ASIC releases enforcement and regulatory update for July to September 2022

ASIC has released its quarterly enforcement and regulatory update for the period July 2022 to September 2022 (Report 753). Report 753 comes off the back of the release of ASIC’s Corporate Plan for 2022-2026 in August, which outlines the regulator’s strategic priorities for the next four years. In accordance with its new Corporate Plan, Report 753 offers an insight into how ASIC will work towards the following priorities over the next four years:

• Product design and distribution: reducing the risk of harm to consumers of financial and credit products caused by poor product design, distribution and marketing, including by driving compliance with new regulatory requirements.
• Sustainable finance: supporting market integrity through proactive supervision and enforcement of governance, transparency and disclosure standards.
• Retirement decision-making: protecting consumers as they plan and make decisions for retirement, with a focus on superannuation products, managed investments and financial advice.
• Technology risks: focusing on the impacts of technology in financial markets and services, driving good cyber-risk and operational resilience practices, and acting to address digitally enabled misconduct and scams.

While ASIC’s latest Corporate Plan was released in August 2022, Report 753 reflected the regulator’s enforcement and regulatory achievements against these priorities for the period July to September 2022. These achievements included:

• Protecting consumers and monitoring remediation by addressing consumer harms throughout the financial services sector, and expanding guidance on consumer remediation.
• Acting against misconduct by financial institutions, particularly in the design, distribution and marketing of financial products.
• Protecting investors and strengthening market integrity including acting against financial services licensees engaging in unconscionable selling practices, banning directors engaged in misconduct and extending product intervention orders for the issue and distribution of binary options for retail clients.
• Improving surveillance outcomes and implementing law reform including through the release of guidance on the Financial Services and Credit Panel and financial adviser exam, and calls for improvements in marketing materials published by fund managers.

Penalties

ASIC has continued to be an active litigator against misconduct in the financial services sector. Notable penalties imposed by the courts during the quarter included:

• A $14.5 million penalty ordered by the Federal Court against the AMP Limited group (AMP), for charging fees for services that were not provided to 1,452 superannuation members. The court found that AMP had breached its obligation as an Australian financial services licensee to act efficiently, honestly and fairly by charging fees for no service and for failing to maintain adequate internal controls to prevent such misconduct.
• A $7.2 million penalty ordered by the Federal Court against Dixon Advisory Superannuation Services Limited, in relation to failures by six representatives to act in their clients’ best interests and provide advice appropriate to their clients’ circumstances. The court found that these representatives had failed to conduct the necessary investigations into the financial products they recommended, and that they had failed to consider the personal circumstances of their clients.

These two penalties underscore that ASIC will not hesitate to use the threat of civil penalty proceedings as a means of deterring misconduct from financial services institutions.