Mackay Chapman June 2024 ASIC Update

In this month’s ASIC update:

• ASIC calls on super trustees to improve gatekeeping of member savings;
• ASIC issues warning over dodgy cold calling operators and online baiting tactics;
• Warning: Beware of sophisticated fake bond and term deposit scams;
• Greenwashing: Keynote speech from the regulator;
• ASIC consults on updated guidance for carbon market participants;
• ASIC calls for better communication and support for grieving families;
• ASIC updates reporting rules for certain subsidiaries;
• Report: Australians need better hardship support from their lenders; and
• Start preparing now: Early ASIC guidance on the mandatory climate disclosure regime.

‍ASIC Calls on Super Trustees to Improve Gatekeeping of Member Savings

An ASIC review found some superannuation trustees are failing to adequately oversee advice fee deductions, potentially harming members.

Key Takeaways:

• Over $990 million in advice fees were charged from member accounts in a 12-month period.
• Some trustees did not check advice documents for legitimacy.
• High fee caps and limited protection for low balances were identified.
• Variable onboarding processes for financial advisors raised concerns.

ASIC is urging trustees to improve oversight by:

• Reviewing how they identify bad actors through advice documents.
• Setting fair fee caps based on the actual cost of advice.
• Strengthening advisor onboarding procedures, including checking ASIC registers.
• Monitoring for suspicious activity, like cold calling tactics.

ASIC will take action against trustees who breach their obligations to members. The report is part of a broader effort to protect consumers from predatory financial practices.

More information can be found here.

ASIC Issues Warning Over Dodgy Cold Calling Operators and Online Baiting Tactics

Australians are being warned by ASIC to be cautious of deceptive tactics used by some financial advisors and cold calling businesses. These tactics aim to pressure people into switching superannuation funds, potentially putting their retirement savings at risk.

The issue lies with unsolicited calls targeting people between the ages of 25 and 50. These calls often use misleading information to pressure victims into switching their superannuation to high-fee products that involve risky investments. This can lead to significant losses in hard-earned retirement savings.

ASIC is actively taking steps to address this problem by investigating financial advisors and cold calling businesses involved in these practices. Additionally, they are encouraging consumers to report any suspicious activity they encounter.

To protect yourself from these tactics, ASIC advises Australians to simply ignore unsolicited calls and online advertisements about superannuation. Before making any changes to your super fund, it's crucial to do your own thorough research. By taking these precautions, you can help safeguard your retirement savings and avoid falling victim to deceptive tactics.

Beware of Sophisticated Fake Bond and Term Deposit Scams

ASIC is warning Australians about a rise in cunning fake bond and term deposit scams. Scammers are impersonating legitimate financial services businesses, particularly those with little online presence, to trick people into investing their money.

These scams can be very convincing.  Here's how they work:

‍Impersonation: Scammers steal details from real businesses, like addresses, licence numbers, and even investment details, to create a believable facade. They often target companies that lack a website or social media presence, making it difficult for you to verify their information.

‍Targeted Investments: Scammers create fake investment opportunities in well-known companies, such as banks and ASX-listed companies. Be wary, legitimate companies and banks do not need a middleman to issue bonds or term deposits. Be especially cautious if they claim to offer government bonds - this is a major red flag.

‍Fake Reviews and Documentation: They fabricate positive online reviews and create fake investment documents with stolen details which imitate the features of real bonds. These documents may even include fake government logos for added credibility.

‍Phishing for Information: They use online ads and social media to lure you in, then collect your personal information through inquiry forms. Once they have your details, they sound professional and knowledgeable, pressuring you to invest quickly.

‍The Money Trap: They'll ask you to send funds to a bank account, often disguised as a "client segregated account" or a third-party account. Legitimate businesses hold client money in specific trust accounts, not personal accounts.

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‍How to Protect Yourself:

‍Be sceptical: If it sounds too good to be true, it probably is. Don't rush into any investment without thorough research.

‍Verify Information: Always check the legitimacy of a business through ASIC Connect's Professional Registers. Don't rely solely on the information they provide.

‍Don't Share Banking Details: Never send money to an individual bank account or a third-party account. Confirm bank details directly with the financial institution.

‍Beware of Unexpected Contact: Be wary of unsolicited calls, emails, or messages from financial services businesses you haven't contacted. Scammers often exploit information from comparison websites.

‍Do Your Research: Educate yourself about legitimate investment options. ASIC's Moneysmart website has resources on bonds and term deposits.

By being vigilant and informed, you can protect yourself from these sophisticated scams and safeguard your hard-earned money.

You can read more about the scams at the ASIC newsroom, here.

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Greenwashing: Keynote Speech from the Regulator‍

ASIC Chair Joe Longo gave a keynote speech at the RIAA Conference Australia on 2 May 2024 focused on greenwashing and misleading and deceptive conduct. 

‍Key Points

• While the shift to sustainable finance may constitute a once-in-a-generation transformation, the fundamental underlying principles of accuracy and transparency are not new.
• Combating greenwashing is critical to supporting trust in sustainable finance-related financial products and services.
• ASIC’s greenwashing interventions are founded on enforcing well-established legal obligations that prohibit misleading and deceptive conduct, and our focus is on entities that we consider carelessly give inaccurate or misleading statements.

