Give consumers the benefit of any doubt when making assumptions, and minimise the risk of under-compensation.
  4. Ensure key decisions are documented and justified.
  5. Apply reasonable endeavours when making remediation payments.
  6. Be timely without sacrificing quality consumer outcomes.
  7. Make it easy for consumers.
  8. Do not profit from the misconduct or other failure.
  9. Ensure the remediation has adequate resourcing, governance and accountability.

Most of these principles already exist within various parts of RG 256. For example, RG 256.19 currently states that “[t]he aim of review and remediation is generally to place affected clients in the position they would have been in if the misconduct or other compliance failure had not occurred”. RG 256.27 states that “[t]he process of review and remediation should be comprehensive, timely, fair, and transparent”.

However, some concepts, such as the application of “reasonable endeavours” when making remediation payments, are new. This principle is discussed further below.

Approach to initiating remediation

RG 256 CP 335
RG 256 provides that review and remediation will be appropriate where a systemic issue has occurred that may have caused clients loss or detriment. It acknowledges that review and remediation will not be appropriate in all circumstances, including where the loss or detriment suffered is a result of a product failure rather than the licensee’s decisions, omissions or behaviour.[5] A remediation must be initiated if a licensee has engaged in misconduct or other failure when providing financial services or credit activities, and the misconduct or other failure has caused, or may have caused, consumer loss.

“Misconduct or other failure” captures breaches of law, contractual failings, negligence or fraud, failures to meet or comply with other regulatory requirements and industry codes, and system failures that result in customers being delivered outcomes that are different from what was promised and errors in pricing algorithms.[6]

Superannuation trustees are also required to consider whether the conduct causing loss is an operational risk that must be remediated.[7]

The revised guidance from ASIC is consistent with the fundamental legal premise of remediation, which is to rectify loss arising from a breach of legal duty/obligation. To carry on the theme of the efficiently, honestly and fairly obligation however, it is like that where there is no clear source of legal obligation to remediate, presumably in relation to financial services, the source could be the efficiently, honestly and fairly licence condition.

The review period

RG 256 CP 335
RG 256 provides that ASIC does not generally expect licencees to review advice given to clients more than seven years before they became aware of the misconduct or other failure. The draft guidance includes a new review period, which begins on the date a licensee reasonably suspects the failure first caused loss to a consumer.

This change is intended to address what ASIC describes as the “unfair” practice of some licensees to limit the scope of remediation to seven years even if they hold relevant records.[8] However, ASIC accepts that records may be destroyed in good faith as a result of record-keeping obligations or privacy requirements. In these circumstances, if it is not appropriate to apply assumptions to fill gaps, the review period may be limited to no longer than seven years.[9]

Beneficial assumptions

RG 256 CP 335
RG 256 does not directly address the potential for licensees to use assumptions in remediation. ASIC now recognises that the use of assumptions to determine which consumers should be included in the remediation and the amount of actual or potential loss can save time and costs and make up for gaps in records.[10]

However, the draft guidance provides that licensees should only use assumptions if they are beneficial to consumers and will:

  • result in outcomes which return consumers as closely as possible to the position they would have been in;
  • are evidence-based and well documented, and
  • are monitored to ensure they achieve those aims.[11]

Following feedback on CP 335, ASIC clarified what it means for an assumption to be “beneficial to consumers”; where there is uncertainty, assumptions should minimise the risk of consumers falling outside of scope and minimise the risk of under compensation.[12]

Calculating foregone returns or interest

RG 256 CP 335
RG 256 sets out that, in most situations, licensees should be able to determine the actual investment returns or interests a client would have received, but also allows licensees to use a fair and reasonable rate to calculate foregone interest in the event that calculating the actual rate is not reasonably practicable. The suggested “fair and reasonable rate” is the RBA cash rate plus 6%.[13] In CP 335, ASIC recognised that it is often not possible for licensees to calculate actual foregone interest. It proposed a three-step framework for calculating foregone returns or interest, which added a second step requiring licensees to consider whether beneficial assumptions could be used to determine an appropriate rate, after they had attempted to determine the actual rate, but before falling back on the default rate.[14]

However, in response to further feedback from licensees on the difficulty of calculating foregone returns across various products, ASIC has revised its approach in the draft guidance to allow licensees to choose to apply assumptions that are beneficial to consumers as a first step rather than use the actual data, if appropriate.

ASIC has also provided another example of a fair and reasonable rate that may be relevant in the context of insurance and other non-investment remediations, namely the Australian Government Bond rate plus 3%.[15]

In our experience with remediation programs across the financial services industry, particularly with respect to superannuation and insurance, it is often the case that remediation can be implemented in a more timely and cost effective manner when assumptions are made around rates of return – and so, this is often a preference and ASIC’s guidance on this issue is welcome. However, where this becomes particularly complex is in the superannuation context, where remediation amounts paid above the actual loss incurred by a member are likely to be treated as superannuation contributions. Accordingly, the appropriateness of using of assumptions (particularly beneficial assumptions) needs to be considered in all the relevant circumstances.

