Latest Legal Updates

ASIC report calls for better AI governance in the financial services sector

Date: 30 October 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

On 29 October 2024 ASIC released a report titled Beware the gap: Governance arrangements in the face of AI innovation (REP 798) urging financial services and credit licensees to ensure their governance practices keep pace with their increasing adoption of artificial intelligence (AI). The report presents the findings from ASIC’s first review of the governance practices relating to AI of 23 licensees in the retail banking, credit, general and life insurance and financial advice sectors.

Key findings

1. Varied and accelerating AI use: AI use varied significantly across the surveyed licensees. Some have been using forms of AI for several years while others are still early in their journey. However overall, adoption of AI is accelerating rapidly.
2. Increase in generative AI use: While most current use cases used long-established, well-understood techniques, there is a shift towards more complex and opaque techniques (such as neural networks used in deep learning and generative AI). The use of generative AI, in particular, is increasing exponentially, presenting new risk management challenges.
3. AI and decision making: AI use was…

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AASIC 2024 update

Date: 25 October 2024
Source: ASIC 2024 update

ASIC Commissioner Kate O’Rourke has presented a keynote address at the 34th Annual Credit Law Conference on 24 October 2024.

ASIC’s key focus is on:

• Improving Consumer Outcomes
  • ASIC's top priority is safeguarding consumers from harmful practices and products in credit and banking sectors.
  • Recent reports examined financial hardship assistance, fee harm in banking, credit card lending practices, and compliance with product design/distribution obligations.
  • Ongoing initiatives focus on reforms to small amount credit contracts, consumer leases, and implementing the enhanced Banking Code of Practice.
  • ASIC is closely monitoring regulatory settings like responsible lending obligations to assess their impact on credit accessibility.
• Advancing Digital and Data Safety
  • Efforts are underway to combat technology-facilitated misconduct such as scams and oversee the use of artificial intelligence (AI) in financial services.
  • Reviews of major banks highlighted deficiencies in scam prevention strategies, governance frameworks, liability determination approaches, and victim support.
  • ASIC supports the proposed Scams Prevention Framework that will impose anti-scam obligations on banks and other key sectors.
  • Governance frameworks guiding AI implementation by financial services providers are being reviewed, with findings to be released soon.

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Department of Industry releases AI Impact Navigator

Date: 24 October 2024
Source: Department of Industry, Science, and Resources

Abstract:

The Department of Industry, Science and Resources (DISR) has released their AI Impact Navigator (the Navigator).

The Navigator is a framework that provides companies with tools to assess and measure the impact and outcomes of their use of Artificial Intelligence (AI). This includes templates for readiness surveys, implementation plans and impact assessments. These tools are to be implemented in a continuous improvement cycle referred to as Plan, Act, Adapt.

The Navigator is aligned with the Voluntary AI Safety Standard and has an emphasis on public reporting and building trust with consumers and other stakeholders, as reflected in its ‘four dimensions’ structure aimed at boosting the positive impacts of the use of AI:

• social licence and corporate transparency;
• workforce and productivity;
• effective AI and community impact; and
• customer experience and consumer rights.

To read more and access the AI Impact Navigator see here.

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Department of Industry, Science and Resources publishes AI and ESG guidance documents

Date: 23 October 2024
Source: AI and ESG – An introductory guide for ESG practitioners

The Department of Industry, Science and Resources (DISR) together with the National Artificial Intelligence Centre have published a practical guide for Environmental Social and Governance (ESG) practitioners on how to understand the implications and opportunities of Artificial Intelligence (AI) in a guidance document “AI and ESG – An introductory guide for ESG practitioners” (Guide).

The Guide assists ESG practitioners by showing how AI can support ESG solutions and provides practical examples of where AI governance can intersect with ESG governance, along with supporting the implementation of the Voluntary AI Safety Standard.

The Guide has been released in conjunction an AI Impact Navigator resource that is designed to help businesses better understand, manage and report the impact and outcome of their AI systems use.

To access the Guide, see the DISR website here. To access the AI Impact Navigator, see the DISR website here.

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Legislation to implement merger reform introduced into Parliament

Date: 10 October 2024
Source: Parliament of Australia

Legislation implementing significant reform to Australia’s merger control regime has been introduced into the Federal Parliament.

The Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024 (Bill) amends the Competition and Consumer Act 2010 (Cth) to introduce a formal, mandatory, suspensory and administrative merger review system, with the Australian Competition and Consumer Commission (ACCC) as the first instance decision maker on each notified acquisition.

 

Timing and notification thresholds

• Timing and transitional arrangements: The new merger review system will come into effect from 1 January 2026 with merger parties able to start using the new system on a voluntary basis from 1 July 2025. Merger authorisation applications will be accepted up until 30 June 2025 and parties may continue to use the informal regime until 31 December 2025. A list of key implementation milestones for the Bill is available in the ACCC’s statement of goals.
• Mandatory notification thresholds: A monetary threshold has replaced the government’s initial proposal of market share percentage thresholds. The thresholds will be prescribed in regulations, but in his Second Reading Speech for the Bill Treasurer Dr Jim Chalmers MP stated there…

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Legislation to implement merger reform introduced into Parliament

Date: 10 October 2024
Source: Parliament of Australia

Legislation implementing significant reform to Australia’s merger control regime has been introduced into the Federal Parliament.

The Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024 (Bill) amends the Competition and Consumer Act 2010 (Cth) to introduce a formal, mandatory, suspensory and administrative merger review system, with the Australian Competition and Consumer Commission (ACCC) as the first instance decision maker on each notified acquisition.

 

Timing and notification thresholds

• Timing and transitional arrangements: The new merger review system will come into effect from 1 January 2026 with merger parties able to start using the new system on a voluntary basis from 1 July 2025. Merger authorisation applications will be accepted up until 30 June 2025 and parties may continue to use the informal regime until 31 December 2025. A list of key implementation milestones for the Bill is available in the ACCC’s statement of goals.
• Mandatory notification thresholds: A monetary threshold has replaced the government’s initial proposal of market share percentage thresholds. The thresholds will be prescribed in regulations, but in his Second Reading Speech for the Bill Treasurer Dr Jim Chalmers MP stated there…

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ASIC updates regulatory guidance on carbon markets

Date: 9 October 2024
Source: Australia Securities and Investments Commission

Abstract:

On 30 September 2024, the Australian Securities and Investments Commission (ASIC) updated its regulatory guidance for carbon market participants following submissions received in response to its Consultation Paper 378 .

Regulatory Guide 236 (RG 236) was updated to reflect the introduction of and reforms to the emissions reductions Safeguard Mechanism in addition to all changes to the Australian Carbon Credit Unit Scheme issued since the last update in 2015.

RG 236 now also takes into account:

• projects involving multiple small-scale carbon abatement activities under a single project; the startup of the Emissions Reduction Fund (ERF);
• ERF reverse auctions for carbon abatement contracts;
• the cessation of carbon units, European Union allowances and Australian-issued its as financial products; and
• the exemption of carbon abatement contracts from the definitions of ‘derivative’ and ‘financial product’ under the Corporations Act 2001 (Cth) (Corporations Act).

Under the new exemption, persons are not required to hold an Australian financial services licence to provide advice about or enter into carbon abatement contracts.

Information Sheet 156 was also updated in accordance with the updated guidance.

ASIC seeks to ensure that its…

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ASIC powers expanded for financial market infrastructures

Date: 9 October 2024
Source: Parliament of Australia

Abstract:

On 17 September 2024, the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 received royal assent. Now in force as the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (the Act), the Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA) have been granted new regulatory powers in relation to financial market infrastructures (FMIs).

ASIC Commissioner Simone Constant states that the Act will “significantly enhance ASIC’s regulatory toolkit for FMIs”, ensuring that ASIC has a “fit-for-purpose regulatory regime for critical financial market infrastructure”.

Schedule 2 of the Act aims to expand ASIC’s regulatory toolkit by providing:

• the power to impose limits on the scope and level of activity that a market licensee or CS facility licensee is permitted to undertake as an overseas licensee;
• declaration powers relating to declared financial markets and widely held market bodies;
• a requirement for ASIC approval for a person to hold over 20 per cent voting powers in FMI licensees incorporated in Australia that are not widely held market bodies;
• the power to make rules for the purpose of…

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ASIC calls for licensing of cryptocurrency industry

Date: 3 October 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

Australian Securities and Investments Commission (ASIC) Commissioner, Alan Kirkland, has announced that most cryptocurrency businesses in Australia will need to obtain a financial services license.

“ASIC’s message is that a significant number of crypto-asset firms in the Australian market are likely to need a licence under the current law. This is because we think many widely traded crypto assets are a financial product,” Mr Kirkland announced, prior to speaking at the Australian Financial Review’s (AFR) Crypto and Digital Assets Summit on 23 September 2024.

ASIC has announced that it is preparing to update Information Sheet 225 by November 2024 which will clarify how particular crypto tokens (which represent digital ownership rights) and certain products will be treated.

The Government has previously released a token mapping consultation paper to identify how crypto assets and related services should be regulated. The Government subsequently released a proposal paper “Regulating Digital Asset Platforms” paper in October 2023 (submissions closed in December 2023) which proposes a new regulatory framework in Chapter 7 of the Corporations Act 2001 under which certain activities would require an Australian Financial…

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Sanctions update - Australia imposes cyber sanctions on Russian cybercriminals

Date: 3 October 2024
Source: Federal Register of Legislation

The Autonomous Sanctions (Designated Persons and Entities and Declared Persons – Thematic Sanctions) Amendment (No. 5) Instrument 2024 (Cth) designates three Russian individuals for targeted financial sanctions and travel bans under Australia's autonomous sanctions regime on the grounds of their involvement in the Russian cybercrime syndicate known as “Evil Corp”.

The sanctioned individuals are:

• Maksim Viktorovich Yakubets, founder and leader of Evil Corp;
• Igor Olegovich Turashev, senior administrator of Evil Corp and DoppelPaymer ransomware group; and
• Aleksandr Viktorovich Ryzhenko, second-in-command of Evil Corp and affiliate of Lockbit ransomware group.

The Minister for Foreign Affairs was satisfied that these individuals were involved in significant cyber incidents within the meaning of regulations 6A(2) and (3) of the Autonomous Sanctions Regulations 2011 (Cth) by virtue of being involved in Evil Corp as well as its precursors and subgroups.

For more information, see the full text of the instrument and explanatory statement.

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Federal Court imposes $12.9 million penalty for Vanguard’s misleading claims about ESG exclusionary screens (Australian Securities and Investments Commission v Vanguard Investments Australia Ltd (No 2))

Date: 26 September 2024
Court: Federal Court of Australia
Judge(s): O’Bryan J
Judgment date: 25 September 2024
Catchwords: CONSUMER LAW – pecuniary penalty for infringement of ss 12DF(1) and 12DB(1)(a) and (e) of the Australian Securities and Investments Commission Act 2001 (Cth) – application of s 12GBA to contravening conduct that commenced prior to 13 March 2019 – application of s 12GBB to contravening conduct that occurs wholly on or after 13 March 2019 – relevant considerations
EVIDENCE – statement of agreed facts tendered in evidence – where agreed facts contained footnote references to documents also tendered in evidence – observations concerning the practice of including documentary references to a statement of agreed facts and the extent to which the practice is permissible under s 191 of the Evidence Act 1995 (Cth)
COSTS – where one party wholly unsuccessful on single issue for which discrete hearing was required but otherwise successful in the proceeding

Abstract

The Federal Court of Australia has ordered Mercer Superannuation (Australia) Limited (Mercer) to pay a $11.3 million pecuniary penalty for making false or misleading representations under the Australian Securities and Investments Commission Act 2011 (Cth) (ASIC Act).

Background

Vanguard ran the Vanguard Ethically Conscious Global Aggregate Bond Index Fund (the Fund), a managed investment scheme marketed as offering an “ethically conscious” investment opportunity. The Fund’s composition was based on the Bloomberg Barclays MSCI Global Aggregate SRI Exclusions Float Adjusted Index, designed to exclude securities that violated applicable environmental, social and governance (ESG) criteria.

Between August 2018 and February 2021, Vanguard made representations through product disclosure statements (PDSs), a media release, statements on its website, a YouTube interview and presentation that the Fund offered an ethically conscious opportunity by screening all securities against ESG criteria before inclusion and excluding any securities that violated the criteria.

The Australian Securities and Investments Commission (ASIC) alleged these representations were misleading as:

• the ESG screening had significant limitations;
• a substantial proportion of the Fund’s securities were from issuers who were not researched or screened against the ESG criteria; and the Fund included violators of the ESG criteria.

ASIC alleged that Vanguard made false or misleading representations regarding the quality of the Fund in breach of s 12DB(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), and engaged in conduct liable to mislead the public regarding the nature and suitability of the Fund contravening s 12DF(1) of the ASIC Act.

Vanguard admitted most allegations but disputed ASIC’s claim that Vanguard’s PDSs and website represented that all securities were researched and screened prior to inclusion in the Fund, arguing that the representations were limited to securities issued by companies. The court accepted Vanguard’s position on this issue: see our previous Latest Legal Update on the earlier proceeding here.

 

Judgment

O’Bryan J applied the statutory pecuniary penalty regimes under ss 12GBA and 12GBB of the ASIC Act, which required consideration of factors such as the nature, circumstances and extent of the contraventions, any loss or damage, prior similar conduct, and maximum penalties. Deterrence was identified as the principal objective.

