Australia
On 9 September 2024, the Australian Securities and Investments Commission (ASIC) released its “Enforcement and Regulatory Update” report, which sets out recent outcomes in enforcement and regulation from 1 January and 30 June 2024. In the first half of the year, the report highlights that ASIC was successful in 95% of its civil and criminal prosecutions, securing $32.2 million in civil penalties and nine criminal convictions. It also notes that ASIC launched 63 new investigations, commenced 12 new civil proceedings and completed 550 surveillances throughout the period. For more information, please click here.
On 10 September 2024, ASIC released its findings of its surveillance of 19 issuers of high-risk investment, insurance and credit products between October 2023 and August 2024 in Report 795 “Design and distribution obligations: Compliance with the reasonable steps obligation.” The report provides a snapshot of compliance with the design and distribution obligations across multiple industries and products. ASIC’s review revealed that many issuers had limited due diligence arrangements to assess and monitor third party distributors, some issuers of high-risk products were relying on broad search terms in online marketing, many issuers used poor quality consumer questionnaires, and only a few issuers monitored consumer outcomes and product performance. The report recommends that issuers improve distribution practices regarding the selection and supervision of distributors, training staff, marketing materials, consumer questionnaires, and information and monitoring outcomes. In addition, ASIC released minor updates to Regulatory Guide 274 “Product design and distribution obligations” (RG 274) to provide greater clarity around ASIC’s guidance on the appropriateness requirement for Target Market Determinations (TMDs). The changes to RG 274 will not require product issuers to update their TMDs. For more information, please click here.
On 17 September 2024, ASIC released a letter to market participants outlining technological and operational resilience guidance, clarifying how to identify critical business services and notification of a major event. The guidance relates to the technological and operational resilience requirements detailed in Chapters 8A and 8B of the ASIC Market Integrity Rules (Securities Markets) 2017 and ASIC Market Integrity Rules (Futures Markets) 2017. For more information, please click here.
On 18 September 2024, ASIC issued a media release to remind large Australian businesses and financial institutions of their mandatory climate reporting obligations, which will take effect from 1 January 2025. This follows the passage of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth) in Parliament on 9 September 2024, which received Royal Assent on 17 September 2024. The mandatory climate reporting requirements will be phased in over the next three years across three groups of reporting entities, with the first reporting cohort required to prepare annual sustainability reports for the financial year commencing on or after 1 January 2025. The second and third reporting cohorts are required to prepare annual sustainability reports for the financial years commencing on or after 1 July 2026 and 1 July 2027, respectively. To assist reporting entities, ASIC has established a dedicated sustainability reporting page on its website to provide information about the new regime and how it will be administered. Furthermore, ASIC will consult with stakeholders on issuing new and/or updated regulatory guidance to assist them in complying with their sustainability reporting obligations. For more information, please click here.
On 19 September 2024, ASIC issued a media release to inform the market about its new powers resulting from the passage of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 in Parliament and the receipt of Royal Assent on 9 September 2024 and 17 September 2024, respectively. The new Australian Financial Market Infrastructure (FMI) laws strengthen the existing regulatory regime, ensuring that ASIC and the Reserve Bank of Australia (RBA) have strong and dependable powers to monitor, manage, and respond to risks related to FMIs. As a next step, ASIC will collaborate with the RBA to develop and provide information and guidance on the use of these new powers. For more information, please click here.
On 20 September 2024, ASIC reissued Regulatory Guide 121 Doing financial services business in Australia (RG 121) to provide the latest guidance to individuals and companies from outside Australia that wish to conduct a financial services business in Australia. This version replaces guidance issued in June 2013. RG 121 has been reissued to: (i) remove references to expired or repealed Australian Financial Services (AFS) licensing relief, including class relief granted by ASIC to foreign financial services providers and foreign collective investment schemes; (ii) amend descriptions of AFS licensing exemptions and relief to reflect those currently available; (iii) update the description of the Courts’ interpretation of ‘carrying on a business in Australia’, such as the general indicators of carrying on a business, other relevant factors and when a one-off transaction may amount to the carrying on of a business; and (iv) update descriptions of, or references to, financial products and services, obligations of AFS licensees, legislation administered by ASIC, other applicable rules and legislation, and ASIC’s regulatory documents to reflect the current legal and regulatory framework. For more information, please click here.
On 24 September 2024, ASIC announced the extension of ASIC Corporations and Credit (Breach Reporting—Reportable Situations) Instrument 2021/716, ASIC Credit (Breach Reporting—Prescribed Commonwealth Legislation) Instrument 2021/801, and ASIC Class Order 14/923 Record-keeping obligations for Australian financial services licensees when giving personal advice (the “Former Instruments”) following its consultation that ended on 4 September 2024. The Former Instruments provide relief from reporting requirements for the reportable situations regime, and to prescribe record keeping requirements for personal advice situations. ASIC concluded that the Former Instruments were operating efficiently and effectively and continue to form a necessary and useful part of the legislative framework. The Former Instruments were extended on the same terms for five years (October 2029). For more information, please click here.
On 26 September 2024, ASIC announced two-year extension of its Consultation Agreement (Agreement) with the Financial Markets Standards Board (FMSB) to 25 September 2026. ASIC and FMSB first signed the Agreement in September 2022 to promote global standards for fair and effective wholesale financial markets, and to formalise ASIC’s active interest in the development of global industry standards. The two-year extension to the Agreement will further facilitate FMSB’s consultation with ASIC in the development of draft standards and other publications and provide ASIC with periodic updates on FMSB’s strategy. For more information, please click here.
