Mackay Chapman August 2023 ASIC Update

In this month’s ASIC update:

• ASIC launches Federal Court civil penalty proceedings in the against Vanguard Investments Australia for greenwashing alleging misleading conduct; 
• APRA and ASIC commence early consultation on the Financial Accountability Regime (FAR); 
• ASIC has written to the Insurance Council of Australia, the Council of Australian Life Insurers and the Financial Services Council following its review of over 100 Target Market Determinations for general and life insurance products; 
• An APRA and ASIC review of how superannuation trustees are supporting their members has found that trustees need to make more progress to enhance retirement outcomes;
• ASIC has acted against eight self-managed superannuation fund (SMSF) auditors for breaches of their obligations; and
• ASIC is warning market participants that strong, targeted enforcement action will continue in the coming months. 

‍ASIC commences greenwashing case against Vanguard Investments Australia

ASIC has commenced civil penalty action against Vanguard Investments Australia for allegedly misleading investors about the ESG exclusionary screens applied to investments in a Vanguard fund. Vanguard claimed that the Vanguard Ethically Conscious Global Aggregate Bond Index Fund was screened against certain ESG criteria, but ASIC alleges that this was not the case.

According to ASIC, Vanguard did not conduct ESG research on a significant proportion of issuers of bonds in the Index and therefore the Fund. As a result, the Index and the Fund included issuers that violated the applicable ESG criteria, including those with ties to fossil fuels.

ASIC is seeking declarations and pecuniary penalties from the Court, as well as orders requiring Vanguard to publicise any contraventions found by the Court.

The date for the first case management hearing is yet to be scheduled by the Court.

Read more here.

APRA and ASIC commence early consultation on FAR

APRA and ASIC have released key materials for consultation to support the implementation of the Financial Accountability Regime (FAR). 

The FAR will replace the Banking Executive Accountability Regime (BEAR) and will impose a strengthened responsibility and accountability framework for APRA-regulated entities in the banking, insurance and superannuation industries.

APRA and ASIC have released a package of documents for consultation, including proposed Regulator rules and Transitional rules.

The regulators are seeking industry feedback on the proposed Regulator rules, including ADI key functions and Transitional rules. The closing date for submissions is 17 August 2023.

Further industry engagement will follow after the Bill is passed by Parliament and receives Royal Assent.

The FAR is a significant piece of legislation that will have a major impact on the financial services industry, and is designed to improve the risk and governance cultures of financial institutions.

Read more here.

ASIC review of insurance target market determinations

ASIC has reviewed over 100 Target Market Determinations (TMDs) for general and life insurance products.

The products reviewed represent higher risk and/or potential for poor value to consumers.

ASIC found that many TMDs were deficient, and that insurers could make improvements to their TMDs.

The letters outline ASIC's findings and recommendations.

Access the letters and read more here.

Review finds super trustees need to improve retirement outcomes planning

A thematic review by APRA and ASIC has found that superannuation trustees need to make more progress to enhance retirement outcomes for their members.

The review found that while trustees are improving their offerings of assistance to members in retirement, there is variability in the quality of approach taken and a lack of urgency in embracing the intent of the Retirement Income Covenant.

Key findings from the review show the need for more focus on:

• Understanding member needs;
• Designing fit-for-purpose assistance; and
• Overseeing strategy implementation.

APRA Deputy Chair Margaret Cole said that "some trustees have made a good start, but overall there has been a lack of progress and insufficient urgency." She added that "as more members approach retirement, trustees must step up and deliver both well-considered strategies and action to support members in retirement."

Read more here.

ASIC continues to act against SMSF auditors

ASIC has taken action against eight self-managed superannuation fund (SMSF) auditors for alleged breaches of their obligations.

This includes breaches of auditing and assurance standards, independence requirements, registration conditions, or because ASIC was satisfied the individual was not a fit and proper person to remain registered.

Five SMSF auditors have been disqualified, and three have had additional conditions imposed on their registration. This is in addition to the cancellation of 413 SMSF auditors in recent months.

ASIC Commissioner Danielle Press said that ASIC will continue to take action where the conduct of SMSF auditors is inadequate.

SMSF auditors have the right to appeal decisions ASIC makes in relation to them.

SMSF trustees and members can check whether their auditor is registered, suspended or has conditions imposed on their registration by searching ASIC's SMSF Auditor register.

Read more here.

ASIC warns of further action against market misconduct

ASIC is warning that it will continue to take strong action against market misconduct in the coming months. This is to protect consumers and ensure that the market is fair and orderly.

ASIC has taken the following actions in recent months:

• Issued over $109 million in civil penalties;
• Cancelled the AFS licence used by Binance Australia Derivatives;
• Charged individuals with insider trading and market manipulation;
• Banned an individual from engaging in naked short selling;
• Released an update on its recent greenwashing interventions; and
• Called on financial institutions to improve their approaches to handling scams.

ASIC also reinforced its commitment to deterring insider trading and market manipulation. It expects to take further action against related misconduct in the coming months.

New tools have also been developed to help ASIC identify and investigate insider trading, based on data analytics and visualisation. The tools are designed to allow ASIC to more efficiently identify suspicious trading by connected parties proximate to market sensitive announcements.

Read more here.

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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.