The following summarises ASIC’s key enforcement outcomes from January to June 2018:
67 investigations commenced
73 investigations completed
Bans and disqualifications
68 people or companies removed or restricted from providing financial services or credit
20 people disqualified or removed from directing companies
$20.44 million in civil penalties
$256.69 million in compensation and remediation for investors and consumers
Infringement notices, compensation and court enforceable undertakings
16 infringement notices issued
12 court enforceable undertakings
$213,200 in infringement notices paid
$7.57 million in community benefit fund payments
13 people charged in criminal proceedings
210 criminal charges laid
176 people charged in summary prosecutions for strict liability offences
342 criminal charges laid in summary prosecutions for strict liability offences
There has been a substantial increase in compensation and remediation for investors and consumers from January to June 2018 ($256.69m) compared with the previous period, July to December 2017 ($94.4m), though falls short of the $618.8m in compensation paid between January and June 2017. This increase is in part attributable to the compensation to consumers who were charged fees for no service by financial services providers, which has been a focus of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (“Royal Commission”).
Auditors of self-managed superannuation funds (“SMSFs”) must be registered with ASIC under the Superannuation Industry (Supervision) Act 1993. Since ASIC became co-regulator of SMSFs in 2013, ASIC has provided a summary of its enforcement actions in relation to SMSF auditors. In more than 120 enforcement matters, 76 SMSF auditors were removed from the register and 24 had further conditions imposed on their registrations.
The areas considered for the enforcement action were:
non-compliance with independence requirements (75 cases)
non-compliance with auditing standards (74 cases)
fit and proper issues, including false and misleading statements, fraud, insolvency or bankruptcy (25 cases)
non-compliance with other requirements, such as continuing professional development or professional indemnity requirements (27 cases)
The report presents data in the financial services industry on the enforcement outcomes by misconduct type. These misconduct types are represented below in a chart from the report:
ASIC has also reported on its ongoing investigation into the conduct of the largest financial advice firms in Australia. Since 2014 ASIC has banned 50 financial advisers from the industry and commenced civil penalty proceedings against Westpac and AMP.
ASIC has reiterated its focus on enforcing higher standards over the next six months, focussing on:
responsible lending practices of Australian Credit licensees;
the responsibility of AFS licensees to monitor and supervise representative’s financial advice;
the obligation of financial services firms to ensure that clients receive the services for which they are charged; and
the scope of the conflicted remuneration obligations on financial licensees and authorised representatives.
The current Royal Commission has recently examined these issues across the financial services and superannuation industry. With the Royal Commission’s interim report due 30 September 2018, followed by the final report by 1 February 2019, financial services misconduct and ASIC’s enforcement regime will continue to be under scrutiny.
Over the last six months ASIC has closely monitored areas including market manipulation, financial benchmarks, listing standards and protecting investors. The report highlighted the recent case of ASIC v Commonwealth Bank of Australia  FCA 941, where the Federal Court imposed pecuniary penalties totalling $5 million on CBA for attempting to engage in unconscionable conduct in relation to the Bank Bill Swap Rate.
ASIC will continue to focus on conduct risk, including:
poor conduct in fixed income, commodities and currency markets
misconduct in relation to initial coin offerings and cryptocurrency markets
serious and organised market misconduct with a focus on cross-border transactions
technology-enabled offending, including cyber-related market misconduct
financial benchmark integrity
This coincides with the commencement of the financial benchmark licensing regime in April 2018.
Unfair terms in small business contracts have been a particular focus for both the ACCC and ASIC since November 2016. Over the next six months ASIC will continue to focus on unfair contract terms in small business contracts, as well as credit lenders who do not lodge annual compliance certificates in accordance with the National Consumer Credit Protection Act 2009 (Cth) and detecting illegal phoenix activity.
ASIC continues to closely monitor compliance and enforce penalties for misconduct in the areas of corporate governance, financial services, market integrity and small businesses. If you have any questions about ASIC’s report or your legal obligations, please contact Hillary Ray or a member of our financial services team.