The court characterised Vanguard’s conduct in promoting its “ethically conscious” fund through false or misleading representations as an objectively reckless disregard of the accuracy of their statements relating to the extent and disclosure of ESG screening. Vanguard’s conduct enhanced its ability to attract investors and increased its reputation as a provider of ESG compliant investment funds at the cost of investors losing the opportunity to invest following their values. However, Vanguard’s cooperation by self-reporting, the lack of evidence of financial investor loss, and compliance improvements mitigated the seriousness.

In determining the penalties, O’Bryan J considered that the maximum penalty of $2.1 million per contravention that could be imposed was “so high as to be practically meaningless” and identified separate penalty amounts for the PDSs, website statements, media release, YouTube video and presentation. A 25% discount was applied to reach the aggregate penalty of $12,900,000 in recognition of Vanguard’s high level of cooperation.

The court also made adverse publicity orders under s 12GLB of the ASIC Act. ASIC was ordered to pay costs involving the discrete hearing where Vanguard wholly succeeded and Vanguard was to pay all other costs of the proceeding. Read the full text of the court’s judgment here: Australian Securities and Investments Commission v Vanguard Investments Australia Ltd (No 2)  [2024] FCA 1086.

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ASIC releases 2023-2024 report on greenwashing misconduct within the financial sector

Date: 23 September 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The Australian Securities & Investments Commission (ASIC) has released Report 791 which outlines the actions taken by the regulator between 1 April 2023, and 30 June 2024 to address greenwashing in the financial sector.

 

ASIC’s Greenwashing Interventions

ASIC's interventions during the reporting period targeted four main areas of concern:

1. Inconsistent Underlying Investments: ASIC identified several instances where underlying investments did not align with the ESG (Environmental, Social, and Governance) screens and policies disclosed to investors. This led to significant regulatory actions, including the initiation of two civil penalty proceedings and the finalisation of one, resulting in an $11.3 million penalty against Mercer Superannuation. Additionally, ASIC issued eight infringement notices and secured 37 corrective disclosure outcomes across various sectors, including listed companies, investment managers, and superannuation trustees.
2. Unsubstantiated Sustainability Claims: ASIC found that several entities made sustainability-related claims without reasonable grounds, leading to potential harm to investors. These claims included overstated environmental impacts and misleading statements about investment exclusions. For example, Future Super was fined for claiming that its entire $400 million fund had been moved…

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Listed@ASX Compliance Update — 10th edition 2024

Date: 18 September 2024
Source: Australian Securities Exchange (ASX)

Abstract:

On 13 September 2024, the Australian Securities Exchange (ASX) issued Compliance Update No. 10/24, which primarily addresses 5 five key topics: meeting material preparation, waivers, the presentation of Listing Rule-compliant resolutions, annual report requirements, and adjustments during daylight saving time.

 

1. Notice of Meeting and Meeting Materials

ASX advises entities to review the guidance from its 2023 AGM observations when preparing their 2024 meeting materials. Common issues identified last year include changes made to meeting documents after submission and insufficient documentation for ASX’s review. ASX reinforced that entities must submit all relevant materials, including proxy forms and constitutional amendment documents, to initiate ASX’s review under Listing Rule 15.1. It also emphasised the importance of ensuring voting exclusion statements comply with Listing Rule 14.11 and properly addressing securities approvals under a Listing Rule 7.1A mandate. If an AGM only addresses Corporations Act items, ASX asserted that meeting materials need not be submitted for review but can be lodged directly through ASX Online.

 

2. Waivers and Timing Considerations

ASX advised entities to consider that waivers related to meeting requirements are not included in the five-business-day review…

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ASIC enforcement and regulatory update: January to June 2024 (Report 794)

Date: 11 September 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

ASIC has released its Enforcement and Regulatory Update (Report 794), detailing its key actions and policy developments from January to June 2024. The report outlines enforcement and regulatory actions taken by ASIC aimed at strengthening the safety and integrity of the financial system and protecting consumers and includes a regulatory developments timetable and case studies by sector.

 

Consumer Protection

ASIC reinforced its commitment to protecting consumers, especially those vulnerable to financial harm. ASIC noted that it took significant action against entities involved in predatory lending practices, misleading conduct, and greenwashing. For example, ASIC targeted crypto-asset businesses, emphasising the importance of ensuring that providers of financial products have the required Australian Financial Services (AFS) licenses.

The regulator also flagged issues in the superannuation sector, particularly in relation to persistently underperforming investment options that eroded members' savings. ASIC highlighted that that it will soon publish the results of its surveillance into how superannuation funds are handling death benefit claims, reflecting its ongoing focus on accountability in the sector. ASIC also noted that their actions have led to criminal convictions…

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Mandatory climate reporting legislation is passed by Parliament

Date: 11 September 2024
Source: The Treasury

Abstract:

The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Bill) was passed by Parliament on 9 September 2024 and Royal Assent of the Bill is expected to occur within the next 7-10 days.

Schedule 4 of the Bill introduces a mandatory climate-related reporting regime in Australia that is aligned with global sustainability standards released by the International Sustainability Standards Board. Under the regime, in-scope entities will be required to include climate-related financial disclosures as part of a new annual sustainability report (in addition to the obligations to prepare annual financial reports under Chapter 2M of the Corporations Act).

The disclosure of climate-related financial information will be in accordance with the final version of the Australian sustainability reporting standards (ASRS) set by the Australian Accounting Standards Board (AASB). The AASB will hold a virtual public meeting soon after Royal Asset to consider and vote on the draft ASRS.

The Bill was previously passed by the Senate on 22 August 2024 with an additional amendment to be passed by the House of Representatives. The amendment requires in-scope entities to report against both a…

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Treasury releases final statutory report on meetings and documents amendments

Date: 11 September 2024
Source: The Treasury

Abstract:

The Treasury has recently released its final statutory review report on the amendments to the meetings and documents legislation, examining the impact of changes introduced in 2021 and 2022 through the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 and the Corporations Amendment (Meetings and Documents) Act 2022. These amendments were made in response to the COVID-19 pandemic and aimed to facilitate virtual and hybrid meetings, electronic distribution of meeting-related documents, and technology-neutral document signing and execution

 

Key Findings:

• Hybrid and Virtual Meetings: The review found that while hybrid meetings are generally well-received, wholly virtual meetings are more contentious. Stakeholders raised concerns about the potential for virtual meetings to diminish transparency and member participation, particularly for listed public companies. However, hybrid meetings, which combine physical and virtual attendance, are viewed positively as they increase accessibility for members who cannot attend in person.
• Voting and Member Participation: The review emphasised the need for clear communication regarding the format of meetings, especially when using virtual technologies. Companies must ensure that members have a reasonable opportunity to participate, ask questions, and vote in real…

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Consultation on the proposed mandatory guardrails for the safe and responsible use of AI in Australia opens

Date: 10 September 2024
Source: Department of Industry, Science and Resources

The Department of Industry, Science and Resources (Department) is seeking feedback on the mandatory guardrails for the use of artificial intelligence (AI) following the release of the proposals paper on “Safe and responsible AI in Australia”.

 

Principles for defining high-risk AI

The consultation will seek feedback on the proposed approach to defining high-risk AI into two broad categories that relate to:

• uses of AI systems or general-purpose AI (GPAI) models that are known and foreseeable; and
• advanced and highly capable GPAI models where all possible applications and risks cannot be foreseen.

In designating AI as high-risk based on intended and foreseeable uses, the proposed considerations include the risks of adverse impacts to human rights, health and safety as well as the wider legal, systemic impacts to the broader Australian society, environment, economy and rule of law.

 

Mandatory guardrails for safe and responsible AI use

The 10 proposed mandatory guardrails aim to address harms and risks from AI, provide greater regulatory certainty for businesses and foster public trust. The proposed guardrails would require…

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AUSTRAC releases guidance on outsourcing to help meet AML/CTF obligations

Date: 6 September 2024
Source: AUSTRAC

The Australian Transaction Reports and Analysis Centre (AUSTRAC) has released new guidance for reporting entities that use outsourcing to help meet their anti-money laundering and counter-terrorism financing (AML/CTF) obligations. The release of this guidance follows AUSTRAC’s consultation on the draft guidance earlier this year.

AUSTRAC’s guidance provides suggested good practices and recommendations to help reporting entities manage some of the risks that may arise when outsourcing AML/CTF functions to a third party. The guidance covers the following key steps when outsourcing:

• Identify the risks that may arise through outsourcing, ensuring that any outsourcing of transaction monitoring is based on a thorough ML/TF risk assessment.
• Conduct due diligence on outsourced service providers.
• Understand legal restrictions on sharing information with outsourced service providers, including in relation to suspicious matter reporting, tipping off and information received from AUSTRAC.
• Use a written agreement for outsourcing. The guidance recommends key provisions that should be addressed in outsourcing agreements.
• Monitor and review ongoing outsourcing arrangements.
• Document procedures for managing outsourcing arrangements in your AML/CTF program.

For a copy of AUSTRAC’s guidance, see here.

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Treasury commences consultation on notification thresholds for new merger control system

Date: 6 September 2024
Source: Australian Treasury

Treasury’s Competition Taskforce has released a Consultation Paper on the notification thresholds that form part of the new merger control system announced by government on 10 April 2024 (see our previous Latest Legal Updates here and here).

Under the new mandatory and suspensory administrative merger control system (proposed to take effect from 1 January 2026), the notification thresholds determine which mergers or acquisitions must be notified to the Australian Competition and Consumer Commission (ACCC) before completion.

When is a party required to notify the ACCC of a merger or acquisition?

Treasury proposes that an acquisition must be notified to the ACCC if:

• It meets the monetary thresholds or the market concentration thresholds and the target business/asset has a “material connection to Australia” (satisfied if, for example, the business is registered or located in Australia, supplies goods or services to Australian customers, or generates revenue in Australia); or
• It is a “high risk” acquisition, as determined by the Minister.

 

Overview of thresholds proposed by Treasury

Treasury’s Consultation Paper outlines the proposed monetary and market concentrations thresholds (each with two ‘limbs’) in the diagram below…

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ASIC expands strategic priorities in updated Corporate Plan

Date: 27 August 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

ASIC has announced an expanded Corporate Plan, adding a new strategic priority focused on Australia’s public and private markets and emerging financial products. ASIC Chair Joe Longo highlighted that strengthening market integrity is essential for maintaining trust in the financial system, which fosters investment and creates job opportunities. Although Australia's private markets are smaller than its listed equity markets, their lack of transparency poses significant risks, particularly as more investors become involved. The new priority aims to enhance consistency and transparency across all markets and products, signalling tougher regulatory expectations.

Over the past three years, ASIC has undergone significant transformation to sharpen its focus. While the core strategic priorities remain consistent, the updated Corporate Plan reflects the agency’s response to a changing environment. The new structure, implemented last year, enables ASIC to better anticipate and address emerging threats and opportunities, optimising the use of its limited resources. In the last year, ASIC initiated 170 new investigations, a 25% increase, and filed 33 new civil proceedings, a 27% rise, leading to 18 criminal convictions and 23 individuals being charged by the Commonwealth Director of Public Prosecutions.

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Mandatory climate reporting requirements and financial regulator powers laws pass the Senate

Date: 23 August 2024
Source: Treasury portfolio

The Treasury Laws Amendment (Financial Market Infrastructure and other measures) Bill 2024 (the Bill) has passed the Senate. The Bill introduces mandatory climate reporting requirements for large listed and unlisted companies and financial institutions commencing on 1 January 2025. Reporting for other large companies will be phased over time according to size and revenue.

The Treasurer has stated that these reform aims to provide investors and companies with clarity and certainty to support net zero transformation and strengthen Australia's reputation as an attractive destination for international capital. The climate reporting reforms are a significant step towards addressing climate risks and promoting investment in cleaner and more sustainable energy sources.

Standardised climate-related financial disclosures will be aligned with international standards to be issued by the Australian Accounting Standards Board (AASB).

Further detailed guidance on the new reporting requirements will be provided shortly however by way of summary:

• All eligible companies will be required to keep sustainability records.
• Eligible companies will be required to prepare sustainability reports that include climate statements and notes, any statements required by legislative instrument and a directors’ declaration.

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Listed@ASX Compliance Update — 9th edition 2024

Date: 14 August 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

On 12 August 2024, the Australian Securities Exchange (ASX) issued Compliance Update No. 09/24, highlighting five key areas: the JORC Code revision, announcement protocols, AGM draft notices, periodic reporting deadlines and the outcomes of the Listed Entities Survey 2024.

1. JORC code update: The Australasian Joint Ore Reserves Committee (JORC) has issued a draft for the updated JORC Code, which is crucial for mining entities reporting exploration results and reserves. Stakeholders are invited to review the draft and provide feedback through an organized engagement event and an online survey by 31 October 2024. This feedback will be important for informing the new JORC Code.
2. Announcement protocols: ASX reminds entities of the correct order for releasing financial documents during reporting periods. The protocol requires that Appendix forms (4D/4E/4F) are released first, followed by any dividend information and other relevant materials. Additionally, entities may request early release arrangements for their financial reports to accommodate specific timing needs.
3. AGM draft notices: Entities are advised to allow sufficient time for ASX to review draft notices of Annual General Meetings especially if they contain complex transactions or numerous resolutions. The standard review period is five business days, excluding the time needed for waiver processing. Entities needing waivers must plan for additional time as per Guidance Note 17, which outlines timeframes for standard and non-standard waivers.

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ASIC alleges ASX’s statements on CHESS replacement project were misleading

Date: 14 August 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The Albanese Government has published its response to the independent review of the 2021 amendments to Australia’s continuous disclosure laws.

