ASIC has set out its supervisory priorities for the year ahead, and one line in the banking list is a review of lender conduct: incentives, referrer arrangements and lender oversight of brokers. It comes while the industry is dealing with the fallout of suspected large-scale mortgage fraud, which is the backdrop to much of what the regulator is looking at.

Two things about that review are worth being clear on before anyone reads too much into it.

First, it is pointed at lenders. "Lender oversight of brokers" is about how a bank monitors the brokers and introducers who send it loans, not about how you supervise your own brokers under your licence. Those are different things. I am not going to weigh in on lender conduct or the fraud matters, because that is not my lane and it is not my place, and the MFAA is right that this is not a story that can be pinned on any one channel.

Second, and this is the part worth your attention: broker oversight is now under the lens from a second direction, and that one does land on licensees.

The review that is actually about you

ASIC's review of the best interests duty is due to report before the end of the year. It is easy to assume it is only about broker files, but that is not what ASIC has been saying. The regulator has been clear that it is also looking at the licensee's own frameworks, and whether they actually hold up. ASIC has said it wants the frameworks that aggregators and licensees rely on to be applied consistently and able to be tested, so a licensee can show the obligations are being met, and it has said principals should use data and monitoring to pick up compliance issues rather than assume they are not there.

That is a supervision question, and it is squarely the principal's to answer.

What ASIC says good looks like

ASIC has been unusually plain about the difference between good and concerning practice. Good means a recommendation tailored to the individual client, with the reasons for it on the file. Concerning means the opposite: reasoning so generic it could sit on any client's file, or a broker who simply processes what the customer asked for when a better option was there. On the generic point it has been blunt, saying that where the reasons for a recommendation are "boilerplate factors that could apply to anyone", it is hard to show the recommendation was in that client's best interests.

For a principal, the obligation is not only that your brokers do the work well. It is that you can show you are overseeing it. Under section 47 of the National Credit Act you have to take reasonable steps to ensure your representatives comply with the credit legislation, whether they are employees or credit representatives. Having a framework is half the job. The other half is being able to demonstrate it works.

Why demonstrable supervision matters

There is a number worth sitting with. Across the reportable situations regime, in its most recent figures, ASIC found that 28% of the breaches that caused customers a loss were identified from customer complaints. More than a quarter of the damage surfaced because a customer put their hand up, not because the licensee's own monitoring caught it. Credit was the single largest category of reports in that data.

If you are relying on complaints to find your problems, you are finding them too late, after a client has already been affected. The whole point of supervision is to be the one who finds the issue first, through your own processes, while there is still time to put it right.

Where a file audit fits

This is what an independent hindsight file audit is for. Someone independent reads the files, cold and after settlement, documents what they find and hands it back. It does not fix anything and it does not certify you as compliant: we identify, you remediate, you verify. What it gives a principal is the thing ASIC is asking about: evidence that the files have been read, not an assumption that they have.

Findings are normal; every working audit produces them. What matters, when oversight is the question, is that your supervision is something you can show, not something you are hoping is there.