ASIC Enforcement wrap: January 2023 | Steady start for ASIC enforcement

ASIC enforcement has started 2023 with some force (pardon the pun) with continued results in greenwashing and design and distribution obligations, reflecting ASIC’s strategic priorities as set out in its latest Corporate Plan for 2022-2026 (discussed here) and its Enforcement Priorities 2023 (discussed here)

January in summary – enforcement actions and outcomes

Civil Action:

• Civil Penalties - In the Federal Court, ASX-Listed Australian Mines Limited was fined $450,000 for three breaches of its continuous disclosure obligations concerning the failure to disclose existence of a 15% buyer’s discount in an offtake agreement for a South Korean company to purchase cobalt and nickel products (ASIC MR here and judgment here)
• In the Federal Court, two home finance companies and two of their directors were penalised a total of $150,000 for failure to cooperate with AFCA in accordance with the National Consumer Credit Protection Regulations 2010 (Cth). The misconduct included the repeated refusal to provide documents and information to AFCA, commencing legal proceedings against an AFCA staff members after staff requested documents, threatening AFCA complainants with legal proceedings unless they withdrew complaints. The companies and directors were also restrained from engaging in credit activities over next 12 months. (ASIC MR here and judgment here)

Criminal:

• Guilty Pleas – Guilty pleas were obtained from two defendants on five counts, involving offenses such as falsifying company books and engaging in dishonest conduct whilst running a financial services business 

Administrative action:

• Infringement Notices – Infringement notices were issued against two ASX-Listed entities. One was penalised $39,960 for greenwashing, claiming that a natural gas development project was “net zero” without a reasonable basis for doing so or being factually incorrect. The other  was penalised $33,000 for breach of continuous disclosure obligations, failing to announce a revenue downturn as soon as it became aware of the situation. 
• Interim Stop Order – One interim stop order was issued by ASIC related to non-compliance with the Design and Distribution Obligations for inappropriate target market and failure to include distribution conditions.
• AAT Appeals – On appeal the AAT upheld ASIC’s decision to cancel AFS license of Olive Financial Markets Pty Ltd.  The AAT found that Olive’s contravention included unconscionable conduct, prohibited hawking, misleading or deceptive conduct, false or misleading statements, failing to provide appropriate advice and failing to act in the best interests of clients, and that the breaches were serious and systemic and occurred over an extended period. Despite improvements made by Olive to the business since the contraventions the AAT was satisfied cancellation is the only appropriate action (ASIC MR here and AAT reasons here)
• Financial Services Bannings – One individual was banned from providing financial services for 4 years, for carrying on a financial services business without an AFS and engaging in misleading and deceptive conduct
• License Cancellation/Suspension – 374 SMSF auditors’ registrations were cancelled for failure to lodge annual statements. This is part of an SMSF auditor annual statements compliance program, which was last undertaken in 2018. The cancelled auditors did not perform a significant number of SMSF audits in the past two to three years.
• Director Disqualifications – Two people was disqualified for a period ranging from 3 years to 5 years, involving 7 companies, owing a total of over $10 million, for reasons including engaging in phoenix activities, failure to maintain proper financial records, failure to exercise due care and diligence, having limited involvement in the companies while other persons performed the directorship role and managed the companies

We expect ASIC’s enforcement focus will increasingly align with its Enforcement Priorities 2023 and expect increased enforcement outcomes around scams, consumer lending, greenwashing, crypto and illegal fundraising and property schemes.

If any of the above is relevant to you or you want to know more, please feel free to get in touch.

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The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such.  It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only.  You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.

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