The Australian Securities and Investments Commission (ASIC) has initiated legal action against ASX Limited, Australia's primary market operator, accusing it of making misleading statements about the status of its Clearing House Electronic Subregister System (CHESS) replacement project. In its Federal Court claim, ASIC contends that ASX falsely announced on 10 February 2022 that the project was "on-track for go-live" in April 2023 and "progressing well." According to ASIC, these statements falsely implied adherence to the projected timeline. ASIC argues that these assertions were deceptive because, at the time, the project was not on track, and ASX lacked a reasonable basis for its optimistic projections.

ASIC's Chair, Joe Longo, emphasised the implications of ASX's alleged misrepresentations, highlighting the essential trust market participants place in the ASX’s disclosures. Longo noted that the project's significance as it involves replacing vital national infrastructure integral to the Australian economy. The alleged misinformation not only misrepresented the project’s status but also resulted in significant financial repercussions following the project's delay and pause in November 2022.

These proceedings are part of a broader effort by ASIC to enforce market integrity, following a recent penalty imposed on ASX for non-compliance with market rules and actions against market manipulation schemes. ASIC has not yet decided the penalties it will pursue for these alleged ASX breaches.

For more, see the ASIC media release here.

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Government responds to continuous disclosure regime amendments independent review

Date: 14 August 2024
Source: Government response to Continuous Disclosure Review

The Albanese Government has published its response to the independent review of the 2021 amendments to Australia’s continuous disclosure laws.

Dr Kevin Lewis conducted an independent review of the changes to the continuous disclosure regime by the Treasury Laws Amendment (2021 Measures No.1) Act 2021 (2021 Amendments). The review was conducted pursuant to section 1683B of the Corporations Act 2001 (Cth) (Corporations Act) and was tabled on 14 May 2024.

The 2021 Amendments had the effect of imposing additional requirements on the Australian Securities and Investments Commission (ASIC), in the case of civil penalty proceedings, or private litigants in the case of civil compensation proceedings, to prove a fault element on behalf of the disclosing entity. ASIC or the private litigant have to show that the disclosing entity knew, or was reckless or negligent with respect to whether the information would, if it were generally available, have a material effect on the price or value of the entity’s securities.

The independent review report made two primary recommendations and four secondary recommendations. The primary recommendations are:

1. that the Government should amend the Corporations Act to remove the requirement for ASIC to prove in civil penalty proceedings that the disclosing entity acted knowingly, recklessly or negligently.

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ASIC extends transitional period for foreign financial services providers

Date: 13 August 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The Australian Securities and Investments Commission (ASIC) has announced a 12-month extension to the transitional relief for foreign financial services providers (FFSPs), allowing them to continue providing financial services to Australian wholesale clients without holding an Australian financial services (AFS) licence. Originally set to expire on 31 March 2025, this relief will now extend until 31 March 2026.

This extension provides certainty to FFSPs relying on the existing relief, allowing them more time to adapt to the upcoming regulatory changes. From 1 April 2025, a new licensing exemption regime, introduced under the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, is expected to commence, pending its passage through Parliament.

Entities not under current ASIC relief can notify ASIC to use the licensing exemption regime once it commences. FFSPs with a foreign AFS licence can continue operating under their existing ASIC licence.

For more, see the ASIC media release here.

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ASIC greenwashing victory against Mercer Superannuation

Date: 8 August 2024
Court: Federal Court of Australia
Member(s): Horan J
Judgment date: 2 August 2024
Catchwords: Corporations — False and misleading statements — Greenwashing — Pecuniary penalties

Background:

The Federal Court of Australia has ordered Mercer Superannuation (Australia) Limited (Mercer) to pay a $11.3 million pecuniary penalty for making false or misleading representations under the Australian Securities and Investments Commission Act 2011 (Cth) (ASIC Act).

Mercer was the trustee of the large Mercer Super Trust superannuation fund (Fund) with almost 300,000 members and around $29 billion in net assets during the relevant period from November 2021 to March 2023. The Fund’s Sustainable Plus Investments were promoted on via statements and videos on Mercer’s website as well as Vimeo and YouTube as excluding investments in companies involved in or deriving profit from alcohol production, gambling operations, and the

However, the court found that, contrary to these representations, six of the seven Sustainable Plus Investments held investments in companies involved in fossil fuel extraction or sale, alcohol production or sale and gambling operations.

Horan J noted that in July 2022, after being alerted by environmental group Market Forces about investments in fossil fuel companies, Mercer had removed some statements referring to "carbon intensive fossil fuels like thermal coal" from its website. However, it did not conduct a full review of the accuracy of all representations about its stated exclusions until after ASIC had commenced proceedings in September 2023.

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AASB seeking feedback on exposure draft ED 331 Climate-related and Other Uncertainties in the Financial Statements

Date: 8 August 2024
Source: Exposure Draft – ED331 Climate-related and Other Uncertainties in the Financial Statements - Open for comment

The Australian Accounting Standards Board (AASB) is seeking feedback on the exposure draft ED 331 Climate-related and Other Uncertainties in the Financial Statements (ED331). ED331 sets out eight examples of how entities apply the requirements of the AASB Accounting Standards to report on the effects of climate-related and other uncertainties in financial statements.

As the AASB’s policy is to incorporate the International Financial Reporting Standards (IRFS) Accounting Standards in the Australian Standards, the AASB is requesting feedback on the proposals in the International Accounting Standards Board (IASB) Exposure Draft and AASB Specific matters for comment. Matters for comment include whether the proposals:

1. may be affected by any regulatory issues in the Australian environment;
2. create any auditing or assurance challenges;
3. would result in useful financial statements;
4. are in the best interests of the Australian economy; and
5. whether relative to the current requirements, have costs or benefits.

Any submissions are due to the AASB by 4 October 2024. The submissions will be used by the AASB to provide comment to the IASB on the IRFS Accounting standards. For more information, see the AASB website.

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Treasury consultation open for exposure draft of Treasury Laws Amendment Bill 2024: Acquisitions

Date: 5 August 2024
Source: The Treasury

Abstract:

The Treasury has initiated a consultation by releasing the exposure draft for the Treasury Laws Amendment Bill 2024, which focuses on reforming the rules and processes for mergers and acquisitions. First announced on 10 April 2024, these reforms are designed to streamline the system, making it faster, stronger, and simpler, with the aim of targeting anti-competitive transactions more effectively to enhance outcomes for consumers and businesses. This draft is built on insights from the earlier consultation held between November 2023 and January 2024.

The draft legislation outlines a new framework that includes the notification and timeline processes, defines what constitutes an acquisition, and details the criteria for assessing competition impacts and substantial public benefits. It also introduces procedural safeguards. Further consultation on notification thresholds, fees, and regulations, including updates to the ACCC’s public register and transparency safeguards, are scheduled for later this year.

Submissions can be made to the Treasury via email or post until 13 August 2024.

For more, see the exposure draft here and the consultation here.

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Listed@ASX Compliance Update – 8th edition 2024

Date: 30 July 2024
Source: Australian Securities Exchange (ASX)

Abstract:

On 25 June 2024, the Australian Securities Exchange (ASX) issued Compliance Update No. 08/24, highlighting three key points about investor presentations, specific situations for suspension, and assistance with ASX Online.

Investor Presentations

• General Guidelines: Investor presentations lodged on the market announcements platform should clearly state if they contain market-sensitive information. The information should be factual, relevant, and free from promotional or political language. Emotive or vague expressions are discouraged.
• Mining Entities: Presentations by listed mining entities must comply with Chapter 5 of the Listing Rules and the JORC Code. Key points include ensuring relevant information is easy to find, proximate cautionary statements are correctly placed, competent person statements are included, mineral resources and ore reserves are categorised appropriately, peer comparisons are accurate, visual results are reported cautiously, and social media disclosures comply with the rules.
• Action by ASX: ASX may take corrective actions, including rejecting announcements, requiring retractions, or suspending trading if guidelines are not followed.

Specific Situations for Suspension

• Unnecessary Trading Halts: ASX may suspend an entity's securities if a trading halt is requested without material information to announce or if the provided announcement is not market-sensitive.

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Duty imposed following change in sole director and secretary of trustee company of a landholder unit trust (Tao v Commissioner of State Revenue (Review and Regulation))

Date: 26 July 2024
Court: Victorian Civil and Administrative Tribunal
Member(s): R Tang AM
Judgment date: 11 July 2024
Catchwords: Duties Act 2000 (Vic) – Dutiable transactions – Acquiring control of landholder treated as relevant acquisition under section 82 – Change in sole director, secretary and shareholder of trustee company of a landholder unit trust treated as acquiring control

Abstract:

The Victorian Civil and Administrative Tribunal has determined that the change in control of a trustee company, in particular the appointment of a new sole director and company secretary, was a change in control of the related landholder unit trust. The new director and company secretary was found to have acquired control of the landholder, and duty was imposed as a result of s 82 of the Duties Act 2000 (Vic).

Background

66 William Road Pty Ltd (Trustee Company) was the trustee of the unit trust WCT Unit Trust (Unit Trust). At the relevant time, the Unit Trust held a development property worth over $1 million, meaning the Unit Trust was a landholder within the meaning of s 71(1) of the Duties Act 2000 (Vic).

On 11 February 2014, Mr Zhiyong Tao became the sole shareholder in the Trustee Company.

On 6 March 2014, Mr Tao became the sole director and company secretary in the Trustee Company.

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Merger reform progresses as government releases draft exposure legislation

Date: 25 July 2024
Source: Department of Treasury

The government has released the exposure draft of the Treasury Laws Amendment Bill 2024 for consultation, which implements the framework and key processes for Australia’s new merger regime announced by the government in April 2024.

The draft legislation largely reflects the proposals for reform announced by the government in April (see our previous Latest Legal Update here), providing a better understanding of the processes and timeline for merger review. The merger notification thresholds (to be based on metrics such as turnover, transaction value and market concentration) are, however, a noticeable absence. These will be set out by regulation and subject to separate consultation.

In terms of timing and transitional arrangements, the new formal, mandatory and suspensory merger clearance model will come into effect from 1 January 2026, but parties can voluntarily notify under the new regime from 1 December 2025. The current informal review process will continue until 31 December 2025 and the existing merger authorisation process will be closed to new applications from 1 July 2025.

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American Express fined $8 million for breach of design and distribution obligations (Australian Securities and Investments Commission v American Express Australia Limited)

Date: 19 July 2024
Court: Federal Court of Australia
Judge: Jackman J
Judgment date: 19 July 2024
Catchwords: CORPORATIONS — Design and distribution obligations — Target market determinations — Knowledge requirements for review triggers — s 994C, Corporations Act 2001 (Cth) (Corporations Act)

Abstract:

The Federal Court has imposed an $8 million penalty on American Express Australia Limited (American Express) for contravening its design and distribution obligations (DDOs) by continuing to issue credit cards despite high cancellation rates suggesting that the target market determinations for these products were no longer appropriate.

Justice Jackman’s judgment provides guidance about the obligations imposed on retail financial product issuers under s 994C of the Corporations Act to review a target market determination when they know, or ought reasonably to know, that the determination is no longer appropriate.

Background

American Express issued the “DJs Amex Card” and “DJs Amex Platinum Card” co-branded with David Jones, which were primarily distributed through David Jones stores. As required by the DDOs in Pt 7.8A of the Corporations Act, American Express made target market determinations (TMDs) for these cards in October 2021.

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Federal Court finds retail financial product issuer breached design and distribution obligations (Australian Securities and Investments Commission v Firstmac Limited)

Date: 10 July 2024
Court: Federal Court of Australia
Judge: Downes J
Judgment date: 10 July 2024
Catchwords: CORPORATIONS — s 994E, Corporations Act 2001 (Cth) (Corporations Act) — design and distribution obligations — obligation to take “reasonable steps” that are “reasonably likely” to result in conduct consistent with target market determination

Abstract:

The Federal Court has found that Firstmac Limited (Firstmac) contravened its design and distribution obligations (DDOs) in s 994E of the Corporations Act by failing to take reasonable steps in relation to the distribution of its “High Livez” investment product.

The case provides important guidance on the steps that retail financial product issuers must take to comply with the DDOs in Pt 7.8A of the Corporations Act. In particular, the decision clarifies the scope of the obligation on product issuers to “take reasonable steps that will, or are reasonably likely to” result in their conduct being consistent with the product’s target market determination.

Background

Firstmac is a non-bank lender that offered various financial products to retail clients between October 2021 and September 2022, including term deposits and a unit trust investment product known as “High Livez”.

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Senate Committee Report highly critical of ASIC

Date: 5 July 2024
Source: Parliament of Australia

Abstract:

The Senate Economics References Committee has handed down its final report (Report) into the capacity and capability of the Australian Securities and Investments Commission (ASIC).

The Report was highly critical of the corporate regulator and outlined 11 key recommendations:

1. Recognition of failure: The Government should acknowledge that ASIC has failed to fulfill its regulatory responsibilities effectively.
2. Separation of functions: The Government should consider splitting ASIC’s functions into a companies regulator and a separate financial conduct authority to enhance efficiency.
3. Improved handling of corporate misconduct: ASIC or future regulatory bodies should be legislatively required to investigate reports of misconduct appropriately. They must develop consistent standards for transparent reporting and establish service standards for providing detailed information to those reporting misconduct.
4. Transparency expectations: ASIC’s statement of expectations should include priorities related to transparency and be reviewed by the Parliamentary Joint Committee on Corporations and Financial Services.
5. Public reporting and registers: The Government should legislate transparency objectives for ASIC, including creating a public register of civil or criminal outcomes from misconduct reports and a long-term public reporting framework to assess regulatory performance.
6. Whistleblower protection: The Corporations Act should be amended to offer financial incentives and compensation for whistleblowers to ASIC, encouraging disclosures that benefit the public.
7. Prioritising litigation: ASIC or any successor regulator should prioritise litigation for serious breaches of corporations law, especially those resulting in significant consumer losses.

