Mackay Chapman July 2024 ASIC Update

In this month’s ASIC update:

• More than 5M Australians Have Struggled to Make Loan and Debt Repayments, Yet Many Not Asking for Help;
• Scam Alert: Fake ASIC Branding is Appearing on Social Media Scams;
• ASIC Recommends 3 Principles for Better Compliance;
• ASIC to Launch New Professional Registers Search; and
• ASIC Gives Top Priorities in a Changing Regulatory Environment.

ASIC is a ‘toothless tiger’ and should be split in two

Liberal senator Andrew Bragg, the chairman of the Senate Economic References Committee, has described ASIC as ‘an organisation without transparency, few prosecutions, and a litany of cultural, structural and governance issues’, in the wake of the handing down of a parliamentary report recommending that ASIC should be split in two.

At Mackay Chapman, we interact with the enforcement arm of ASIC regularly, and our Directors, Dan Mackay and Michael Chapman, have both had stints working at ASIC.  Our experience with ASIC does not fully align with the final report’s conclusions about its effectiveness. It is not a ‘toothless tiger’ - it has teeth, and they can be sharp - but at the same time, it can have a tendency to go for the easy win over the more challenging prosecution. It is not a complaints resolution body, but it would appear too often ASIC has dismissed as a complaint something that ought to have been investigated. Many of our financial services dispute matters have started that way - where an earlier investigation by ASIC in response to a complaint may have prevented investors losing their money.

There is some truth to the notion that ASIC’s remit is too broad and it is spread too thin to effectively do all of the things it is called upon to do. Whether that is best addressed by a split (and the risk of duplication) versus increasing funding (acknowledging funding has been boosted in recent years, but it started from a low base) is open to debate.

The final report, which has been tabled in parliament following five days of public hearings over 20 months and 198 written submissions, highlights:

• The scope of ASIC’s responsibility is ‘impossibly’ broad and it has shown it cannot effectively fulfil its mandate;
• ASIC is a ‘gun-shy’ regulator that, whilst presenting a 97% litigation success rate in annual reports, isn’t taking on challenging cases and addressing serious misconduct; and
• Many reports of misconduct are dismissed as ‘complaints’ and are dismissed almost immediately.

The report addresses many other concerns. A copy of the full report is available here: https://parlinfo.aph.gov.au/parlInfo/download/committees/reportsen/RB000117/toc_pdf/AustralianSecuritiesandInvestmentsCommissioninvestigationandenforcement.pdf

The report makes 11 recommendations, including most sensationally that the government should strongly consider separating ASIC’s functions between a company regulator and a separate financial conduct authority (Recommendation 2).

It also recommends a new governance structure, with a Chair or CEO as sole statutory appointee and accountable authority, with the appropriateness of the commission structure entirely to be explored (Recommendation 8).

It should not be overlooked that the committee’s deputy chairman, Labor senator Jess Walsh, criticised the final report and claimed Labor members of the committee had just 24 hours to view and comment on the recommendations.

Nonetheless, the final report voices strongly held opinions about ASIC’s performance and its (multiple) roles that bring simmering concerns about ASIC back to the boil and will no doubt spur further debate.

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More than 5M Australians Have Struggled to Make Loan and Debt Repayments, Yet Many Not Asking for Help‍

A new study found that many people are struggling to make loan repayments due to rising costs and other issues. Despite this, many are reluctant to seek help from their banks.

The main reasons people don't ask for help include lack of awareness of available programs, fear that it will hurt their credit score, and shame or embarrassment. The study found that people are entitled to ask their banks for assistance, and a new campaign is being launched to raise awareness about this.

If you are struggling to make repayments in Australia, you should contact your bank and ask about hardship assistance programs. There are free resources available to help you understand your options.

ASIC has provided downloadables on the matter here.

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Scam Alert: Fake ASIC Branding is Appearing on Social Media Scams‍

Scammers are using fake social media ads and impersonating ASIC to trick people into investing in fake courses or sending them money.

