Following the release of its enforcement and regulatory update for April to June 2023 (Report 767), ASIC advises that it will continue strong, targeted enforcement action to uphold market integrity and protect consumers and investors from financial harm.
We set out our insights from Report 767 below.
Civil penalties
ASIC's enforcement proceedings for the half year to 30 June 2023 resulted in $109.1 million in civil penalties, which is a noticeable uplift from the $76.3 million in civil penalties that ASIC reported in the July to December 2022 period (see our summary of Report 757 here).
One of Australia's largest general insurers (Insurance Australia Limited) was penalised $40 million by the Federal Court in June 2023, being the largest penalty ever imposed on an insurer for breaches of consumer protection laws, for failing to honour discount promises made to customers who held NRMA-branded insurance policies.
The Federal Court also recently ordered two companies in the AMP Group to pay $24 million for charging life insurance premiums and advice fees to the superannuation accounts of over 2,000 deceased customers.
ASIC-initiated review of insurance pricing practices
In June 2023, ASIC released When the price is not right: Making good on insurance pricing promises (Report 765). That report:
- estimated that general insurers will be required to repay over $815 million to more than 5.6 million customers due to their systemic pricing failures;
- revealed valuable insights into the systems, processes and governance within insurers for delivering on their promises; and
- provided a roadmap to the insurers for the improvements required.
Greenwashing
ASIC also released an update on its recent greenwashing interventions (Report 763). The update sets out 35 interventions made against greenwashing in the nine months to March 2023. These included 23 corrective disclosure outcomes, 11 infringement notices, and the commencement of civil penalty proceedings in one case.
Interim stop orders
Between April and June 2023, ASIC issued its first interim stop orders against superannuation and insurance products in relation to their target market determinations (TMDs), under the design and distribution obligations which came into effect in October 2021. Among other reasons, ASIC imposed these orders because the relevant TMDs:
- were defined too broadly, and had not properly considered the risks of the product options (see ASIC's media release in relation to stop orders for Spaceship Super and Spaceship Voyager Funds);
- did not consider the financial situation of the target market consumers, increasing the risk that they would acquire a product that was inconsistent with their objectives or needs (see ASIC's media release regarding 38 stop orders for pet insurance products); and
- failed to consider the impact of key eligibility criteria (i.e. age and minimum employment criteria) on the suitability of the product for certain classes of consumer (see ASIC's media release with regard to stop orders placed on life insurance companies).
This follows ASIC's initial, risk-based review of available TMDs in May 2023, which found that a significant number were deficient under these obligations. See our summary of the design and distribution obligations in relation to TMDs here.
Scams
In April 2023, ASIC released Scam prevention, detection and response by the four major banks (Report 761). That report examined the approaches taken by the major banks to prevent, detect and respond to scams. ASIC's analysis revealed that scam losses for major bank customers exceeded $550 million last financial year and impacted over 31,700 customers.
Addressing scams will remain both an ASIC and government priority. As stated by ASIC Deputy Chair, Sarah Court:
"Combating scams is a critical task for all of corporate Australia – financial institutions, telecommunication providers, digital platforms and other organisations need to work cohesively to stop scams at the source."
Other enforcement action
Other enforcement outcomes included the cancellation of Binance Australia Derivative's AFS licence, a custodial sentence for an individual engaging in market manipulation, and multiple charges of insider trading.
Between April and June 2023, three individuals faced enforcement ranging from injunctions to imprisonment for carrying on unlicensed financial services businesses, including a self-described "social media finfluencer". ASIC also banned an individual who engaged in naked short selling from providing financial services for 3 years. ASIC will continue to review compliance with the short selling regime to uphold market integrity.
Updated guidance on reportable situations regime
We have previously provided an overview of the new breach reporting regime that commenced on 1 October 2021, as well as ASIC's corresponding Regulatory Guide 78 - Breach reporting by AFS licensees and credit licensees (RG 78).
In April 2023, ASIC updated their guidance on the reportable situations regime (formerly breach reporting) for AFS licensees and credit licensees. The guide was updated to address some operational issues which have arisen since the implementation of the regime on 1 October 2021. ASIC also made minor changes to the prescribed form for lodging reportable situations, which is located on the ASIC Regulatory Portal.
The updated RG 78 and a detailed overview of the changes to RG 78 can be found here.
The changes made to RG 78 include:
- clarifying the circumstances in which licensees may group multiple reportable situations into one report to ASIC;
- new guidance on the information to include when licensees describe a reportable situation; and
- new guidance for licensees on ASIC’s expectations when licensees are providing updates related to a reported breach.
ASIC has also noted that the above changes are only the "first phase of changes we have implemented under the reportable situations program of work".
Regulatory developments timetable
ASIC has again issued an interactive regulatory developments timetable which lists ASIC's proposed timeframes for regulatory work, including the publication of draft or final guidance, or the anticipated making of a legislative instrument.
The timetable lists 21 initiatives planned between July and September 2023, 11 initiatives between October and December 2023, and 13 initiatives for January 2024 and beyond. It includes ASIC's expected actions for relevant initiatives, including consultation, updates to regulatory guides, issuance of information sheets or user guides, and implementation of rules made.