ASIC Enforcement Wrap: January and February 2025 | ASIC continues successful regulatory actions in superannuation

Key January and February Takeaways:

• Superannuation breaches are continuing to be an ASIC focus, with a former SMSF auditor’s disqualification upheld by the ART, a financial advisor’s registration cancelled for providing incompetent advice in setting up an SMSF, and AustralianSuper penalised for failing to merge multiple member accounts.
• Firstmac Limited was ordered to pay $8 million in ASIC’s first civil penalty action against a distributor relating to DDO breaches.
• Allianz and AWP were convicted and fined a combined total of $16.8 million for disseminating false or misleading information related to the characteristics or level of coverage of the travel insurance they offered.

Spotlight – Confidence restored in voluntary disclosure regime

A successful appeal by ASIC in the Full Federal Court case of Australian Securities and Investments Commission v Macleod [2024] FCAFC 174 has restored confidence in ASIC’s voluntary disclosure regime.

The voluntary disclosure regime is designed to allow parties to provide legally privileged information to ASIC while agreeing with ASIC that there is no waiver of legal professional privilege (the intention being that the provision of privileged information to ASIC may assist in the effective and efficient conclusion of regulatory investigations).

The document in question in the Macleod case under a voluntary disclosure agreement was a PwC report, commissioned by Noumi’s external lawyers, so they could advise on addressing accounting irregularities.

In the Federal Court’s at first instance, Justice Yaseen Shariff found that Noumi, in providing the PwC report to ASIC, waived legal professional privilege. Justice Shariff found that ASIC could use the report to identify witnesses and the questions to ask them, and that this was “inconsistent with the maintenance of confidentiality”.

However, the Full Federal Court disagreed with the first instance decision, finding that “[i]t cannot be said that such derivative use of information amounts to a disclosure of that information”.

The case highlights the complexity of navigating the regime and high impact ASIC investigations. This is a complex area which only experts in ASIC regulation and defence understand.  Before considering voluntary disclosure under the regime make sure you are informed by expert advice, take ahigh level of care to minimise the risk that confidential information could be disclosed or legal client privilege waived.

January and February in Summary – Enforcement Actions and Outcomes

Civil Action:

Civil Penalties

The Federal Court ordered civil penalties totalling $35,240,000 in three cases:

• Firstmac Limited was ordered to pay $8 million in penalties by the Federal Court for failing to meet its design and distribution obligations (DDO). This was ASIC’s first civil penalty action against a distributor relating to DDO breaches. On 10 July 2024, the Court found that Firstmac implemented a cross-selling strategy of marketing investments in High Livez, a registered managed investment scheme, to 780 consumers who held existing term deposits with Firstmac. It breached its DDO by sending product disclosure statements to those existing term deposit holders without first taking reasonable steps to ensure consistency with its target market determination for the product. The Court found that this amounted to a contravention of section 994E(3) of the Corporations Act. Justice Downes found that Firstmac’s conduct was ‘objectively reckless’ and ‘fell short of the standard required by the DDO’ which increased the risk of exposure to harm to consumers to whom the High Livez product disclosure statement was inappropriately distributed.
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• AustralianSuper was ordered to pay $27 million in penalties by the Federal Court for failing to merge multiple member accounts. Between 1 July 2013 and 31 March 2023, approximately 90,700 AustralianSuper members held multiple accounts and incurred $69 million in losses of multiple administration fees, insurance premiums, and lost investment earnings. The Federal Court held this to be a breach of fundamental duties AustralianSuper owed to its members. Justice Hespe said that AustralianSuper’s non-compliance were systemic failings as a result of not having the appropriate systems and processes in place. This was the first case ASIC has brought as a co-regulator with APRA regarding contraventions of section 52 of the Superannuation Industry (Supervision) Act 1993.
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• The Star Entertainment Group Ltd (Star)’s former Chief Casino Officer, Gregory Hawkins, and former Chief Financial Officer, Harry Theodore, were penalised by the Federal Court after they admitted to breaches of their duties in contravention of section 180(1) of the Corporations Act 2001 in proceedings brought by ASIC. Mr Hawkins was ordered to pay $180,000 and was disqualified from managing corporations for 18 months. Mr Theodore was ordered to pay $60,000 and was disqualified from managing corporations for nine months.