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Taxation (Multinational — Global and Domestic Minimum Tax) Bill 2024 (Cth)

Date: 5 July 2024
Source: Parliament of Australia
Jurisdiction: Federal

Abstract:

The Government has introduced legislation that will set a 15% minimum tax for all multinational enterprise (MNE) groups with an annual global revenue of at least EUR 720m (approximately A$1.2b) effective from 1 January 2024.

The reforms arise from the agreement made in 2021 between Australia and 135 other members of the Organisation for Economic Co-operation and Development (OECD)/G20 to the ‘Two-Pillar’ solution of tax reform to ensure that MNEs pay a fair share of tax wherever they operate and generate profits. The legislation is part of delivering on the Government’s 2023-24 Budget announcement to implement Pillar Two of the OECD/G20s ‘Two-Pillar’ solution.

The Government introduced the following 3 bills as a set of legislation required to implement a global and domestic minimum tax in Australia:

• Taxation (Multinational—Global and Domestic Minimum Tax) Imposition Bill 2024 (Cth) (Imposition Bill);
• Taxation (Multinational—Global and Domestic Minimum Tax) Bill 2024 (Cth) (Taxation Bill); and
• Treasury Laws Amendment (Multinational—Global and Domestic Minimum Tax) (Consequential) Bill 2024 (Consequential Bill)

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Listed@ASX Compliance Update – 7th edition 2024

Date: 2 July 2024
Source: Australian Securities Exchange (ASX)

Abstract:

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Report of Senate Greenwashing inquiry delayed until November 2024

Date: 28 June 2024
Source: Federal Parliament

The reporting date for the Senate Standing Committee on Environment and Communications (Committee) inquiry into Greenwashing (Inquiry) has been extended until 20 November 2024.

The Senate referred the inquiry to the Committee in March 2023, with an initial reporting date in December 2023. That was subsequently extended until 28 June 2024 and has now been further extended until November.

Submissions to the Inquiry closed in June 2023, with 178 submissions received from a broad range of stakeholders, including regulators, businesses and advocacy groups. Public hearings were held in April and May of this year.

Information about the Inquiry, including the terms of reference and copies of all submissions, is available on the Committee website.

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Treasury establishes panel to review the meeting and documents amendments to the Corporations Act 2001

Date: 25 June 2024
Source: Statutory Review of the Meetings and Documents Amendments – consultation

The Assistant Treasurer and Minister for Financial Services, the Hon Stephens Jones MP has established a panel to conduct the statutory review of the meetings and documents amendments made to the Corporations Act 2001 (Cth) by Schedule 1 of the Treasury Laws Amendment (2021 Measures No.1) Act 2021 and the Corporations Amendment (Meetings and Documents) Act 2022.

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Takeovers Panel declares unacceptable circumstances in Beam Investment transactions

Date: 24 June 2024
Source: Takeovers Panel

Abstract:

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Federal Court finds iSignthis Limited liable for continuous disclosure breaches and misleading conduct, and director for breach of his duties

Date: 24 June 2024
Judge: MCEVOY J
Judgment date: 21 June 2024
Catchwords: continuous disclosure obligations – misleading or deceptive conduct – directors duty of care and diligence

Abstract:

The Australian Securities and Investments Commission (ASIC) initiated proceedings against iSignthis Limited (iSignthis) and its former CEO, Mr Nickolas John Karantzis for continuous disclosure breaches and breaches of directors’ duties. The Federal Court found that iSignthis misrepresented its revenue composition and failed to disclose significant information about the termination of its relationship with Visa, resulting in multiple breaches of the Corporations Act 2001 (Cth) (Corporations Act) by both the company and Mr Karantzis.

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Federal Government releases Australia’s sustainable finance roadmap

Date: 19 June 2024
Source: Treasury

Abstract:

Following consultation in late 2023, the Federal Government has released Australia’s sustainable finance roadmap, setting out its vision for the implementation of key sustainable finance reforms and related measures.

The sustainable finance roadmap provides important clarity on the steps to achieving Australia’s sustainable finance policy objectives and supports the development of sustainable finance markets in Australia. The roadmap includes 10 policy priorities across three pillars as follows:

Pillar 1: Improve transparency on climate and sustainability

1. Implementing climate-related financial disclosures
2. Developing the Australian Sustainable Finance Taxonomy
3. Supporting credible net zero transition planning
4. Developing sustainable investment product labels

Pillar 2: Financial system capabilities

5. Enhancing market supervision and enforcement
6. Identifying and responding to systemic financial risks
7. Addressing data and analytical challenges
8. Ensuring fit for purpose regulatory frameworks

Pillar 3: Australian Government leadership and engagement

9. Issuing Australian sovereign green bonds
10. Stepping up Australia’s international engagement

A copy of the sustainable finance roadmap is available here.

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APRA releases finalised guidance on new Prudential Standard CPS 230 Operational Risk Management

Date: 14 June 2024
Source: Australian Prudential Regulation Authority (APRA)

APRA has published its finalised Prudential Practice Guide CPG 230 Operational Risk Management (Practice Guide) intended to help banks, insurers and superannuation trustees implement Prudential Standard CPS 230 Operational Risk Management (CPS 230), which takes effect from 1 July 2025.

CPS 230 aims to ensure that APRA regulated entities (entities) are resilient to operational risk and disruptions. CPS 230 requires entities to effectively manage operational risk, maintain critical operations through severe disruptions and manage risk associated with the use of service providers.

The finalised Practice Guide has been updated to address feedback from submissions to the first draft and has been simplified to align more closely with CPS 230.

In response to submissions on the draft Practice Guide, APRA has announced key changes including:

• Non-Significant Financial Institutions will have a further 12 months to comply with certain business continuity and scenario analysis requirements in CPS 230; and
• APRA’s three-year supervision programme to support implementation.

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Treasurer makes disposal order in relation to foreign interests in rare earths miner Northern Minerals Limited

Date: 6 June 2024
Source: Federal Register of Legislation

Abstract:

The Treasurer has issued a disposal order under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) in relation to certain foreign interests in rare earths miner Northern Minerals Limited (ASX: NTU). The order is the first non-land disposal order issued under the FATA.

Northern Minerals Limited (Northern Minerals) is an Australian heavy rare earths-focused mining company. It owns the Browns Range project in northeastern WA and aims to develop it to mine dysprosium and terbium. These elements are key to producing high-performance magnets, which are used in defence capabilities as well as electric vehicles, wind turbines, smartphones, LCD screens and displays, energy saving lighting, and speakers and headphones.

Under the Foreign Acquisitions and Takeovers (Disposal of Interests in Northern Minerals Limited) Orders 2024, Yuxiao Fund Pte Ltd (Yuxiao) and four other shareholders are directed to dispose of their interests in Northern Minerals within 60 days. The orders cover approximately 614 million ordinary shares (10.4%) of Northern Minerals’ issued share capital.

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ASIC launches new Professional Registers Search

Date: 29 May 2024
Source: Australian Securities and Investments Commission

Abstract:

The Australian Securities and Investments Commission (ASIC) has announced the upcoming launch of its new Professional Registers Search (PRS) in late June 2024. This new search functionality will allow users to search across multiple professional registers databases using a single search.

Currently, users need to search each professional register individually to find licenses, registrations and other information. The new PRS will enable faster and more convenient to access information.

Key features of the new PRS include:

• Single search across multiple databases: The PRS will initially allow users to search across nine registers in one search, including financial and credit licensees and representatives, liquidators, auditors and more.
• Filtering of search results: Users will be able to filter results to show only licenses or registrations in a particular state or territory or via other criteria. This provides more targeted information.
• Improved user experience: The search has been designed with a 'user-first' approach to make it more intuitive and easier for anyone to find information.

A survey on the PRS homepage will collect user experience feedback to inform ongoing improvements.

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ASIC Commissioner indicates ASIC’s compliance priorities

Date: 29 May 2024
Source: Australian Securities and Investments Commission

Abstract:

Australian Securities and Investments Commission (ASIC) Commissioner Alan Kirkland has outlined ASIC’s compliance priorities for the financial services field in a speech delivered to the Australian Finance Industry Association Risk Summit 2024. The areas of focus are centred on key issues affecting consumers including the rising cost of living, climate change and technological advancement.

With these areas in mind, ASIC will target behaviours affecting consumers such as:

• home loan lenders’ compliance with financial hardship obligations (following the findings revealed in a review of practices of 10 large lenders);
• high-cost credit facilities and predatory lending practices;
• misconduct in used car financing; and
• misconduct impacting First Nation people and vulnerable consumers.

ASIC is also focused on how corporations deal with technological risk relating artificial intelligence, cyber security and financial scams.

See the full text of the speech here.

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ASIC expands financial reporting and auditing program

Date: 20 May 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

ASIC has announced its focus areas for the financial reporting and audit surveillance program, which now includes superannuation funds alongside listed companies, public interest entities, and large proprietary companies.

ASIC Commissioner Kate O’Rourke highlighted the need for preparers, directors, and auditors to pay close attention to these focus areas to collectively improve financial reporting and audit quality. Ms O’Rourke also stated that ASIC will continue to scrutinize financial reporting elements requiring the most significant judgment.

Surveillance coverage

This is the second year of the inclusion of large proprietary companies, previously exempt, in ASIC’s audit surveillance program. These companies are now required to lodge audited financial reports, with ASIC monitoring compliance closely. Additionally, superannuation trustees must now lodge audited financial reports within three months of the financial year-end, starting from the 2023-24 financial year.

Climate-Related Risks

ASIC urges directors to engage with the upcoming mandatory climate reporting reforms proposed by the Australian Government, which will apply to entities required to prepare financial reports under Chapter 2M of the Corporations Act. These reforms are set to begin with financial years starting from 1 January 2025. In the interim, entities are advised to voluntarily report material climate-related risks in line with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations, ensuring that voluntary statements are not misleading.

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Listed@ASX Compliance Update – 6th edition 2024

Date: 20 May 2024
Source: Australian Securities Exchange (ASX)

Abstract:

On 16 May 2024, the Australian Securities Exchange (ASX) issued Compliance Update No. 06/24, highlighting two key updates:

1. New Data Breach Example in Guidance Note 8:

The ASX has introduced a new example to Guidance Note 8 on Continuous Disclosure Listing Rules 3.1 – 3.1B, addressing common disclosure issues during cyber incidents. The example illustrates how existing rules apply to a hypothetical data breach scenario, including the use of trading halts, voluntary suspensions, and confidential engagement with regulators. This updated Guidance Note, which takes effect from 27 May 2024, will be accessible via ASX Online and the ASX website.

2. Nomination of External Director Candidates for Election at AGM:

Under Listing Rule 14.3, listed entities must accept nominations for director elections up to 35 business days before the annual general meeting unless otherwise specified in the entity’s constitution. For industries requiring regulatory approvals for director appointments, ASX advises entities to handle nominations such that candidates can be conditionally appointed, pending necessary approvals.

For more, see the full Listed@ASX Compliance Update no. 06/24 here.

Subscribe to our practice area round-up emails.

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Independent review of continuous disclosure reforms tabled in Parliament and publicly released

Date: 15 May 2024
Source: The Treasury

Abstract:

The final report (Report) of the independent review of changes to the continuous disclosure framework enacted by the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth) (Amending Act) was tabled in both houses of Parliament on 14 May 2014 and subsequently publicly released.

The Amending Act, passed by the previous Coalition Government amended the Corporations Act 2001 (Cth) (Corporations Act) to add a knowledge, recklessness or negligence fault element to civil proceedings for breaches of continuous disclosure obligations by companies and their directors and officers. The Amending Act contained sunset provisions (sections 1683B and 1683C) requiring the Government to initiate an independent review of the impact of the new provisions within 2 years of their enactment and to respond to the review findings. Last September, the Labor Government appointed former ASX Chief compliance officer Kevin Lewis to undertake the independent review and the Report was received on 13 February 2024.

The overarching finding of the Report is that the 2-year review period provided under the Amending Act has been insufficiently long to “draw meaningful, evidence - based conclusions” on many matters forming part of the review’s terms of reference.

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Legislation amending subsidiary disclosure and thin cap rules passes Parliament and gains Assent

Date: 13 May 2024
Source: Federal Parliament

Abstract:

The Federal Parliament has recently passed the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share - Integrity and Transparency) Bill 2023 (Cth) (Bill), which will introduce major reforms in the “thin capitalisation” taxation regime. The Bill received Royal Assent to become the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share - Integrity and Transparency) Act 2024 (Cth) on 8 April 2024. These changes to the Income Tax Assessment Act 1936 (Cth) , Income Tax Assessment Act 1997(Cth) and the Taxation Administration Act 1953 (Cth) are set to align with the Organisation for Economic Co-operation and Development's (OECD) best practices, particularly OECD BEPS Action 4, and will take effect from income years commencing on or after 1 July 2023. The amendments target multinational entities operating in Australia, introducing stricter measures to limit interest deductions and enhance transparency in financial reporting.