You can read the full speech here.

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ASIC Consults on Updated Guidance for Carbon Market Participants‍

ASIC is proposing updates to their guidelines for companies involved in buying and selling carbon credits.

These credits, called ACCUs and soon SMCs, are important for companies that release greenhouse gases. The update is to clarify the rules for who needs to hold a licence to give advice in relation to or trade these credits.

ASIC ought feedback on their proposal by 3 June 2024. ASIC also plans to update a separate document with more detail by the end of this year.

The CP 378 Safeguard mechanism reforms: Updates to RG 236 is available to read here.

ASIC Calls for Better Communication and Support for Grieving Families‍

ASIC is looking into how superannuation funds handle death benefit claims to ensure these claims are processed smoothly and efficiently, especially since beneficiaries are often grieving a loss.

During a review, ASIC identified several areas for improvement, particularly in communication with beneficiaries. When someone dies, their loved ones are typically distressed, anxious and emotionally vulnerable. ASIC emphasises the importance of clear and timely communication from super funds during this difficult time.

One of the biggest concerns is the delay in processing claims. Additionally, some funds don't adequately explain the claims process or what documents beneficiaries need to submit. This lack of clarity can add to the stress and confusion experienced by grieving families.

Furthermore, it was found that not all super funds offer assistance in languages other than English. Nor do they always provide adequate support for people with disabilities who may need help navigating the claims process.

In light of these findings, ASIC is urging super funds to improve their communication with members and beneficiaries. This includes providing clear explanations of the death benefit claims process, timelines, and required documents, all written in easy-to-understand language. Additionally, super funds should offer more support for beneficiaries who don't speak English or have disabilities. Regularly reviewing their claims handling procedures to identify areas for improvement is also crucial.

ASIC Updates Reporting Rules for Certain Subsidiaries‍

Following industry feedback, ASIC has adopted a no-action position on the financial reporting obligations of special purpose financing subsidiaries, or other wholly-owned subsidiaries, that issue debentures to sophisticated or professional investors, and their guarantors. 

Under Instrument 2016/785, wholly-owned companies may be relieved from financial reporting obligations under the Corporations Act 2001 where they enter into a deed of cross guarantee with their holding entity and meet certain other conditions. 

However, wholly-owned companies that are ‘borrowers in relation to debentures’, or ‘a guarantor of such a borrower’, are excluded from relief under ASIC Instrument 2016/785.  SIC became aware that some groups with financing subsidiaries (used to provide funds to other companies within the group) may have misinterpreted the rules.

ASIC is now offering a "no-action" position. This means they won't penalise these subsidiaries or their guarantors for not filing annual reports, as long as they comply with other requirements to rely on Instrument 2016/785.  This applies to financial years ending after September 2016 (when the original regulation was issued) and excludes subsidiaries involving trusts. 

This temporary policy is in place until October 2026 or until ASIC revises the regulation after consulting with industry experts.

Report: Australians Need Better Hardship Support From Their Lenders‍

ASIC report REP 783 found that many Australian home loan lenders are failing to adequately support customers experiencing financial hardship. The report revealed concerning practices, including difficulty accessing assistance, standardised approaches that don't consider individual circumstances, and a lack of support for vulnerable customers.

ASIC is critical of lenders who ignore hardship requests or use a "one-size-fits-all" approach. The report highlights that 40% of customers who received temporary relief fell behind on payments again after the assistance period ended. ASIC emphasises that struggling borrowers deserve better treatment and warns lenders of potential enforcement action if they don't improve their practices.

The report acknowledged that some lenders have improvement programs in place, but makes clear more work is needed. ASIC expects all lenders to take action and prioritise better support for customers facing financial hardship. The lenders subject of the review will be required to submit plans outlining how they will address the identified issues.

ASIC offers resources and guidance for borrowers struggling to make repayments. Its advice is to contact the lender first, then escalate complaints if necessary. For those with multiple debts or needing help applying for hardship assistance, ASIC recommends contacting the National Debt Helpline.

People can also contact local financial counselling services for support or assistance.

Start Preparing Now: Early ASIC Guidance on the Mandatory Climate Disclosure Regime‍

ASIC Chair Joe Longo gave a speech about upcoming mandatory climate reporting requirements for Australian businesses. 

Here are the key points:

• Over 6,000 businesses will soon need to report on climate-related risks and opportunities.
• Don't wait for the final rules - start preparing now by collecting data and building capabilities to comply.
• ASIC will provide guidance to help businesses meet these new requirements, but it won't be a step-by-step instruction manual.
• There will be a transition period to ease the burden of compliance.
• ASIC will take a pragmatic approach to enforcement, focusing on education and support in the initial stages.
• Reporting climate risks can benefit businesses by improving risk management and identifying new opportunities.
• Companies already reporting under the TCFD framework are well-positioned for the new regime.

ASIC encourages entities to design flexible systems that can handle future sustainability reporting requirements beyond climate change.

Overall, the message is clear: mandatory climate reporting is coming soon, and businesses need to start preparing now to ensure a smooth transition and reap the potential benefits.

The full speech can be accessed here.


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.