Katarina Klaric, Principal, Stephens Lawyers & Consultants
The Australian Securities and Investments Commission (ASIC), Australia’s company and financial services market regulator, released its latest Corporate Plan 2023-27, which continues to focus on enforcement and protecting Australian consumers and small businesses from predatory lending practices, scams, digital-enabled misconduct, unfair contract terms, misleading sustainability claims and misconduct and poor governance[i]. ASIC will also be monitoring the use and development of artificial intelligence (AI) and how this will impact businesses and markets[ii].
ASIC’s four year plan provides companies and organisations with useful insight into the regulator’s strategic priorities in respect of compliance and enforcement. This update provides an overview of ASIC’s plan.
Enforcement work continues to be part of ASIC’s enduring priorities, with ASIC dedicating significant resources to detecting, disrupting, investigating and responding to unlawful conduct. During the period between 1 January 2023 and 30 June 2023, ASIC enforcement activities and outcomes included-[iii]
- Commencement of 70 new investigations and 144 ongoing investigations.
- Issuance of 7 infringement penalty notices and had $5.9million paid in penalties.
- Disqualification or removal of 49 individuals from being company directors.
- Commencement of 7 court proceedings seeking civil penalties.
- Charging of 124 individuals with strict liability offences in summary prosecutions.
- Charging of 333 individuals with strict liability offences.
In addition, there were criminal prosecutions of individuals by the Commonwealth Director of Public Prosecutions (DPP) flowing from ASIC’s investigations.
ASIC’s enduring enforcement priorities focus on addressing misconduct that affects market integrity and/or involves consumer harm, including:-
- Insider trading, continuous disclosure breaches or failures, market manipulation, governance failures and other misconduct that damages market integrity.
- Misconduct that impacts First Nations peoples.
- Misconduct that involves a high risk of consumer harm, in particular conduct that is targeted to financially vulnerable consumers.
- Systemic compliance failures by large financial institutions that results in wide consumer harm[iv].
ASIC Key Strategic Priorities and Strategic Projects
ASIC’s key strategic priorities and strategic projects for the next 4 years focus on:
Product Design and Distribution
ASIC’s strategic priority is to reduce the harm caused to consumers by poor design, distribution and marketing of financial and investment products including over-the-counter (OTC) derivatives, insurance products, credit and credit-like products, crypto-assets and decentralised finance. ASIC will continue to focus on monitoring compliance with all requirements in respect of design and distribution obligations and will increase its risk-based surveillance, taking action to address poor design and distribution of products. ASIC will also support the Australian Government in the development of an effective regulatory framework for crypto-assets and decentralised finance focused on consumer protection and market integrity[v].
ASIC’s strategic priority is to support and ensure sustainable finance practices to ensure market integrity and efficiency and compliance with governance and disclosure requirements to deter and reduce the harm from greenwashing. ASIC will continue to support the Australian government’s sustainable finance strategy including the proposed introduction of a globally aligned mandatory climate related disclosure regime for large business and financial institutions.
Enforcement action against entities involved in misconduct involving poor governance and disclosure, misleading marketing and greenwashing will continue to be a key priority[vi]. During 2023, ASIC commenced three court proceedings against entities involved in alleged greenwashing seeking imposition of penalties.[vii]
With about 3 million Australian’s reaching retirement age and becoming eligible to draw from their superannuation in the next 10 years[viii], ASIC will be focusing on superannuation products, managed investments and financial advice to protect consumers planning for retirement from poor design, distribution and marketing of financial products and investment scams[ix].
ASIC’s plan recognises that new and evolving technologies are transforming the financial sector with the use of algorithms and AI technologies in the financial markets without sufficient transparency as to how these technologies work and the potential risk to consumers. These technologies also enable sophisticated illegal scam activities. Cybersecurity attacks continue to pose significant risks to potential widespread financial market disruption, with the interconnection of digital financial services[x].
ASIC’s priorities will focus on addressing the impact of technological risk in the financial markets and services including digitally enabled misconduct. ASIC will continue to actively supervise and engage with organisations to promote good practices in the management of operational risks and enhance cyber and operational resilience practices. ASIC will be taking targeted surveillance to monitor cyber and operational resilience by regulated entities. Enforcement Action will also be taken against organisations for governance failures relating to cyber resilience and fail to mitigate the risk of cyber-attacks[xi].
This update is not intended to be a substitute for obtaining legal advice.
© Stephens Lawyers & Consultants. 9 September 2023. Authored by Katarina Klaric, Principal, Stephens Lawyers & Consultants.
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[i] ASIC Media Release published 28 August 2023- “ASIC focuses on protecting vulnerable consumers and small business in 23-24”.
[iii] ASIC Summary of Enforcement Outcomes- 1 January 2023 to 30 June 2023- https://asic.gov.au/about-asic/asic-investigations-and-enforcement/asic-enforcement-outcomes/summary-of-enforcement-outcomes-1-january-2023-to-30-june-2023
[iv] ASIC Corporate Plan 2023-24, 28 August 2023, p4
[v] Ibid, pp7, 9 and 10.
[vi] Ibid, pp7 and 9.
[vii] ASIC Media Release published 11 August, 2023 – “ASIC commences greenwashing case against Active Super” – being ASIC’s third greenwashing civil penalty proceeding after ASIC recently took action against Mercer Super and Vanguard Investments Australia.
[ix] Ibid, pp7 and 8
[x] Ibid, p6.
[xi] Ibid, 7, 8 and 10.