Appeals

• The Full Federal Court has upheld ASIC’s appeal against Rory Macleod, Noumi’s former managing director and CEO. The Full Court found that providing documents to ASIC pursuant to a Voluntary Disclosure Agreement does not necessarily waive any valid legal professional privilege claim. The judgment overturns the Court’s earlier decision that Noumi waived Legal Professional Privilege when it provided documents to ASIC pursuant to a voluntary disclosure agreement.

Other Results

ASIC obtained orders against three individuals:

• The Federal Court has made interim freezing orders against financial adviser Ferras Merhi and former director Osama Saad following applications made by ASIC. Mr Merhi and his associated entities and Mr Saad and his associated entities are currently the subject of ASIC investigations relating to certain managed investment schemes including the Shield Master Fund. These interim orders are in place until 4 April 2025 at 7pm AEDT.
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• The Federal Court has made interim freezing orders against Falcon Capital Limited, the First Guardian Master Fund and David Anderson, where Falcon is the responsible entity of First Guardian and Mr Anderson is a director of Falcon. The orders were sought by ASIC to protect investor funds during an ongoing investigation.

Criminal Action:

Charges

Two individuals were charged:

• Mark Barnes appeared at the Downing Centre Local Court on 4 February 2025 and was charged with two counts of dishonestly obtaining a financial advantage by deception and one count of attempting to dishonestly obtain a financial advantage by deception. Mr Barnes allegedly provided false invoices from his company Barnes Marketing Services Pty Ltd (in liquidation) to the financial funding company Handley Advisory Partners Pty Ltd trading as FIFO Capital Metro NSW (FIFO), where FIFO provides advance payments of purchased invoices. The false invoices were for purported services provided by Barnes Marketing Services to the Sydney Symphony Orchestra, however, no services had been rendered to the Orchestra. As a result, Mr Barnes obtained amounts of $1,318,979 and $1,159,645. Services had been provided by Barnes Marketing Services to Opera Australia, but the false invoices inflated the amounts purportedly invoiced to the Orchestra. Mr Barnes repaid the amounts obtained from the false invoices to FIFO but continued submitting false invoices to continue to increase cash flow. Additionally, Mr Barnes allegedly attempted to dishonestly obtain $118,206 for a false invoice provided to FIFO for services purportedly provided to the Orchestra.
  
• Vickie Anne Vella appeared at the Penrith Local Court on 7 February 2025 and was charged with two counts of dishonestly using her position as a director to gain an advantage. The charges were in relation to when Ms Vella was a director of Midcoast Reinforcement Pty Ltd (in liquidation) and Coast Reo Pty Ltd (in liquidation). ASIC alleges that between 4 August 2016 and 5 April 2018, Ms Vella transferred company funds to a credit card and expended a total of $1,565,298 for personal use.

Guilty Plea

One individual pleaded guilty to criminal charges:

• Anthony Paul Torre, a former financial advisor, pleaded guilty to three counts of stealing and two counts of fraud in the District Court of Western Australia on 28 January 2025. The offences committed between March 2010 to January 2015 amounted to $1,030,000 of misappropriated client funds.

Sentencing

Two companies were sentenced:

• The Supreme Court of New South Wales convicted and imposed criminal fines of $13.5 million against Allianz Australia Insurance Limited (Allianz) and $3.3 million against AWP Australia Pty Ltd (AWP). Allianz was convicted of six counts of disseminating false or misleading information and AWP was convicted of one count of disseminating false or misleading information contrary to the Corporations Act. The false or misleading information related to information published online regarding Allianz’s travel insurance that misrepresented the characteristics or level of coverage available to consumers.

Appeals

One individual had their appeal dismissed:

• Bradley Grimm, a former financial planner, was unsuccessful his appeal against conviction and sentence in the Victorian Court of Appeal. On 5 September 2024, Mr Grimm was convicted of three counts of engaging in dishonest conduct while running a financial services business. He was sentenced to 18 months imprisonment and a good behaviour bond for 18 months upon release pursuant to a recognisance of $5,000. On 3 October 2024, Mr Grimm sought leave to appeal his conviction and sentence on the basis of a miscarriage of justice and a manifestly excessive sentence. On the 19 February2025, the Victorian Court of Appeal refused the application for leave to appeal, saying that Mr Grimm’s sentence was in fact a lenient one, not manifestly excessive.

