This is a service specifically targeted at the needs of busy non-executive directors (NEDs). We aim to give you a ‘heads up’ on the things that matter for NEDs in the week ahead – all in two minutes or less.

In this edition, we discuss the decision by the Australian Securities and Investments Commission (ASIC) to ban former directors of XTrade.AU Pty Ltd (XTrade), the decision of the Takeovers Panel (Panel) affirming the declaration of unacceptable circumstances previously made in relation to the affairs of Ringers Western Limited (RWL) on review, and orders made by the Federal Court of Australia requiring American Express Australia Limited (Amex) to pay $8 million in penalties for breaching the design and distribution obligations contained in the Corporations Act 2001 (Cth) (DDOs).

In Over the Horizon, we touch on the ongoing debate over the development of Australia’s energy policy, and the suggestion it is now too late to effect a pivot towards nuclear energy in transitioning to a net zero economy.

Regulation

ASIC bans former directors of XTrade.AU Pty Ltd for failure to comply with financial services law

On 18 July 2024, ASIC announced that it had banned the former directors of XTrade, Mr Shay Zakhim and Mr Anthony Anderson from carrying on a financial services business for three and five years respectively. XTrade is an online trading company dealing with retail over the counter derivative products including cryptocurrency and foreign exchange. ASIC found that Mr Zakhim and Mr Anderson were involved in XTrade’s failure to: (1) adequately manage conflicts of interest, which encouraged XTrade representatives to use aggressive sale tactics towards Australian consumers, and (2) ensure XTrade representatives took reasonable steps to comply with financial services law, which encouraged XTrade representatives to use unfair tactics to entice Australian clients to deposit additional funds. The bans are part of ASIC’s ongoing work to maintain high standards of judgment, diligence, and professionalism in the financial services sector.

Legal

Takeovers Panel affirms declaration of unacceptable circumstances in relation to the affairs of Ringers Western Limited on review

On 16 July 2024, the review Panel announced that it affirmed the initial Panel’s decision to make a declaration of unacceptable circumstances in relation to the affairs of RWL. As discussed in a previous edition of Boardroom Brief, the application concerned the acquisition of shares in RWL by the Ringers Western Discretionary Trust (RW Trust) pursuant to a bonus share deed which had the effect of increasing RW Trust’s shareholding in RWL from 63.31% to 99.94%. The initial Panel ordered that the shares acquired be cancelled, finding that this acquisition did not take place in an efficient, competitive and informed market, had a significant effect on the control of RWL, and effectively diluted minority shareholder interests to nominal percentages. The review Panel lifted the stay on the initial Panel’s orders and varied them so the cancellation would take effect on 18 July 2024.

Federal Court of Australia orders American Express to pay $8 million in fines for failing to meet its design and distribution obligations

On 19 July 2024, the Federal Court of Australia published the decision of Jackman J which imposed $8 million in penalties on Amex for breaching its DDOs in relation to two of its co-branded credit cards that were distributed in David Jones stores. Justice Jackman noted that the credit card issuer was obliged pursuant to its own ‘DDO Product Owner Guide’ to review the target market determination (TMD) for these products periodically and when required by triggering events. However, Amex failed to do so, and breached its DDOs. The cancellation rate of David Jones credit card applications was a metric Amex monitored and was found to be a ‘TMD review trigger’. Instore customers were offered incentives to sign up for credit cards in the form of a discount at the point of sale if the customer was instantly or conditionally approved. His Honour found that Amex should have known that the high rate of cancelled applications reasonably suggested that the TMDs were no longer appropriate for the purposes of the DDO. Deputy ASIC Chair Ms Sarah Court noted, “[t]his is an important decision, because it highlights the requirement for issuers and distributors of financial products to customers to have in place adequate systems to monitor events and circumstances that suggest a target market determination is no longer appropriate”. Directors are reminded that compliance with the DDO provisions is a current regulatory priority for ASIC and should therefore be a focus of board governance for financial services companies. 

Over the horizon

A nuclear awakening: too late, too hard? 

Significant complexities and challenges continue to plague Australia’s energy policy and roadmap to transition to a net-zero economy. The heated debate pitting nuclear power against renewable energy sources such as wind and solar as the solution to Australia’s future is no exception, which has divided corporate Australia since Opposition Leader Mr Petter Dutton’s push for nuclear power last month. As discussed in a previous edition of Boardroom Brief, while nuclear power offers a pathway to minimise greenhouse gas intensity of baseload power generation, some have argued that a pivot toward nuclear power comes a decade or two too late and would come at too high a cost. Ongoing uncertainty regarding energy policy in Australia continues to undermine investment in both conventional and renewable energy, with investment in new wind and solar capacity now starting to sharply decline. While this no doubt reflects uncertainty around whether the renewables sector in Australia will continue to receive Commonwealth fiscal and policy support over the next few decades, perhaps the more important factor is the slow rate of progress in developing the necessary transmission and storage infrastructure required to ensure that electricity generated by wind and solar assets can be delivered safely and reliably to the grid.