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In this edition, we discuss the 2023-24 Annual Report of the Australian Securities and Investments Commission (ASIC), ASIC’s Federal Court action alleging that QBE Insurance (Australia) Limited (QBE) misled customers in relation to pricing discounts, and various announcements by the Takeovers Panel in relation to the affairs of Montu Group Pty Ltd (Montu), Tissue Repair Ltd (ASX: TRP) (TRP), and Namoi Cotton Limited (ASX: NAM) (NAM).
In this week’s Over the Horizon , we discuss the opening statement delivered by ASIC Chair Mr Joe Longo to the Senate House of Representatives Standing Committee on Economics.
Regulation
ASIC releases 2023-24 Annual Report. On 22 October 2024, ASIC released its annual report for 2023-24 . The report outlines ASIC’s key regulatory and enforcement activities during the financial year, which were focused on protecting consumers, reducing costs for businesses, and strengthening ASIC’s capabilities. ASIC reported a 25% increase in the number of formal investigations commenced (compared to the previous year), as well as a 23% increase in the number of civil proceedings commenced in the Federal Court. Notably, only $90.8 million in civil penalties were ordered by the courts compared to the previous year’s $190 million. ASIC also achieved several regulatory ‘firsts’, including the first court-imposed penalty for greenwashing, the first stop order on a life insurance product and the first infringement notice issued to a market operator, the ASX. ASIC Chair Mr Joe Longo stated that this year “ASIC had a dedicated focus on growth and transformation” and, looking ahead, ASIC aims to strengthen its surveillance, supervision and enforcement capabilities, to meet challenges and opportunities such as “increased market volatility, advances in artificial intelligence, data and cyber risks, and the flow of capital from public to private markets” .
Legal
ASIC alleges QBE misled customers over pricing discounts
On 23 October 2024, ASIC announced it had commenced court proceedings in the Federal Court alleging that QBE misled customers about the value of discounts offered on certain general insurance products. Between July 2017 and September 2022, QBE made statements and sent renewal notices to commercial and private customers promising discounts on premiums for a range of general insurance products. ASIC has alleged that these statements were false or misleading representations regarding the value, benefit, price and existence or effect of rights under the products. The pricing mechanisms meant that the final price of a customer’s insurance premium may not have included the full value of a discount promised by QBE. According to ASIC Deputy Chair, Ms Sarah Court, “QBE’s pricing model potentially eroded the discounts received by over half a million customers, in some cases to nil” . ASIC is seeking civil penalties, declarations and adverse publicity orders.
Takeovers Panel makes a declaration of unacceptable circumstances in relation to the affairs of Montu Group Pty Ltd
On 24 October 2024, the Panel announced that it had made a declaration of unacceptable circumstances in relation to the affairs of Montu, having regard to (among other things) the effect of the circumstances on the control, or potential control, of Montu. As discussed in a previous edition of Boardroom Brief , the Panel had received an application from two shareholders in relation to a selective buy-back of shares in Montu, which raised concerns related to disclosure deficiencies and the potential for Montu’s largest shareholder, MG Invest Limited (MG Invest), to increase its shareholding in Montu above 90%. In response to such concerns, Montu provided supplementary disclosure and adjourned the meeting. However, the Panel considered that Montu did not provide sufficient information to allow shareholders to properly assess the merits of accepting the buy-back offer (including the potential for MG Invest to increase its shareholding to 90% and compulsorily acquire all outstanding shares in Montu). The Panel has accepted undertakings from Montu and MG Invest in lieu of orders.
Takeovers Panel publishes reasons for declining to consent to a review of its decision regarding Tissue Repair Ltd
On 24 October 2024, the Panel published the President of the Panel’s reasons for declining to consent to a review of a decision of the sitting Panel (that decision being to decline to conduct proceedings on an application in relation to the affairs of TRP). As discussed in a previous edition of Boardroom Brief , the Panel concluded that there was no reasonable prospect that it would make a declaration of unacceptable circumstances in light of undertakings given by certain TRP shareholders.
Takeovers Panel publishes reasons for consenting to the withdrawal of an application in relation to the affairs of Namoi Cotton Limited
On 21 October 2024, the Panel published its reasons for consenting to a request by Louis Dreyfus Company Melbourne Holdings Pty Ltd (LDC) to withdraw an application in relation to the affairs of NAM. As discussed in a previous edition of Boardroom Brief , NAM had been the subject of two competing off-market takeover offers from LDC and Olam Agri Australia Pty Ltd (Olam). LDC sought to withdraw an application which concerned (among other things) whether an unconditional off-market transaction between Olam and two shareholders of NAM to acquire, in aggregate, a 9.99% stake in NAM, which was not made available to any other NAM shareholders, conferred a collateral benefit and constituted unacceptable circumstances. The Panel consented to LDC withdrawing its application on the basis that the subsequent events had resolved the circumstances underlying the application, being: (1) the termination of an agreement for Olam to acquire a 7.92% stake in NAM; (2) Olam effectively withdrawing its takeover bid; and (3) Olam undertaking to accept LDC’s takeover offer as revised on 1 October 2024.
Over the horizon
ASIC Chair speaks on ASIC’s transformation at Standing Committee on Economics
On 25 October 2024, ASIC Chair Mr Joe Longo delivered an opening statement to the House of Representatives Standing Committee on Economics focused on the transformation of ASIC over the past three years. Mr Longo said that this transformation, said to be “the most significant organisational redesign of the agency in 15 years” , enhanced collaboration across the agency, reduced matter processing times, improved data analytics and surveillance capabilities and strengthened engagement with external stakeholders. Due to these changes, Mr Longo stated that ASIC is “well-placed for the next phasestrengthening ASIC’s culture and investing in data, systems and technology” . This transformation may be a step towards a more effective corporate regulatory framework in light of the report published by the Senate Economics References Committee on 3 July 2024, discussed in a previous edition of Boardroom Brief , which was critical of ASIC’s capacity to respond to corporate misconduct due to significant structural, resourcing and cultural issues. In any event, we expect the increased Parliamentary scrutiny of ASIC to spur greater enforcement activity in the next 12 months.