These scams involve:

• Using the ASIC logo to make fake investment ads seem legitimate.
• Cold calling people and claiming to be from ASIC to get money back on investments (ASIC never does this).
• Impersonating ASIC on social media platforms like Telegram and asking for money to release investments.

Here's how to spot a fake ad:

• It uses the ASIC logo to promote investments.
• It claims to be endorsed by ASIC.
• It directs you to a private social media group.
• It links to a new social media account that doesn't match ASIC's official handles.

If you see a suspicious ad:

• Don't click on it.
• Check ASIC's real social media accounts for warnings (listed in the article).
• Report the ad to the social media platform and Scamwatch.

If you think you've been scammed:

• Stop sending money.
• Report it to your bank and ASIC.
• Consider contacting IDCARE for identity theft help.
• Report the scam to Scamwatch and the social media platform.
• Warn your friends and family.

For help with debt or emotional stress, contact the resources listed here; or contact us today.

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ASIC Recommends 3 Principles for Better Compliance‍

At a recent investor relations conference, ASIC Commissioner Simone Constant spoke to investor relations professionals about how companies can stay compliant with new regulations - with a focus on listed entities. 

One in every two adult Australians has investments, outside their home and outside their super fund. That speaks to a democratised market, which is a testament to transparency and confidence in our markets. 

ASIC is keen to keep it that way. The point of Simone’s speech is whilst we often hear about the cost of compliance, we don’t talk enough about the value of this compliance. It has an inherent value that needs to be recognised.   

She emphasised three key principles for navigating the ever-changing environment of compliance: transparency, accountability, and consistency. She noted ASIC is committed to fostering good governance in listed companies and sees itself as on something of a ‘common mission’ with them. This, in turn, helps investors and consumers feel confident and informed when participating in our markets, ultimately leading to a stronger financial system.

You can read the speech in full here.

ASIC to Launch New Professional Registers Search (aka: How to avoid being scammed by the next Melissa Caddick)‍

Melissa Caddick held herself out to be an appropriately licensed financial adviser through her company, Maliver Pty Ltd. That was a lie - she appropriated a former colleague’s Australian Financial Services Licence number, which she published on documents to investors. She was in fact not licensed, which was only discovered shortly before she was raided by ASIC at 6.07am on 11 November 2020 (and subsequently disappeared). 

Whilst information was available on the ASIC Professional Register that would have allowed someone to check the bona fides of her AFSL at the time, this apparently did not occur.  This could have been due to an unfamiliarity with the system, which unhelpfully separates financial services licensees and authorised representatives (and therefore requires separate searches of different registers).

Australia's financial watchdog is now making things easier for consumers to check the legitimacy of financial professionals. Launching in late June 2024, a streamlined Professional Registers Search (PRS) will allow users to search across all ASIC-regulated professions with a single go.

This means you'll be able to quickly verify if someone is properly licensed to provide financial advice, act as a liquidator, or perform other regulated activities, all from one user-friendly search. This is a big improvement from the current system which requires searching separate databases for different professions, as noted above.

The new PRS is part of ASIC's push to become a more digital and data-driven regulator. Their goal is to create a single online hub for all interactions with ASIC, making it easier for consumers and businesses alike. This includes continually improving the PRS based on user feedback, with the ultimate goal of providing a secure and efficient way to navigate the financial landscape.

ASIC Gives Top Priorities in a Changing Regulatory Environment‍

ASIC Commissioner Alan Kirkland gave a speech at the Australian Finance Industry Association (AFIA) Risk Summit 2024, 22 May 2024.

“Consumers are facing a wave of challenges – rising costs, climate change, and a rapidly changing technological landscape. These trends are impacting how they interact with financial services.

ASIC is committed to protecting consumers in this evolving environment. We're focusing on the biggest threats and adapting our regulations to address them. This includes a continued focus on financial hardship, as evidenced by our recent report on the practices of 10 large home loan lenders when dealing with struggling customers.”

See the rest of the speech 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.