Making remediation payments

RG 256 CP 335
RG 256 is silent on what ASIC expects from licensees when they need to find and make payments to affected consumers, especially if a consumer has exited or closed a product or service. In CP 335, ASIC proposed a “best endeavours” standard, and said that cheques should generally be issued as a last resort.[16]

However, ASIC has revised this to a “reasonable endeavours” standard in the updated draft guidance, noting that a “best endeavours” standard may cause “uncertainty for licensees about how far they are expected to go to return remediation money”.[17] The draft guidance also provides that automatic payments to a consumer’s active account to be the priority and cheques should only be used when other avenues for automatic payment are not reasonably available in the circumstances.[18] If, despite reasonable endeavours, licensees cannot find and pay affected consumers, they should first lodge the money in an unclaimed money regime (if available) and, if not, make a “residual remediation payment” to a charity or not-for-profit organisation.[19]

ASIC is also consulting on the appropriateness of a $5 low value compensation threshold. It does not consider the $20 threshold outlined in the current RG 256 appropriate to apply across all products but notes that retaining some low value compensation threshold will provide certainty for licensees and allow for a more efficient outcome.[20] However, the draft guidance also provides that if the licensee has current payment information on file or the affected consumer is a current customer, then remediation should be paid regardless of value.[21] Details of licensees’ low value compensation thresholds will need to be included on their websites.[22]

The payment of residual amounts to a charity or not-for-profit organisation has long been a last resort practice for the industry, designed to ensure that the licensee does not obtain any windfall benefit from misconduct in circumstances where remediation payments cannot be made to customers. While this is a useful avenue for licensees, it is important to note that such a payment will not extinguish legal liability à la the customer.

Settlement deeds

RG 256 CP 335
RG 256 states that settlement deeds are an important part of the remediation process for advice licensees but that deeds should only be relevant to the conduct being remediated.[23] CP 335 shifts away from this approach, providing that licensees should generally not require settlement deeds in the context of remediation. However, it recognises that there may be limited circumstances where a licensee is required to use settlement deeds to meet their obligations or obtain PI insurance.[24]

Engaging with external organisations and complying with licensing obligations and other laws

The updated draft guidance acknowledges that licensees may need to engage with AFCA, the ATO, APRA and/or their PI insurer in relation to their remediation. For example:

  • if a consumer complains about a matter that is subject to an existing remediation or the remediation itself, the licensee’s IDR requirements will apply and if a consumer is not satisfied with the licensee’s IDR response, they will have the further right to complain to AFCA;[25]
  • licensees may need to engage with the ATO in relation to the taxation impacts on consumers when remediation payments are made;[26]
  • all APRA-regulated institutions must comply with their breach notification requirements in relation to remediation;[27] and
  • licensees must have arrangements for compensating consumers for loss suffered as a result of a breach by the licensee or its representatives of their obligations under Chapter 7 of the Corporations Act.[28]

Finally, licensees must be conscious of conducting remediation in a manner that is consistent with their general licensing and other obligations, including their obligations to provide services efficiently, honestly and fairly, to have adequate resources available to provide the services authorised by their license (which will include having adequate resources to conduct remediation), and in relation to record-keeping.[29]

Superannuation trustees and fund managers in particular are subject to general law and statutory duties which they must consider and balance when applying ASIC’s guidance on remediation, especially when dealing with trust or scheme property. For example, the draft guidance recognises that trustees and fund managers may have obligations to pursue remediation payments from third-party licensees, to “get in” trust or scheme property and ensure a member’s account is made whole.[30]

Some further (unaddressed) issues

While the draft is helpful in many ways, there are still issues that vex the industry in many cases or at least are the subject of confusion in other cases.


One such issue is the proper destination of superannuation remediation payments.

The ATO has provided useful guidance on the taxation treatment of remediation payments in superannuation, which is directly linked to who has the right of compensation in a particular scenario. However, ASIC’s guidance in CP 335 does not address the specific issues facing superannuation trustees in undertaking or facilitating remediation of superannuation fund members (either by the trustee itself or a third party), and where these remediation payments should be made.

We have been at the forefront of advising the industry that generally, remediation payments should be paid to the trustee of the relevant fund for the benefit for fund members on the basis that, typically, the trustee is the entity that has suffered the direct loss (as legal title holder). An ancillary reason is that the payment to the superannuation trustee also deals with any issues of preservation of benefits and impermissible early access to superannuation benefits by members.