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Federal Court’s first ruling against a non-cash payment facility involving crypto

Court: Federal Court of Australia
Judge(s): Downes J
Judgment date: 3 May 2024
Catchwords: s 911A of the Corporations Act 2001 (Cth) contraventions — exemptions from holding an Australian Financial Services Licence — non-cash payment facility — digital currency and crypto assets — authorised representative — financial product and financial product advice — ss 12DA and 12DB of the Australian Securities and Investments Commission Act 2001 (Cth) contraventions — promotion of non-cash payment facility involving crypto — false or misleading representations —misleading or deceptive conduct of the Corporations Act 2001 (Cth) contraventions — unauthorised customer account withdrawals — lack of adequate systems to prevent or detect fraudulent transactions by third parties — liability — agreed penalty — regulator standing to enforce civil penalty provisions for failure to have appropriate controls in place by financial services providers

Abstract:

In proceeding brought by the Australian Securities and Investments Commission (ASIC), the Federal Court has declared that BPS Financial Pty Ltd (BPS) contravened s 911A(1) and 911A(5B) of the Corporations Act 2001 (Cth) (Corporations Act) and ss 12DA(1), 12DB(1)(a) and 12DB(1)(e) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) in respect of a non-cash payment facility that relates to the “Qoin” crypto-asset tokens and digital wallets (together as “Qoin Facility”), which BPS established in 2020.

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ASIC seeks feedback on proposed updates to guidance on AFS licensing obligations for carbon markets

Date: 6 May 2024
Source: Australian Securities and Investments Commission

The Australian Securities and Investments Commission (ASIC) has released a consultation paper seeking stakeholder feedback on proposed updates to its regulatory guidance on Australian financial services (AFS) licensing requirements for carbon market participants.

The key proposed changes relate to the implications of recent reforms to the financial services and markets provisions in Ch 7 of the Corporations Act (2001) (Cth) (Corporations Act) enacted by the Safeguard Mechanism (Crediting) Amendment Act 2023 (Cth). From 1 July 2023, the Clean Energy Regulator (CER) can issue safeguard mechanism credits units (SMCs) to large industrial facilities covered by the Safeguard Mechanism. which are regulated as financial products under the Corporations Act.

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Federal Court orders Macquarie Bank to pay $10M penalty for unauthorised customer account withdrawals (full judgment update)

Court: Federal Court of Australia
Judge(s): Wigney J
Judgment date: 19 April 2024
Catchwords: s 912A of the Corporations Act 2001 (Cth) contraventions — unauthorised customer account withdrawals — lack of adequate systems to prevent or detect fraudulent transactions by third parties — liability — agreed penalty — regulator standing to enforce civil penalty provisions for failure to have appropriate controls in place by financial services providers

Abstract:

In proceeding brought by the Australian Securities and Investments Commission (ASIC), the Federal Court has ordered Macquarie Bank Ltd (Macquarie) to pay a penalty of $10 million for failing to have effective controls preventing unauthorised fee transactions by third parties on customer accounts, in contravention of s 912A(1)(a) and (5A) of the Corporations Act 2001 (Cth).

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ASIC Chair outlines the regulator’s roadmap on greenwashing and sustainable finance reform

Date: 3 May 2024
Source: Australian Securities and Investments Commission

Joe Longo, the Chair of the Australian Securities and Investments Commission (ASIC) has delivered a speech at the Responsible Investment Association Australasia (RIAA) elaborating on the regulator’s approach to greenwashing and sustainability representations.

Greenwashing is misleading or deceptive conduct

Mr Longo reiterated prior statements by both the ACCC and ASIC and by the courts, that “greenwashing” is by no means a new concept, but simply a manifestation of misleading or deceptive conduct that has recently entered the spotlight. Likewise, he emphasised that the obligation for sustainability-based claims to be accurate and able to be substantiated and founded on reasonable grounds applies equally to all kinds of representations and information provided to markets and investors.

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Second stage consultation on reforming Australia’s AML/CTF regime

Date: 3 May 2024
Source: Progressing reforms to Australia’s anti-money laundering and counter-terrorism financing laws

On 2 May the Attorney-General's Department (A-G) announced the commencement of the second stage of consultation on reforming Australia's anti-money laundering and counter-terrorism financing (AML/CTF) regime, the key requirements of which are currently set out in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the Act).

The second stage consultation includes the release of detailed reform proposals outlined in several consultation papers published on the A-G's website. The reforms aim to extend the scope of the existing AML/CTF legislation to high-risk sectors including lawyers, accountants, trust and company service providers, real estate agents and dealers in precious metals and stones.

Other key objectives of the proposed reforms which will apply to both current and newly proposed reporting entities are to simplify and modernise the regime in line with international standards set by the Financial Action Task Force (the global financial crime watch dog), reduce the complexity and regulatory burden for reporting entities, ensure the regime responds to evolving threats, and harden businesses against exploitation by criminals.

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AFSL holder Odyssey receives good behaviour bond for failure to comply

Date: 2 May 2024
Source: Australian Securities and Investments Commission

Odyssey Equity Finance Pty Ltd (Odyssey), an Australian financial services licensee, was sentenced in the Dandenong Magistrates’ Court for failing to lodge financial reports with ASIC for three consecutive financial years.

Odyssey pleaded guilty to three counts of contravening s 989B of the Corporations Act 2010 (Cth) (Corporations Act) for failing to lodge a profit and loss statement and balance sheet, and three counts of contravening s 989C for failing to lodge an auditor's report.

At the sentencing hearing, Odyssey submitted its failures were due to the ill health of its director. The Magistrate was not satisfied the medical treatment prevented compliance, but accepted his illness and Odyssey’s guilty plea as mitigating factors.

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Government announces reforms to strengthen foreign investment framework

Date: 2 May 2024
Source: Treasury

Abstract:

The Federal Government has announced reforms to streamline and strengthen Australia’s foreign investment framework, to deliver a stronger, faster and more transparent approach to foreign investment.

The reforms implement a risk-based approach to reviewing foreign investment proposals and aim to attract investment and boost economic security, while strengthening the Government’s ability to protect the national interest in an increasingly complex economic and geostrategic environment.

Strengthening framework to protect national interest

Key changes to strengthen the foreign investment framework for higher-risk proposals include:

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ASIC orders retailer to end Centrepay credit arrangements

Date: 26 April 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The Australian Securities and Investments Commission (ASIC) has ordered that Coral Coast Distributors (Cairns) Pty Ltd (Coral Coast) can no longer sign up customers into credit agreements for purchases through Centrepay deferred deductions arrangements in its Urban Rampage stores. This is the first time ASIC has issued a final stop order under the design and distribution obligations (DDO) regime.

ASIC previously made an interim stop order preventing Coral Coast from entering into new credit agreements via Centrepay. The stop order was initially in place for 21 days, before being extended while an ASIC delegate made a final determination.

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ASIC outlines steps for mandatory climate disclosure regime

Date: 24 April 2024
Source: Australian Securities and Investments Commission

Abstract:

The Australian Securities and Investments Commission (ASIC) Chair Joe Longo delivered a keynote speech at the Deakin Law School International Sustainability Reporting Forum on 22 April 2024, focusing on the forthcoming mandatory climate disclosure regime in Australia. The speech highlighted the need for entities to begin preparing for the new climate reporting requirements, given the considerable changes expected in financial reporting and disclosure standards.

More than 6,000 entities will be required to report under the new climate-related disclosure requirements within the next few years, with Longo emphasising that organisations must establish systems, processes, and governance practices to comply with these changes.

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Federal Court orders Macquarie Bank to pay $10M penalty for unauthorised customer account withdrawals

Date: 22 April 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

Macquarie Bank Ltd (Macquarie) has been ordered by the Federal Court to pay a $10 million penalty for its failure to establish effective controls preventing unauthorised fee transactions by third parties on customer accounts in contravention of s 912A(1)(a) and (5A) of the Corporations Act 2001 (Cth).

The Federal Court found that, between 1 May 2016 and 15 January 2020, Macquarie had failed to implement effective controls to prevent or detect transactions conducted by third parties through Macquarie’s bulk transacting system, which were outside the scope of their authority that only permitted them to withdraw their fees from their client’s Cash management accounts, such as the fraudulent transactions made by financial adviser, Ross Hopkins.

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Federal Court finds DG Institute made false or misleading representations, sole director knowingly concerned in contraventions (Australian Competition and Consumer Commission v Master Wealth Control Pty Ltd)

Date: 10 April 2024
Court: Federal Court of Australia
Judge(s): Jackman J
Judgment date: 9 April 2024
Catchwords: Consumer law – misleading and deceptive conduct – accessorial liability

Abstract:

The Federal Court has found Master Wealth Control Pty Ltd (Master Wealth Control), trading as DG Institute, made false or misleading representations in the promotion and sale of two education programs for control of wealth. Its director, Ms Dominique Grubisa, was also found liable for aiding, abetting and procuring contraventions and being knowingly concerned in and party to the contraventions.

 

Background

DG Institute offered two education programs relating to property and business investment to consumers called Real Estate Rescue (RER) and Master Wealth Control (MWC) from April 2017 to November 2022. Both programs were promoted through free in-person and online seminars and in videos featuring Ms Grubisa on its website.

During this period, at least 1,900 and 1,800 students were enrolled in the RER and MWC programs respectively and each paid between $4,500 to $9,200 to participate. DG Institute earned a total of over $18 million in revenue from both programs.

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Corporate Finance Update – Issue 16

Date: 9 April 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The recent Corporate Finance Update Issue 16 delves into a range of topics within the corporate finance sector, focusing on cybersecurity, environmental compliance, greenwashing, and significant regulatory updates.

Cybersecurity Insights: The update emphasises the partnership between the regulatory body and the Council of Financial Regulators (CFR) in conducting Cyber and Operational Resilience Intelligence-led Exercises (CORIE) with major financial organisations. These exercises aim to fortify cyber resilience by simulating realistic cyber attacks to identify and address vulnerabilities, particularly in password management and access controls. Findings reveal critical security gaps, underscoring the need for enhanced cybersecurity measures, including robust password protocols and multifactor authentication, to protect against evolving cyber threats and safeguard sensitive data within the financial services sector.

Environmental Compliance and Greenwashing: The issue sheds light on the enforcement actions taken against greenwashing. ASIC's issuance of infringement notices to entities such as Morningstar and Northern Trust highlights the regulatory focus on ensuring that companies' environmental claims are truthful and substantiated. The update details the specific allegations against these firms, pointing out the discrepancies in their environmental claims and the actual investments or practices they engaged in.

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Federal Court finds Vanguard engaged in greenwashing by misrepresenting ESG credentials of investment fund (Australian Securities and Investments Commission v Vanguard Investments Australia Ltd [2024] FCA 308)

Date: 3 April 2024
Court: Federal Court of Australia
Judge(s): O’BRYAN J
Judgment date: 28 MARCH 2024
Catchwords: CONSUMER LAW – ss 12DB and 12DF ASIC Act – greenwashing – ESG representations

Abstract:

In proceedings brought by the Australian Securities and Investments Commission (ASIC), the Federal Court has found Vanguard Investments Australia Ltd (Vanguard) liable for breaching the consumer protection provisions in ss 12DB and 12DF of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) by making false or misleading representations about the ESG screening criteria for its Ethically Conscious Global Aggregate Bond Index Fund (the Fund). A hearing as to penalties will occur at a later date.

The case:

ASIC alleged that in Product Disclosure Statements (PDS), media releases, website content, a Youtube video interview and at a promotional event presentation later published online, Vanguard had made representations that the Fund offered an ethically conscious investment opportunity by seeking to track the Bloomberg Barclays MSCI Global Aggregate SRI Exclusions Float Adjusted Index (Index)) and that before being included in the Index (and thus, the Fund), securities were researched and screened against ESG criteria and those that breached the criteria were excluded or removed.

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Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 introduced

Date: 3 April 2024
Source: Parliament of the Commonwealth of Australia

Catchwords: Corporations – operation of unregistered management investment scheme in contravention of s 601ED(5) of the Corporations Act 2001 (Cth) – carrying on financial services business without an Australian Financial Services Licence in contravention of s 911A of the Corporations Act – investment in cryptocurrency

Abstract:

On 27 March 2024, landmark climate reporting legislation was introduced into the House of Representatives as Schedule 4 of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Bill).

The Bill was introduced following consultation on an exposure draft of the Bill and, if enacted, would introduce a new mandatory climate disclosure reporting regime in Australia which is aligned with international standards.

The Senate has referred the provisions of the Bill 2024 to the Senate Economics Legislation Committee for inquiry and report by 30 April 2024.

Mandatory climate-related reporting regime

The specific details of the new mandatory climate disclosure requirements will be set out in new accounting standards which are currently being developed by the Australian Accounting Standards Board (AASB) and based on the International Sustainability Standards Board (ISSB) standards: IFRS S1 and IFRS S2.

There are a few key differences in the Bill compared with the exposure draft. For example, the reporting requirements which apply to Group 1 entities.

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New legislation to increase the accessibility and affordability of financial advice

Date: 28 March 2024
Source: Treasury

Summary originally published by Capital Monitor

The Government has introduced the first tranche of legislation to deliver its comprehensive package of reforms to ensure Australians have access to quality and affordable financial advice, said Assistant Treasurer Stephen Jones. There are over five million Australians at or approaching retirement who need assistance to navigate the pension and superannuation systems. Unfortunately, the average cost of financial advice puts professional advice out of reach for many Australians. The Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024 implements reforms which reduce unnecessary red tape that adds to the time and cost of preparing financial advice.

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Update on consultation draft for 5th Edition of ASX’s Corporate Governance Principles and Recommendations

Date: 25 March 2024
Source: Australian Securities Exchange (ASX)

Abstract:

The ASX Corporate Governance Council is consulting on the proposed 5th Edition of its Corporate Governance Principles and Recommendations. Consultation is open until 6 May 2024.

