ASIC enforcement news and insights for busy people
Your quarterly round-up of the key enforcement developments and updates that ASIC-regulated entities and individuals need to know about, packaged up in a five-minute read and brought to you by our Disputes and Investigations team.
Key themes of the quarter - August to October 2024
There has been loads going on at ASIC this quarter. The recently released Annual Report revealed a fairly full slate of enforcement outcomes in 2023-2024: civil actions resulted in over $90 million in court ordered penalties, investigations led to 18 criminal convictions and a total of $936,000 in fines were ordered by the courts.
In the same period, ASIC commenced around 170 formal investigations (an increase of about 25% on the previous year) and filed 32 new civil proceedings in the Federal Court - so buckle up; we can expect loads more to come.
ASIC’s Enforcement and Regulatory update for the period January to June 2024 published in August 2024 indicated that focus areas for enforcement would include superannuation and greenwashing - both clear themes we have identified this quarter, with notably 11 financial services enforcement litigation matters in progress with respect to superannuation misconduct.
ASIC also gives us a bit more insight over what might lay in store with the release of ASIC’s 2024-25 Corporate Plan , identifying its top five strategic priorities for 2024-2028. This expanded the regulator’s strategic priorities to include Australia’s public and private markets and emerging financial products . Strategic priorities retained from previous Corporate Plans include improving consumer outcomes and progressing digital and data resilience and safety measures. Climate change risk is a top priority as well as a significant area of ongoing focus, and remains one of the key three themes we have identified for this quarter, as summarised below.
1. Climate-related financial disclosure is here and greenwashing remains (even more of) a concern
Australia’s first framework for climate-related financial disclosures has been introduced by the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth) (quite the mouthful!) which was passed by Parliament on 9 September 2024 and received royal assent on 17 September 2024.
From 1 January 2025 , entities that are required to prepare annual financial reports under Chapter 2M of the Corporations Act 2001 (and meet certain thresholds) will be required to prepare sustainability reports . Implementation will occur in phases, with the largest entities being required to submit sustainability reports for their financial years commencing from 1 January 2025. A comprehensive overview of the key elements of the Bill is here . ASIC is urging businesses to proactively engage with these mandatory climate reporting requirements and has established a dedicated sustainability reporting page to provide information about the new regime and how ASIC will administer it.
Although, as we know, ASIC does not need to wait for new legislation to take action against ESG-related misconduct. On 25 September 2024, the Federal Court ordered Vanguard to pay a (record) $12.9 million penalty, after Vanguard admitted it had made false or misleading representations and engaged in conduct that was liable to mislead the public in relation to an ‘ethically conscious’ fund . See here for a detailed consideration of the reasons for the penalty.
The liability judgment handed down in April was ASIC’s first greenwashing court outcome (see further here), although since then, ASIC has secured two other successful verdicts in the Federal Court, including a pecuniary penalty of over $11 million against Mercer Super. We anticipate similar enforcement, supervision and surveillance over the incoming climate-related financial disclosure.
So if you are a large Australian company (and even if you are not!) preparations should already be well underway to develop (and action) a compliance road map with a view to complying with mandatory (and expected) requirements with respect to climate disclosures.
2. Superannuation
ASIC is zeroing in on misconduct in the superannuation sector, which following the release of the ASIC January to June 2024 Enforcement and regulatory update (Update) on 9 September 2024, has been put on notice to do more to protect members from practices which put consumers at risk . Examples of such practices include failure to seek choice (as opposed to underperforming) superannuation investment options and employing high-pressure tactics to encourage inappropriate superannuation switching. Keep your eyes peeled, as ASIC is gearing up to unveil the results of its surveillance into how superannuation funds are handling death benefits claims in the coming months.
Hot on the heels of the Update (and underlining that the superannuation sector is indeed being placed under the microscope), on 1 October 2024, ASIC announced that it had (during the first half of 2024) taken action against 13 self-managed superannuation fund auditors in relation to a range of topics, including breaches of auditing and assurance standards, independence requirements, continuing professional development obligations, and fit and proper person criteria for remaining an approved SMSF auditor. See here for the ASIC media release.
And it will not have gone unnoticed that two of ASIC’s three (successful) civil penalty actions for greenwashing have been against entities in the superannuation sector.
Although it’s not all home runs for ASIC - it announced on 18 September 2024 that the Federal Court had dismissed ASIC’s case (started in March 2021) against superannuation trustee , Retail Employees Superannuation Pty Ltd for allegedly making misleading representations about limitations on members’ rights to transfer superannuation funds out a trust over a three year period, finding that "REST accurately conveyed to members what its rules and practices were. Its factual statements about that to members were accurate” .
ASIC was ordered to pay 80% of the defendants cost and stated that it brought the action to “clarify the law around [superannuation portability and choice of superannuation fund] and to emphasise the critical responsibility of trustees to provide accurate information to their members” .
3. New Banking Code
The new version of the Australian Banking Association’s Banking Code of Practice (Code) was approved by ASIC in June . It’s not mandatory for industry codes to be submitted to ASIC for approval; however, ASIC’s approval indicates that it considers consumers and industry participants can have confidence that the new Code is robust and appropriate.
The updated version includes enhancements to key protections for consumers and small businesses and will commence on 28 February 2025. Some of the key changes are:
This represents the first major amendment to the Code since October 2021, and participating banks will need to begin uplifting their processes and systems and rolling out training well in advance of the February 2025 commencement date.
What else did I miss?
Here’s our pick of other key ASIC enforcement highlights we think you should know about:
What next?
Look out for developments in the following areas over the coming months:
Look out for our next issue of Regulatory Rumblings at the end of January 2025. Otherwise, please do get in touch if you have any questions or need advice.
In the meantime, for an in-depth, weekly overview of regulatory matters more broadly, see our Financial Services team’s excellent publication here .