There are some cases however, as an exception, where remediation of unrestricted, non-preserved amounts can be paid to the relevant member directly (outside of the superannuation fund).


In our experience, a number of areas in the insurance space should also be clarified. These include:

  • in relation to life insurance and general insurance, whether there are any circumstances in which a product issuer should be legally required to remediate for the actions of an unrelated distributor. This raises issues around the relevant financial service which is the subject of the remediation, and whether that financial service was conducted by, for or on behalf of the insurer. If the conduct forms part of the issuing of insurance, then breaches involving this activity would likely be part of a remediation ambit. However, conduct by another entity, such as in the provision of general advice in the distribution of insurance, is prima facie a separate activity, and whether such distribution is part of the financial service of issuing the relevant financial product is by no means clear;
  • in relation to life insurance, the inability of the insurer to unilaterally cancel cover has been a challenge for remediation program designs where termination and a full refund of the entire premium paid (plus interest) is the desired outcome;
  • with the recent transformation of claims handling and settling services into a financial service, we expect this will be a large area of focus – particularly given the application of the efficiently, honestly and fairly obligation to claims handling and settling services. In our view, the area of procedural fairness is one that should be considered by both life and general insurers;
  • in relation to life and general insurance, the quantification of the appropriate amount to be remediated (that is, refunded) is a challenge, particularly in circumstances where partial (or complete) cover was afforded under the policy to the relevant customer cohort. In these scenarios, it can be difficult to determine whether a customer would prefer to keep the relevant insurance cover, or have the cover cancelled and refunded. For this reason, sometimes the insurance industry has developed remediation programs based on an “opt-in” methodology – to provide customers with the choice. However, ASIC’s position on the appropriateness of such opt-in programs is unclear.

Next steps

ASIC is inviting comments on the draft guidance up until 11 February 2022. It has said that the draft is “only an indication of the approach [it] may take and is not [its] final policy”.[31]

However, the final guidance, when released, will apply immediately to remediations initiated on or after the date of issue. ASIC has decided not to provide a transition period because “[t]he guidance does not introduce any new legal requirements” but “provides licensees with greater clarity about [ASIC’s] expectations and what actions they can take to achieve fair and timely outcomes in line with their existing licensing obligations”.[32]

ASIC “understands that many licensees are already applying the principles and much of the updated guidance already” and is “encouraging licensees to consider the final guidance when conducting remediations that they began before [ASIC] issued the final guidance”.[33]

This makes it important for licensees to be across the draft guidance and suggests that ASIC expects many of the provisions to remain in the final version, despite its comments about the draft providing an indication of the proposed approach only.



[1] See RG 256.10-11.

[2] CP 335 at p. 6.

[3] CP 350 at p. 7.

[4] RG 000.40-62.

[5] RG 256.45-48.

[6] RG 000.24-26.

[7] RG 000.27.

[8] ASIC Report 707: Response to submissions on CP 335 Consumer remediation: Update to RG 256 at [35].

[9] See RG 000.69-73.

[10] RG 000.96-97.

[11] RG 000.98.

[12] RG 000.99.

[13] RG 256.130-133.

[14] CP 335 at p. 27.

[15] ASIC Report 707: Response to submissions on CP 335 Consumer remediation: Update to RG 256 at [69]-[72], [74]; RG 000.152-153, RG 000.162.

[16] CP 335 at p. 30.

[17] ASIC Report 707: Response to submissions on CP 335 Consumer remediation: Update to RG 256 at [82]; RG 000.177.

[18] RG 000.195.

[19] RG 000.59.

[20] ASIC Report 707: Response to submissions on CP 335 Consumer remediation: Update to RG 256 at [93].

[21] RG. 000.185.

[22] RG 000.189.

[23] RG 256.201.

[24] RG 000.222-226.

[25] RG 000.261-262.

[26] RG 000.266.

[27] RG 000.269.

[28] RG 000.272.

[29] See RG 000.275-330.

[30] RG 000.291-295.

[31] ASIC Report 707: Response to submissions on CP 335 Consumer remediation: Update to RG 256 at [11].

[32] ASIC Report 707: Response to submissions on CP 335 Consumer remediation: Update to RG 256 at [16].

[33] ASIC Report 707: Response to submissions on CP 335 Consumer remediation: Update to RG 256 at [16]-[17].


Michael Vrisakis
Michael Vrisakis
+61 2 9322 4411
Crystal Sanders
Crystal Sanders
Special Counsel
+61 2 9225 5146
Tamanna Islam
Tamanna Islam
Senior Associate
+61 2 9225 5160
David Kim
David Kim
Senior Associate
+61 2 9225 5407
Hartley Spring
Hartley Spring
Senior Associate
+61 2 9322 4656