Background

The 4th Edition was issued in 2019, shortly after the release of the final report from the Royal Commission into Misconduct into the Banking, Superannuation and Financial Services Industry.

The 5th Edition consultation draft is intended to respond to evolving investor and community expectations around issues such as corporate conduct, culture, management of risk, stakeholder relationships, reporting, and remuneration. It is intended to reinforce entities’ frameworks, and not to create parallel regulatory regimes.

The 5th Edition maintains the existing 8 Principles, with some changes to expression. It contains 33 general Recommendations, with 7 additional Recommendations that apply only in limited cases (eg for entities established outside of Australia).

The consultation draft and a mark-up against the Fourth Edition are available on the ASX website. ASX has also released a background paper with consultation questions, as well as a webinar summarising the key proposed changes.

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ASIC commences first proceedings against director for failing to obtain DIN

Date: 25 March 2024
Source: Australian Securities and Investments Commission

The Australian Securities and Investments Commission (ASIC) has commenced proceedings against a director for failing to obtain a director identification number (DIN).

The DIN regime, administered by the Australian Business Registry Services and enforced by ASIC came into effect on 1 November 2021 and existing company directors had until 30 November 2022 to apply for a DIN.

Failure to have a DIN is both a civil contravention and a criminal offence (s1272C(1) Corporations Act 2001 Cth) This is the first time proceedings have been brought against a director for contravening section 1272C(1). The defendant faces a maximum penalty of $13,320.

Read ASIC’s media release here.

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Financial Accountability Regime commences today (15 March 2024)

Date: 15 March 2024
Source: Australian Prudential Regulation Authority (APRA)

Abstract:

The Financial Accountability Regime (FAR) has commenced for the banking industry. As noted in our previous update, on 8 March 2024 the regulators, APRA and ASIC, released final rules and further guidance to support the financial services industry in implementing the FAR regime.

The regulator’s information package released on 8 March 2024 (and updated on 14 March 2024) includes:

• the Regulator rules, which prescribe information for inclusion in the FAR register of accountable persons;
• the Transitional rules, which prescribe information to be provided by authorised deposit-taking institutions (ADIs) in relation to their existing accountable persons under the BEAR at the transition point to the FAR;
• an Information paper for ADIs, including the information ADIs and their authorised NOHCs must provide to APRA and ASIC;
• an Information paper for accountability entities, including an overview on how the regulators will jointly administer the FAR and how the regulators will use their regulatory and enforcement powers;
• Accountability statement guidance and template; and
• reporting form instruction guides to assist banking entities in providing the required information to APRA and ASIC.

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ACCC’s 2024 compliance and enforcement priorities reinforce focus on consumer protection

Date: 12 March 2024
Source: Australian Competition & Consumer Commission (ACCC)

On 7 March 2024 the Australian Competition and Consumer Commission released its compliance and enforcement priorities for 2024/25. ACCC Chair Gina Cass-Gottlieb announced the priorities in her address to the Committee for Economic Development Australia.

The ACCC’s priorities span across both competition and consumer law. Many of the issues identified in the ACCC’s 2022 and 2023 compliance and enforcement priorities remain a focus for the ACCC again this year. Other priorities have gained further prominence due to prevailing economic trends and conditions including the cost-of-living crisis (and price increases across a range of products and services) and the drive towards green and sustainable alternatives for the benefit of consumers and the environment.

Exclusive arrangements by firms with market power and competition and consumer issues relating to digital platforms and in global and domestic supply chains are among the enforcement priorities from 2023/4 that were not listed in the 2024/5 priorities.

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ASX pays $1M+ penalty for information transparency failure

Date: 7 March 2024
Source: Australian Securities and Investments Commission

Abstract:

The Australian Securities Exchange Ltd (ASX) has paid a $1,050,000 penalty after an Australian Securities and Investments Commission (ASIC) investigation found the market operator to have failed to comply with the Market Integrity Rules.

The investigation concluded that ASX had breached Market Integrity Rule 6.1.2, which requires market operators to make certain information available in the pursuit of pre-trade transparency, on 8,417 occasions between 4 April 2019 and 22 December 2022.

In determining the penalty, ASIC considered that the incorrect system which investors were presented with contained lessor information regarding price formation, liquidity and investment opportunities. ASIC found that whilst there was no evidence of other losses being suffered due to ASX’s failure to comply with the rule, the damaged caused to public confidence in the operation of the market was an aggravating factor. Also viewed as an aggravating factor was ASX’s failure to detect the issue and escalate it for remediation.

This is the first time that ASIC has issued an infringement notice to a market operator.

Read ASIC’s full media release here.

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ASIC issues infringement notice for greenwashing to fund trustee Melbourne Securities

Date: 28 February 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The The Australian Securities & Investments Commission (ASIC) has issued an infringement notice to Melbourne Securities Corporation Limited (Melbourne Securities) as trustee and responsible entity of the Bloom Fund for alleged greenwashing conduct. Melbourne Securities has paid $13,320 to comply with the notice.

Between March 2022 and June 2023, Melbourne Securities made several statements in the Bloom Fund’s PDS representing that the Fund would seek to avoid investments in various excluded activities such as fossil fuels.

However, contrary to the statements in the PDS, the Bloom Fund utilised revenue thresholds that ASIC alleges were not disclosed to investors, which applied a negative screening process allowing it to invest in companies that derived up to 33% revenue from such excluded activities.

For example, according to ASIC, between March 2022 and May 2023, the Fund acquired and held a direct investment in General Electric Co which derived 16% of its revenue from fossil fuels in the 2022 financial year.

Greenwashing in financial services has been a clear focus for ASIC in the past 18 months.

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ASIC’s appeal successful in its misrepresentation case against ACBF and Youpla (Australian Securities and Investments Commission v ACBF Funeral Plans Pty Ltd (in Liq))

Date: 4 March 2024
Court: Federal Court of Australia – Full Court
Judge(s): Murphy, O’Bryan and Shariff JJ
Judgment date: 29 February 2024

Catchwords: Consumer law – Alleged false and misleading representations and misleading or deceptive conduct in marketing and selling funeral insurance plans to Indigenous communities

Abstract:

The Australian Securities and Investments Commission (ASIC) has successfully appealed against ACBF Funeral Plans Pty Ltd (ACBF) and Youpla Group Pty Ltd (Youpla), with the Full Federal Court finding that their representation that they were under Aboriginal ownership or management from 1 January 2015 to 30 November 2018 was false.

Background

ACBF, a Youpla subsidiary, offered, promoted and sold their funeral expenses insurance policy named the “Aboriginal Community Funeral Plan” (ACF Plan) primarily to Aboriginal consumers and promoted the plan as “Australia’s only funeral insurance plan dedicated to the Aboriginal community”.

In 2017, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry made adverse findings against ACBF.

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ASIC issues interim stop order to retailer for Centerpay deductions

Date: 4 March 2024
Court: Federal Court of Australia
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The Australian Securities and Investments Commission (ASIC) has issued an interim stop order under s 739 of the Corporations Act 2001 (Cth) (Corporations Act) to Coral Coast Distributors (Cairns) Pty Ltd (CCD), which operates Urban Rampage retail stores, to halt its practice of having customers enter into credit agreements for purchases through Centrepay deductions.

As these deductions constituted a credit facility, CCD was required to adhere to the design and distribution (DDO) regime, contained in Pt 7.8A of the Corporations Act by publishing a Target Market Determination (TMD) to identify the class of consumers for whom the product was suitable and taking steps to ensure it would be marketed to that class. ASIC considered that CCD's Target Market Determination (TMD) lacked detail, particularly regarding consumers' financial capacity assessment and that this resulted from CCD’s inability to ensure that this form of credit facility was suited to the needs of the consumers identified in the TMD.

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ANZ/Suncorp acquisition to proceed as Tribunal overturns ACCC decision

Date: 20 February 2024
Source: Australian Competition & Consumer Commission

The Australian Competition Tribunal (Tribunal) has set aside the Australian Competition & Consumer Commission’s (ACCC) decision to deny authorisation of ANZ's proposed acquisition of Suncorp's banking business.

The Tribunal is the review body for decisions made by the ACCC and applies the same authorisation test as the ACCC, granting authorisation if either: 1) the conduct would not have the effect or be likely to have the effect of substantially lessening competition; or (2) the public benefit would outweigh the detriment.

The acquisition will now proceed to Treasurer Jim Chalmers for final approval and also requires modifications to existing legislation through the Queensland parliament

The ACCC’s decision

The ACCC denied authorisation for the acquisition in 2023, stating that it was not satisfied that the proposed acquisition was not likely to substantially lessen competition in the critical banking markets impacted by the acquisition (see our previous Latest Legal Update ACCC denies ANZ acquisition of Suncorp Bank). One of the ACCC’s key arguments was that the deal would make it more likely that the major banks would coordinate in the future.

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Federal Court finds crypto fintech engaged in unlicensed financial services (Australian Securities and Investments Commission v Web3 Ventures Pty Ltd)

Date: 16 February 2024
Court: Federal Court of Australia
Judge(s): Jackman J
Judgment date: 9 February 2024

Catchwords: Corporations – operation of unregistered management investment scheme in contravention of s 601ED(5) of the Corporations Act 2001 (Cth) – carrying on financial services business without an Australian Financial Services Licence in contravention of s 911A of the Corporations Act – investment in cryptocurrency

Abstract:

In Australian Securities and Investments Commission (ASIC) v Web3 Ventures Pty Ltd [2024] FCA 64, the Federal Court of Australia held that fintech company Block Earner had engaged in unlicensed financial services conduct in contravention of ss911A(1) and (5B) of the Corporations Act 2001 (Cth) (the Corporations Act) and operated an unregistered managed investment scheme contrary to ss 601ED(5) and (8) of the Corporations Act. The decision clarifies the application of financial services law to crypto products.

Background

Block Earner operates an online platform through its website, offering various products. Between March to November 2022, Block Earner offered an ‘Earner’ which allowed consumers to earn fixed yield returns from different crypto-assets. From March 2022 onward it Block Earner has offered a second product, ‘Access’ offers consumers streamlined access to peer-to-peer finance.

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Westpac ordered to pay $1.8 million penalty for unconscionable pre-hedging in interest rate swap deal

Date: 12 February 2024
Court: Federal Court of Australia
Judge(s): Lee J
Judgment date: 31 January 2024

Catchwords: Corporations – unconscionable conduct – insider trading – pre-hedging – Corporations – breach of financial services licensee obligations – services not provided efficiently, honestly and fairly

Abstract:

The Federal Court has ordered Westpac Banking Corporation (Westpac) to pay penalties of $1.8 million for unconscionable conduct in an $12 billion interest rate swap deal and $8 million towards for the Australian Securities and Investments Commission’s (ASIC) costs.

Background

On 20 October 2016, Westpac executed the largest interest rate swap in Australian financial market history (Swap Deal) to allow a consortium of investors from the IFM group and AustralianSuper to acquire a 50.4% interest in Ausgrid. Westpac had previously quoted the consortium an execution margin on the basis that it would not receive notice of the Swap Deal to prevent on-market pre-hedging.

Despite awareness of its clients’ concerns regarding potential pre-hedging, Westpac made internal plans to pre-hedge up to 50% of the interest rate and failed to disclose these plans to the consortium.

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Listed@ASX Compliance Update - 1st edition 2024

Date: 5 February 2024
Source: Federal Register of Legislation

Abstract:

The recent Listed@ASX Compliance Update details material updates to the Australian Securities Exchange (ASX) admission procedures and other compliance requirements. These updates, effective from 5 February 2024, aim to streamline processes for entities seeking admission to the ASX's official list and enhance clarity and efficiency in compliance and reporting. Below is a summary of the key changes and updates as outlined in the announcement:

1. Changes to ASX’s Admission Procedures:

• Spread Requirement Compliance: Entities must now use a standardied spread register template provided by ASX to demonstrate compliance with the spread requirement under Listing Rule 1.1 condition 8, ensuring at least 300 non-affiliated security holders, each with securities valued at a minimum of $2,000. A legal attestation confirming compliance with this requirement is also needed.
• Escrow Documentation Standardization: The documentation required to demonstrate compliance with escrow requirements has been standardized and reduced. The ASX will now accept a restriction notice in place of restriction deeds for ASX-imposed escrow, although restriction deeds may still be used voluntarily or if specifically required by ASX.

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Climate-related financial disclosure - Exposure draft legislation

Date: 22 January 2024
Source: Treasury

Summary originally published by Capital Monitor.

This consultation follows the government's announcement of the final policy design for corporate climate-related financial disclosure requirements, as outlined in the Policy Statement. The Exposure Draft legislation seeks to amend parts of the Australian Securities and Investment Commission Act 2001 and the Corporations Act 2001 (Cth) to introduce mandatory requirements for large businesses and financial institutions to disclose their climate-related risks and opportunities. Treasury is seeking views on the Exposure Draft legislation and accompanying explanatory materials by 9 February 2024. Late submissions cannot be considered.

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ALRC recommends confronting complexity in corporations and financial services legislation

Date: 19 January 2024
Source: Australian Law Reform Commission

Summary originally published by Capital Monitor.

The Australian Law Reform Commission (ALRC) Final Report, Confronting Complexity: Reforming Corporations and Financial Services Legislation (Report 141, 2023), was tabled in Parliament by the Attorney-General, the Hon Mark Dreyfus KC MP. The report found that the legislation governing Australia's financial services industry is a tangled mess - difficult to navigate, costly to comply with, and unnecessarily difficult to enforce. Judges have described the current laws as being like 'porridge', 'tortuous', 'treacherous', and 'labyrinthine'.