‍Cases Discontinued

Three individuals had their criminal cases discontinued:

• Peter James Dykes, Peter Alan Torney, and Anthony John Dunlop, former directors of Capital Mining Limited, appeared in the Perth Magistrates Court in 2022 and were each charged with dishonestly using their position as a director. On 1 November 2024, the matters were discontinued in the District Court of Western Australia.

Administrative action:

Licence Suspension/Cancellation

Five companies or individuals had their AFS licence or ACL suspended or cancelled:

• LRA Corporate Pty Ltd, a financial services provider, had its AFS licence cancelled under section 915B of the Corporations Act by ASIC effective from 3 February 2025. ASIC became aware that LRA Corporate ceased carrying on a financial services business and subsequently cancelled its AFS licence.
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• Auckland Finance Pty Ltd, a credit provider, had its ACL cancelled under the National Consumer Credit Protection Act 2009 by ASIC effective from 31 January 2025. ASIC became aware that Auckland Finance had ceased engaging in credit activities for some time and subsequently cancelled its ACL.
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• Tracie Lee Hanson had her ACL cancelled from 4 October 2024. Ms Hanson failed to lodge three annual compliance certificates, had been expelled from the Australian Financial Complaints Authority due to non-payment of fees, and failed to pay industry funded levies to ASIC for three years.
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• William James Lawrence had his ACL cancelled from 28 January 2025. Mr Lawrence failed to pay industry funded levies to ASIC for six years.
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• Vestiuum CSF Pty Ltd (Vestiuum) had its AFS licence suspended until 19 August 2025. Vestiuum had its licence suspended because it ceased carrying on financial services since December 2021. Vestiuum has since taken steps to relaunch its financial services business, thus the suspension period will allow Vestiuum to be in a position to resume its financial services business.

Stop Orders

ASIC placed two stop orders:

• Green Planet Recycling Solutions Limited had two interim stop orders issued to it by ASIC on the public offer (offer) of redeemable preference shares (Company Securities). The first order, the prospectus interim stop order, was made in relation to the offer of Company Securities under the prospectus to raise up to $20,000,000. ASIC was concerned that the prospectus did not adequately disclose all information required under section 710 of the Corporations Act2001. The second order, the design and distribution obligations interim stop order, was made because of a failure to prepare a target market determination (TMD) in relation to the offer. ASIC was concerned that Part 7.8A of the Corporations Act 2001 was contravened as no TMD had been prepared.

Bannings

Three individuals were banned or permanently banned:

• Financial adviser David Eduardo Cubilla was permanently banned following his conviction of fraud. While Mr Cubilla was an authorised representative of AMP Financial Planning Pty Ltd, he misappropriated funds from a client’s superannuation account. He was convicted of fraud under section 408C of the Queensland Criminal Code in June 2024 and was sentenced to seven years imprisonment. Mr Cubilla has been banned, among other things, from providing any financial services and engaging in any credit activities. The permanent banning took effect on 27 December 2024.
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• Financial adviser Lachlan John King was permanently banned following his conviction of fraud. Mr King was an authorised representative of multiple companies between June 2005 and March 2019. While working as a financial planner, between February 2012 and March 2019, Mr King misappropriated funds totalling $1,797,493.66 from eight clients, including family members. Mr King has been banned, among other things, from providing any financial services and engaging in any credit activities. The permanent banning took effect on 5 February 2025.
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• Peter Aardoom was banned for eight years from 19 February 2025 from providing financial services, controlling an entity that carries on financial services, and performing any function related to the carrying on of a financial services business.

Administrative Review Tribunal

One decision was made by the Administrative Review Tribunal (ART):

• The ART upheld ASIC’s decision to disqualify Mr MD Nazrul Islam from being an approved self-managed superannuation fund (SMSF) auditor. Mr Islam was disqualified by ASIC from being an approved SMSF auditor in February 2024 where he appealed the decision to the ART on 17 April 2024. On 18 December 2024, the ART affirmed the disqualification. The ART found that Mr Islam has failed to satisfy the relevant auditing standards on three audit files.
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Financial Services and Credit Panel

One decision was made by the Financial Services and Credit Panel (FSCP):

• Glenn Paul Meilak has had his registration as a financial adviser cancelled and he is prohibited from being registered with ASIC for two years commencing 10 February 2025. Mr Meilak was found to have displayed a lack of care and a level of incompetence in providing advice when recommending clients to set up self-managed superannuation funds.

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.