On 26 September 2024, ASIC announced that the specific requirements relating to land used in primary production managed investment schemes under ASIC Corporations (Land Holding for Primary Production Schemes) Instrument 2024/15 will no longer apply from 1 October 2024. The instrument imposed minimum standards that a responsible entity must meet in relation to the holding of certain interests in land for certain types of registered managed investment schemes. ASIC has decided that the specific requirements for primary production schemes covered by this instrument are no longer necessary. For more information, please click here.
On 30 September 2024, ASIC released its updated regulatory guidance for carbon market participants in Regulatory Guide 236 Do I need an AFS licence to participate in carbon markets? (RG 236). RG 236 provides guidance for participants in the carbon markets, including people involved in the Australian Carbon Credit Unit (ACCU) scheme, responsible emitters for safeguard facilities, market intermediaries and advisers to participants in the carbon market. As the name suggests, the guidance will assist participants in carbon markets in deciding whether they need an AFS licence to engage in activities associated with participation in the carbon market. The updates to RG 236 are to address the safeguard mechanism reforms that commenced on 1 July 2023 and reflect changes to the ACCU Scheme that have occurred since RG 236 was last re-issued in May 2015. For more information, please click here.
On 30 September 2024, ASIC announced the extension of existing relief granted to operators and promoters of employee redundancy funds from the AFS licensing and managed investment provisions of the Corporations Act for a transitional period of 18 months. Under the transitional relief, entities relying on the relief will be required to notify ASIC. Existing entities relying on the relief will need to notify ASIC by 31 October 2024. This will assist to ensure all fund operators can be contacted in connection with the upcoming consultation. Entities can notify ASIC of their reliance on the relief by emailing ASIC at rri.consultation@asic.gov.au. For more information, please click here.
Enforcement
On 4 September 2024, ASIC announced that it has cancelled the AFS licence of Contracts for Difference (CFDs) and foreign exchange contracts issuer, FXOpen AU Pty Ltd (FXOpen AU), after an investigation identified serious concerns about the inadequacy of its human resources to provide financial services and to carry out supervisory arrangements. In addition, ASIC’s investigation found that FXOpen AU failed to comply with its obligations as an AFS licensee, including maintaining competence to provide financial services covered by the licence, complying with the ‘key person’ condition on its licence, and complying with financial services laws. For more information, please click here.
On 9 September 2024, ASIC announced that the former director of Reiwa-Capital, Russell Sandiford, has been sentenced to two years and 8 months’ imprisonment, to be served by way of an Intensive Correction Order (ICO), relating to his dishonest use of investor funds. It was found that, between January 2020 and June 2022, Mr Sandiford contacted individuals using email addresses that he held from his previous employment as a market trader and analyst at brokerage firms. Mr Sandiford invited the email recipients to participate in one of two funds: (i) a ‘Hedge Fund,’ which offered, for a nominal one-off fee, a split of profits from a trading account operated by Mr Sandiford trading in foreign exchange products and commodities; and an ‘Income Fund,’ where investors would pay a capital investment amount on the basis it would be paid into a larger pool of funds to be used to trade foreign exchange products and commodities for the profit of investors. As a result, over two and a half years, 74 clients paid $440,909 to Mr Sandiford for investing or trading via those funds. Mr Sandiford used the funds primarily for personal expenses or purposes unrelated to trading including gambling and personal entertainment, rather than investing or trading as agreed. For more information, please click here.
On 16 September 2024, ASIC announced that Mark Francis McCabe has pleaded guilty to three offences of dishonestly obtaining a financial advantage by deception contrary to s192E(1)(b) of the Crimes Act 1900 (NSW) (Crimes Act), with a further four offences to be taken into account on sentencing. Mr McCabe dishonestly obtained a financial advantage between October 2015 and May 2020 of $940,350 from eight victims, seven of who were former clients of Guevara Capital Access (GCA) (Deregistered) and/or Online Trading Capital (OTC) (Deregistered). Mr McCabe was the sole director of both companies. The dishonest and deceptive representations made by Mr McCabe to investors included that he (through GCA and/or OTC) would provide ― and had provided ― investors with access to foreign exchange trading accounts with access to “capital” funds (in these accounts in specific amounts) to trade in a profit share arrangement on a trading platform provided by a third party. Contrary to the representations made to investors, Mr McCabe only provided “test” accounts which were not capable of placing real foreign exchange trades. Investors used these “test” accounts to conduct what they believed to be genuine trading; however no actual trading took place. For more information, please click here.
On 25 September 2024, ASIC announced that the Markets Disciplinary Panel (MDP) has fined Macquarie Bank Limited (Macquarie), a market participant in energy derivatives, a record $4.995 million for failing to prevent suspicious orders being placed on the electricity futures market. This is the highest penalty ever imposed by the MDP. It was noted that on 50 occasions, from January to September 2022, Macquarie breached market integrity rules by permitting three of its clients to place suspicious orders. Each order displayed characteristics of an intention to ‘mark the close’, meaning each order was placed within the last minute of market close, impacting the daily settlement price, in a direction favourable to the client’s existing interest in that contract. For more information, please click here.
On 25 September 2024, ASIC announced that the Federal Court ordered Vanguard Investments Australia to pay a $12.9 million penalty for making misleading claims about Environmental, Social, and Governance (ESG) exclusionary screens. These screens were applied to investments in the Vanguard Ethically Conscious Global Aggregate Bond Index Fund to exclude bond issuers with significant business activities in certain industries, including fossil fuels. However, this was not always the case. In fact, it was noted that approximately 74% of the securities in the fund by market value were not researched or screened against applicable ESG criteria. For more information, please click here.
This document is provided for information purposes only and does not constitute legal, tax, investment, regulatory, accounting or other professional advice. For more information on the legal and regulatory status of IQ-EQ companies please visit www.iqeq.com/legal-and-compliance.