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Statutory Declarations Regulations 2023 (Cth) give effect to new Commonwealth statutory declaration regime from 1 January 2024

Date: 4 January 2024
Source: Federal Register of Legislation

Abstract:

Following the passing of the Statutory Declarations Amendment Act 2023 (Cth) (Amendment Act) allowing Commonwealth statutory declarations to be made and witnessed electronically from 1 January 2024 (including through certain online digital verification platforms), the Governor-General has made the Statutory Declarations Regulations 2023 (Cth) (Regulations).

The Regulations repeal and replace the Statutory Declarations Regulations 2018 (Cth) from 1 January 2024 and give effect to the amendments made to the Commonwealth statutory declaration regime by the Amendment Act, including by prescribing:

• who can witness Commonwealth statutory declarations; and
• the technical requirements for making Commonwealth statutory declarations under the new digital statutory declaration provisions.

Prescribed witnesses

The Regulations do not change who can witness a Commonwealth statutory declaration.

As with the previous regulations, the Regulations provide that a Commonwealth statutory declaration can be witnessed by any of the following “prescribed persons” in person or by video link:

• a person enrolled as a legal practitioner on the roll of a state or territory Supreme Court or the High Court of Australia;

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Higher fees for foreign investment in housing

Date: 11 December 2023
Source: Treasury

The Treasurer has announced the following proposed changes to the fees payable on foreign investment applications and actions involving land and land entities:

• *tripling the fees payable when a foreign person purchases an established residential dwelling;
• *doubling vacancy fees for all foreign-owned dwellings purchased since 9 May 2017;
• *strengthening the enforcement regime administered by the Australian Taxation Office;
• *applying the commercial foreign investment fees for investment applications and actions for Build to Rent projects from 14 December 2023 onwards.

Legislation will be required to implement the changes and is expected early in 2024.

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Listed@ASX Compliance Update: December 2023

Date: 11 December 2023
Source: Australian Securities Exchange (ASX)

Abstract:

ASX has released its latest Compliance Update for December 2023. Key updates include:

• The 2024 Market Announcements Reporting Calendar is now available, serving as a reference guide for listed entities with 30 June or 31 December balance dates, outlining key reporting dates under the Listing Rules.
• Insights from the AGM season: ASX observed common issues in draft notices of meeting submissions. The majority of these reviews occur in September and October for entities with a 30 June balance date.
• Entities are reminded to submit complete documentation for review at the same time. This includes proxy forms and any other relevant documents that are part of the notice of meeting package.
• Clarification on voting exclusion statements: Entities must ensure these statements align with Listing Rule 14.11 and exclude all votes as required by the rules.
• Issues of securities under an agreement: Notices of meeting should accurately reflect agreements for issuing securities, adhering to Listing Rules 7.1, 7.1A, and related guidance notes.
• Listing Rule 7.1A mandate: Entities seeking additional capacity under this rule must include specific information in their notice of meeting as per Listing Rule 7.3A.

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Federal Court orders ANZ to pay $900,000 penalty for continuous disclosure breach

Date: 11 December 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

Australia and New Zealand Banking Group Limited (ANZ) has been fined $900,000 by the Federal Court for breaching its continuous disclosure obligation. This courts decision that ANZ had breach section 674(2) of the Corporations Act pertains to a 2015 institutional share placement worth $2.5 billion where ANZ failed to notify the Australian Securities Exchange (ASX) that its underwriters were to acquire ANZ shares valued at approximately $754 million to $790 million as part of this placement. Justice Moshinsky emphasized the gravity of the contravention and the need for a substantial penalty to serve as a deterrent.

The court's decision emphasised the significance of continuous disclosure in financial markets with ASIC Deputy Chair Karen Chester remarking that this ruling sends a strong message to both ANZ and the broader market. ANZ was also ordered to cover ASIC's legal costs.

For more, see the media release here.

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High Court finds class action waiver clause unfair, allows Ruby Princess appeal

Date: 6 December 2023
Court: High Court
Judge(s): Gageler CJ, Gordon, Edelman, Gleeson, Jagot JJ
Judgment date: 6 December 2023

Catchwords: CONSUMER PROTECTION - Extraterritorial application of s 23 of Australian Consumer Law - Whether s 5(1)(g) of Competition and Consumer Act 2010 (Cth) extended application of s 23 of ACL to contract- Whether class action waiver clause constituted unfair term under s 23 of ACL and void.

REPRESENTATIVE PROCEEDINGS - Whether class action waiver clause unenforceable as contrary to Pt IVA of Federal Court of Australia Act 1976 (Cth)

PRIVATE INTERNATIONAL LAW – Forum – Exclusive jurisdiction clause – Whether strong reasons not to grant stay of proceedings.

Abstract:

In Karpik v Carnival plc [2023] HCA 39 the High Court determined an interlocutory application arising out of representative brought on behalf of passengers of the Ruby Princess cruise ship against Carnival plc and Princess Cruise Lines Ltd (Princess) claiming losses caused by illness and deaths caused by the COVID-19 outbreak. The main proceedings were recently determined by the Federal Court in In Karpik v Carnival plc (The Ruby Princess) (Initial Trial) [2023] FCA 1280.

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ASX announces product based solution for CHESS replacement – industry consultation on next phase to commence in 2024

Date: 24 November 2023
Source: Australian Securities Exchange

Summary originally published by Capital Monitor.

ASX has entered into an agreement with TCS for the delivery of its TCS BaNCS for Market Infrastructure product, which offers a modular technology platform for clearing and settlement services. ASX considers that the chosen product will allow it to provide a reliable, supportable and scalable platform that meets the needs of the Australian market now and into the future. It can satisfy the licence obligations of ASX Clear and ASX Settlement, and is capable of supporting potential new services and innovation from ASX or other providers.

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ASIC announces 2024 enforcement priorities

Date: 24 November 2023
Source: Australian Securities and Investments Commission

Summary originally published by Capital Monitor.

ASIC announced its enforcement priorities for 2024, indicating its enforcement focus for the coming year and communicating its intent to industry and stakeholders. In 2024, two new priorities have been added in relation to the superannuation industry, including a focus on member services failures and misconduct relating to the erosion of superannuation balances. New priorities relating to insurance claims handling, compliance with financial hardship obligations and the reportable situation regime have also been added. In addition, ASIC will be taking action against misconduct relating to used car financing to vulnerable consumers and gatekeepers such as auditors, registered liquidators and financial services and credit licensees who do not comply with their legal obligations.

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ASIC and RBA acknowledge ASX's CHESS solution design announcement

Date: 24 November 2023
Source: Australian Securities and Investments Commission

Summary originally published by Capital Monitor.

The product-based solution and vendor announced by ASX is a foundational step in getting the CHESS replacement program back on track. This follows advice provided by the ASX Cash Equities Clearing and Settlement Advisory Group (Advisory Group), a small group of recognised industry leaders established to advise ASX Clear and ASX Settlement on strategic clearing and settlement issues led by independent chair Alan Cameron AO. ASIC Chair Joe Longo said, `It will be critical for ASX to now focus on engaging with the market on the detailed design of the CHESS Replacement program with a realistic and achievable timeline for implementation.'

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Electronic signing, remote witnessing and digital verification of Commonwealth statutory declarations from 1 January 2024

Date: 17 November 2023
Source: Parliament of Australia

The Statutory Declarations Amendment Act 2023 (Cth), allowing Commonwealth statutory declarations to be made and witnessed electronically, has received Royal Assent. The amendments will commence on 1 January 2024.

In addition to allowing for electronic signing and remote witnessing, the amendments introduce a new way of executing Commonwealth statutory declarations through a digital verification process conducted on a prescribed online platform.

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Nature-related risks pose a risk for directors

Date: 16 November 2023
Source: Commonwealth Climate and Law Initiative

Abstract:

The question as to whether directors’ existing duty under section 180 of the Corporations Act 2001 (Cth) (Corporations Act) permits or requires directors to consider nature-related risks has been recently considered in a legal opinion: “Nature-related risks and directors’ risks” authored by Sebastian Hartford-Davis and Zoe Bush (Opinion). The Opinion was commissioned by the global climate and nature investment and advisory law firm Pollination in collaboration with the Commonwealth Climate and Law Initiative.

The Opinion follows on from previous landmark opinions by Noel Hutley and Sebastian Hartford-Davis in 2016 and 2019 and a supplementary opinion in 2021 which concluded that directors’ had a duty under the Corporations Act to address climate-related risks or face legal consequences. These opinions are considered to have influenced the prioritisation of climate risk issues by directors and it is expected that the Opinion will have a similar impact on the prioritisation of nature-related risks across board rooms in Australia.

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Statutory Declarations Amendment Bill passes both houses of Parliament

Date: 10 November 2023
Source: Parliament of Australia

The Statutory Declarations Amendment Bill 2023 (Cth), allowing Commonwealth statutory declarations to be made and witnessed electronically, has passed both houses of Parliament. The amendments will commence on the later of 1 January 2024 and the day after Royal Assent.

In addition to allowing for electronic signing and remote witnessing, the amendments introduce a new way of executing Commonwealth statutory declarations through a digital verification process conducted on a prescribed online platform.

Read the full text of the Bill and the explanatory memorandum on the Parliament of Australia website.

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Treasury releases Australia’s Sustainable Finance Strategy for consultation

Date: 5 November 2023
Source: The Treasury

Abstract:

On 2 November 2023 the Federal Treasury released Australia’s Sustainable Finance Strategy for consultation. The Sustainable Finance Strategy supports Australia’s transition to net zero and affirms the Government’s commitment to driving sustainable finance and investment in Australia. The Sustainable Finance Strategy includes 12 policy priorities across three key pillars.

Pillar 1: improving transparency on climate and sustainability:

1. Establishing a framework for sustainability-related financial disclosures.
2. Developing a sustainable finance taxonomy, providing a common language and classification system for identifying and reporting on sustainable economic activities and investments.
3. Supporting credible net zero transition planning.
4. Developing a labelling system for investment products marketed as sustainable.

Pillar 2: Enhancing financial system capabilities:

5. Enhancing market supervision and enforcement.
6. Identifying and responding to potential systemic financial risks, by strengthening the financial system’s resilience to climate change and other sustainability shocks and stressors.
7. Addressing data and analytical challenges.
8. Ensuring fit for purpose regulatory frameworks.

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Treasury consults on two-year review of continuous disclosure reforms

Date: 2 November 2023
Source: Treasury

Abstract:

Treasury is seeking views from interested parties as part of its review of the continuous disclosure amendments made under the Treasury Laws Amendment (2021 Measures No.1) Act 2021.

The amendments introduced a permanent fault element for civil penalty proceedings brought under the continuous disclosure regime. As a result, for:

• ASIC to succeed in a civil penalty proceeding against; or
• a plaintiff to succeed in a proceeding for damages from,

a company or its officers for alleged breaches of continuous disclosure laws, they must show that the entity or its officers acted with “knowledge, recklessness or negligence”: s 674A, Corporations Act 2001 (Cth) and s 12DA, Australian Securities and Investments Commission Act 2001 (Cth).

As set out in the consultation paper, the review will consider, among other things, whether the amendments are working in support of an efficient, effective and well-informed market.

Consultation is open until Friday 1 December 2023. Submissions may be emailed to continuousdisclosurereview@treasury.gov.au.

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ASIC publishes insights on mandatory breach reporting regime

Date: 1 November 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The Australian Securities and Investments Commission (ASIC) has released its second publication in response to information it has received from financial services and credit licensees concerning mandatory breach reporting obligations (reportable situations regime). The publication notes a lack of any material progress in several areas previously highlighted by ASIC, which include:

• - A low proportion of licensees reporting, suggesting potential non-compliance
• - Extended durations taken by licensees to identify, investigate, and remedy certain breaches
• - Ongoing challenges in pinpointing and documenting the underlying causes of breaches

ASIC Chair Joseph Longo stated that the reportable situations regime has been active for over two years and thus licensees should have adjusted their operations to ensure total compliance. He emphasised that ASIC, despite providing guidance, will now adopt a more stringent stance, including enforcement actions if necessary.

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Updates to WA Supreme Court Consolidated Practice Directions on schemes of arrangement

Date: 31 October 2023
Source: Supreme Court of Western Australia

Abstract:

The Supreme Court of Western Australia has released updates to its Consolidated Practice Directions providing guidance on members’ schemes of arrangement.

The updates align with the new Federal Court Schemes of Arrangement Practice Note (GPN-SOA) and the Supreme Court’s Reissued Practice Note SC EQ 04 - Corporations List, which were issued in response to the significant streamlining changes put forward by Jackman J in Re Vita Group [2023] FCA 400.

The updated Consolidated Practice Directions are available on the Supreme Court website.

More to come.

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Further modernising business communications measures for corporations, competition, consumer, superannuation and insurance sectors

Date: 30 October 2023
Source: Federal Register of Legislation

Abstract:

The Governor-General has issued the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Commencement Proclamation 2023 (Cth) (Proclamation) to prescribe 1 January 2024 as the start date for the modernised publication measures under the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Act 2023 (Cth) (Modernising Business Communications Act).

The Governor-General has also made the Treasury Laws Amendment (Modernising Business Communications) Regulations 2023 (Cth) (Amendment Regulations) to modify corporations, consumer credit, insurance and superannuation regulations in line with the Modernising Business Communications Act.

Proclamation

The Proclamation fixes 1 January 2024 as the start date for the modernisation of certain publication requirements in the Corporations Act 2001 (Cth) (Corporations Act), the Competition and Consumer Act 2010 (Cth) (CCA) and other legislation, as set out in Pt 4, Sch 1 of the Modernising Business Communications Act.

On and from that date, the Corporations Act will allow:

• no liability companies to advertise the sale of forfeited shares by electronic means (rather than only through national newspapers);

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Exposure Draft for Australian Sustainability Reporting Standards: disclosure of climate-related financial information

Date: 26 October 2023
Source: Australian Accounting Standards Board (ASSB)

Abstract:

The AASB has released an Exposure Draft for Australian Sustainability Reporting Standards: Disclosure of Climate-related Financial Information (ED SR1) which outlines the proposed climate-related financial disclosure requirements for Australian companies.

The ED SRI Sustainability Reporting Standards are based on the Global Sustainability Standards: IFRS1 (sustainability-related financial information) and IFRS2 (climate-related disclosures) released by the ISSB on 26th June 2023.

The AASB is inviting stakeholders to provide feedback on the sustainability standards proposed by ED SR1 by submitting a comment letter on the AASB website or completing an online survey. An invitation to a roundtable discussion will also be offered. Submissions from stakeholders will be accepted until 1st March 2024.

See the full release by the AASB here.

Please see our previous LLU on the Global Sustainability Standards released by the ISSB here.

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ASIC revises licensee obligations under the reportable situations regime

Date: 20 October 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The Australian Securities & Investments Commission (ASIC) has made the ASIC Corporations and Credit (Amendment) Instrument 2023/589 (Instrument), which enacts key alterations to the reportable situations regime. Under the prior regime, Australian financial services (AFS) licensees and Australian credit licensees were mandated to notify ASIC regarding certain reportable situations, particularly ‘significant’ infringements of ‘core obligations’ under s 912D of the Corporations Act 2001 (Cth) (Corporations Act) and s 50A of the National Consumer Credit Protection Act 2009 (Cth).

Under the Instrument , certain breaches relating to misleading or deceptive conduct under subsection 1041H(1) of the Corporations Act and subsection 12DA(1) of the Australian Securities and Investments Commission Act 2001, and false or misleading misrepresentations under s12DB(1) of the ASIC Act, are no longer considered significant breaches of core obligations requiring reporting. For a breach to be eligible for these exemptions, it should:

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Listed@ASX Compliance Update

Date: 20 October 2023
Source: Australian Securities Exchange

Summary originally published by Capital Monitor.

ASX has made updates to Guidance Note 15- ASX Listing Fees ('GN 15') and associated fee arrangements. The key change is an update to the method used for the calculation of fees for quotation of additional securities that are quoted on different dates. Where securities are issued in multiple tranches and quoted on different dates, for example in the case of an institutional placement, rights issue and shortfall issue, each tranche will be treated separately for the purpose of calculating fees for quotation of additional securities. This change enables a consistent fee calculation approach across all event types.

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Treasury consults on regulation of digital and crypto assets

Date: 17 October 2023
Source: The Treasury

Abstract:

The Federal Government has released a proposal paper that recommends making crypto exchanges and digital asset platforms subject to existing Australian financial services laws and requiring platform operators to obtain an Australian Financial Services Licence. The proposal paper also recommends requiring digital asset platforms adhere to minimum standards for holding tokens, standards for custody software, and standards when transacting in tokens. Feedback on the proposal paper is due by 1 December 2023, with further consultation on draft legislation planned for 2024.

In recent years, consumers have suffered harm and lost assets due to the collapse of crypto platforms. The proposed regulatory framework intends to increase oversight, protect consumers, support innovation, provide certainty in the industry, and ensure consistency with other jurisdictions.

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ASIC's Impact in 2022–23

Date: 16 October 2023
Source: Australian Securities & Investments Commission (‘ASIC’)

Abstract:

The Australian Securities & Investments Commission (ASIC) has released its 2022–23 Annual Report, which has reinforced its commitment to robust enforcement actions to benefit consumers and small businesses while upholding trust in the financial system.

ASIC's efforts in the period resulted in 35 criminal convictions, nearly $190 million in civil penalties and fines imposed by the courts and the initiation of over 130 new investigations. ASIC noted that its’ priorities aligned with emerging trends and challenges in the regulatory landscape, including sustainable finance, the aging population, digital technology risks, and product design and distribution obligations.

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New Federal Court and NSW Supreme Court practice notes on schemes of arrangement

Date: 16 October 2023
Source: Federal Court of Australia

Abstract:

The Federal Court and Supreme Court of NSW have released new guidance on members’ schemes of arrangement, following the significant streamlining changes put forward by Jackman J in Re Vita Group [2023] FCA 400.

The new Federal Court Schemes of Arrangement Practice Note (GPN-SOA) and the Supreme Court’s Reissued Practice Note SC EQ 04 - Corporations List are available on each Court’s website.

More to come.

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Court rules in favour of ASIC in major ANZ continuous disclosure case

Date: 16 October 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The Federal Court has issued a ruling against the Australia and New Zealand Banking Group Limited (ANZ), asserting that the bank had violated continuous disclosure laws (under s 674(2) of the Corporations Act) during a $2.5 billion institutional share placement in 2015. The breach resulted from ANZ's failure to disclose crucial information concerning the allocation of shares to underwriters. ASIC Deputy Chair Karen Chester highlighted that ANZ had neglected to inform the market that underwriters for the share placement had purchased nearly a third of the shares, amounting to approximately $790 million.

Ms Chester added that proper disclosure is fundamental to ensuring fair and efficient markets and investors must be fully apprised of information likely to significantly impact the price or value of a security. This significant decision reinforces the essential role of continuous disclosure rules in upholding market integrity. It also underscores that a substantial acquisition of shares by underwriters during capital raising can constitute price-sensitive information necessitating public disclosure.

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Condor Blanco Mines Faces $100K Reporting Fine

Date: 10 October 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

Condor Blanco Mines Limited has been fined $100,000 for failing to submit five annual financial reports from 2018 to 2022.

The company, previously delisted from the ASX in 2018 due to non-payment of its annual listing fee, did not attend its court hearing on 19 September 2023 and was convicted and sentenced in its absence on five charges of breaching s 319 of the Corporations Act 2001 (Cth). The penalty underscores the importance of timely and accurate financial reporting in compliance with statutory obligations.

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ASIC appeals Federal Court findings in case against ACBF Funeral Plans

Date: 4 October 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

In September 2023, the Federal Court of Australia ordered ACBF Funeral Plans Pty Ltd (ACBF) to pay a $1.2 million penalty for misrepresenting the sale and promotion of a funeral expense insurance policy (ACF Plan) to consumers, primarily Indigenous people, in contravention of ss 12DA(1), 12DB(1)(a) and 12DB(1)(e) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) (ACBF Funeral Plans Pty Ltd [2023] FCA 1041; BC202312500). See our previous Latest Legal Update here.

The court accepted the Australian Securities & Investments Commission’s (ASIC) claim that ACBF, by offering, promoting and selling the ACF Plan and representing that the ACF Plan provided a lump sum payout, had engaged in conduct that was misleading or deceptive and had made false or misleading representations. ASIC also alleged that ACBF falsely represented that it was owned or managed by Indigenous persons. Dismissing this claim, the court found that ACBF did make such representations, but that the representations were not false. ASIC is appealing this part of the decision.

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ASIC prosecutes 36 companies for financial reporting breaches in H1 2023

Date: 4 October 2023
Source: Australian Securities & Investments Commission (‘ASIC’)

Abstract:

The Australian Securities and Investments Commission (ASIC)ASIC has provided an update on its regulatory activities in enforcing financial reporting obligations in the first half of 2023. Between January 1 and June 30, 2023 ASIC)prosecuted 36 companies, securing over $700,000 in penalties due to non-compliance with financial reporting standards. This crackdown aimed to ensure companies adhered to the requirements of lodging financial reports, holding annual general meetings (AGMs), and maintaining the proper number of directors and resident directors.

Three companies faced notably large fines over $100,000 for compliance breaches. ALT Financial Group Ltd was fined $123,000 for failures related to reports, AGMs, and director count. TV2U International Ltd incurred a $110,000 penalty for report and directorship lapses, and RMG Ltd was fined $105,000 for similar reasons. Additionally, Adgex Ltd was penalised $83,000, while the ABM Group's 11 companies totalled a $69,000 fine.

ASIC has emphasized that financial reports are essential as they provide invaluable information to shareholders, creditors, and the public, helping in making informed decisions regarding transactions with these companies.

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ASIC remakes sunsetting legislative instruments on takeovers, compulsory acquisitions and relevant interests

Date: 29 September 2023
Source: Australian Securities and Investments Commission (ASIC)

Abstract:

ASIC has remade seven legislative instruments relating to takeovers, compulsory acquisitions and relevant interests which were largely due to sunset on 1 October 2023.

The relief was remade following Consultation Paper 365 Remaking ASIC class orders on takeovers, compulsory acquisitions and relevant interests. Summaries of the responses, along with ASIC’s response, are set out in REP 773 Response to submissions on CP 365 Remaking ASIC class orders on takeovers, compulsory acquisitions and relevant interests.

The refreshed relief from the Corporations Act 2001 (Cth) (Corporations Act) is on substantially the same terms as the sunsetting instruments, subject to the following amendments.

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Fintech company pays $53,280 penalty for potentially misleading representations about crypto product

Date: 27 September 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

Bobbob Pty Ltd (Bobbob), a fintech company, has paid $53,280 in response to four infringement notices issued by the Australian Securities & Investments Commission (ASIC). ASIC was concerned that Bobbob was making certain representations about a crypto-asset linked investment product (product) that had the potential to mislead consumers about the product’s approvals, risks, characteristics and benefits.

In the infringement notices, ASIC stated that it had reasonable grounds to believe that Bobbob had contravened s 12DB(1)(e) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) by making false or misleading representations about:

• whether the product was approved or licensed by ASIC;
• the similarity of the product to a bank account, including the risk profile;
• whether the product was a safe and stable investment with minimal risk of capital loss; and
• whether the product earned all customers an interest rate of 7.6% per annum from the time they invested.

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Government seeks independent review of Continuous disclosure regime reforms

Date: 26 September 2023
Source: The Treasury

Abstract:

On 19 September 2023 the Federal Government announced the appointment of Kevin Lewis as an independent reviewer to evaluate recent changes to Australia's continuous disclosure regime under the Corporations Act 2001 (Cth) (Corporations Act). The review will examine the operation of the changes to the regime enacted by the Treasury Laws Amendment (2021 Measures No 1) Act 2021 (Cth) which had the effect of limiting civil liability for continuous disclosure breaches to conduct which meets a subjective fault element of knowledge, negligence or recklessness.

The Amending Act introduced a sunset provision for the reforms (sections 1683B and 1683C) which required the Minister to seek an independent review of the new provisions within 6 months of their two-year anniversary.

Mr Lewis previously served as the Chief Compliance Officer at the ASX and practiced in financial services and corporate law.

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ASIC urges AFS licensees to strengthen remediation procedures

Date: 26 September 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

Following a review of the remediation policies and procedures of several large financial institutions, the Australian Securities & Investments Commission (ASIC) has called on Australian financial services and credit licensees to ensure that they remediate affected consumers quickly and fairly in accordance with ASIC’s Regulatory Guide 277: Consumer Remediation (RG 277). RG 277, which replaced and expanded upon the scope of Regulatory Guide 256: Client review and remediation conducted by advice licensees, offers guidance for Australian financial services and credit licensees on best practices for consumer remediation programs initiated on or after 27 September 2022.

ASIC’s review identified certain practices that were inconsistent with the obligations under RG 277 for licensees to be proactive, timely and fair in their approach to consumer remediation.

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TNFD releases final recommendations for nature-related disclosures

Date: 25 September 2023
Source: The Taskforce on Nature-related Financial Disclosures (TNFD)

On 18 September 2023 at Climate Week NYC, the TNFD released its final recommendations for nature-related risk management and disclosure (TNFD recommendations). The TNFD recommendations provide a framework for reporting and assessing nature-related risks and opportunities to assist companies and financial institutions to better understand, report and act on their dependencies and impacts on nature, and to align their activities with global goals for biodiversity and climate.

The final recommendations build on the previous draft framework that was published in July 2023, and incorporate feedback received during an extensive market consultation and testing process. Consistent with the approach of the Task Force on Climate-related Financial Disclosures, the TNFD recommendations cover four pillars: governance, strategy, risk & impact management, and metrics & targets, and are designed to enable integrated nature-related and climate-related disclosures. The TNFD also provides additional guidance for financial institutions and specific biomes.

To assist companies and financial institutions in (voluntarily) adopting its recommendations, the TNFD has also published implementation guidance and other supporting materials including guidance on the identification and assessment of nature-related issues, found here.

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Illegal phoenixing activity prompts ASIC to disqualify shadow director, Mr Philip Whiteman, from managing companies for five years

Date: 25 September 2023
Source: ASIC disqualifies Philip Whiteman from managing corporations for maximum five years after engaging in illegal phoenix activity

Investigations by the Australian Securities & Investments Commission (ASIC) into the role of Mr Philip Whiteman in five business advisory companies that entered liquidation over a 4-month period have prompted the regulator to disqualify Mr Whiteman from managing companies five years allowed under s 206F, Corporations Act 2001 (Cth).

ASIC found that Mr Whiteman was a shadow director of A&S Services Australia Pty Ltd (ACN 165 857 321), Bolton & Swan Pty Ltd (ACN 153 647 360), ACN 147 341 991 Pty Ltd (ACN 147 341 991), Armstrong and Shaw Pty Ltd (ACN 148 949 375), and Ainslie Harding & Wood Solicitors Pty Ltd (ACN 607 552 741), and that in that role, he breached various directors’ duties.