ASIC has recently released a report covering enforcement results for the period 1 July 2016 to 31 December 2016. The report highlights investigations undertaken during this period as well as a high level analysis of the results.
By way of example, the report notes that the following proportions of misconduct type in the financial services sector:
- 31% - Credit.
- 25% - Dishonest conduct, misleading statements.
- 17% - Unlicensed conduct.
- 2% - Misappropriation, theft and fraud.
- 25% - Other financial services misconduct.
In regard to market integrity results by misconduct type:
- 25% - Continuous disclosure.
- 19% - Market Integrity Rules.
- 12% - Insider trading.
- 44% - Other market misconduct.
Corporate governance results by misconduct type:
- 25% - Action against liquidators.
- 19% - Action against directors.
- 6% - Action against auditors.
- 3% - Insolvency.
- 47% - Other corporate governance misconduct.
ASIC has indicated that the focus of its enforcement activity for the first half of the 2017 calendar year will cover the following:
Market Integrity - Integrity of financial market benchmarks being a high enforcement priority.
Corporate Governance - ASIC expects the gatekeepers (ie, company officeholders, auditors, insolvency practitioners and other external advisers) to adhere to high standards as required by the law.
Financial Services - With a specific focus on responsible lending practices, advisers’ compliance with the best interests requirements, differentiating between general and personal financial product advice.
ASIC highlighted several certain high profile cases which supported its enforcement objectives:
Foreign Exchange Supervision- ASIC accepted Enforceable Undertakings from the National Australia Bank and Commonwealth Bank in relation to the banks’ wholesale spot foreign exchange businesses.
Insider Trading - Hochtief was found to have engaged in insider trading when the entity instructed its subsidiary to acquire 200,000 Leighton Holdings shares, while Hochtief’s Chief Financial Officer had information about Leighton Holding’s expected financial results.
Continuous Disclosure - Two directors of Padbury Mining were each disqualified from managing corporations for three years for breaching their duties as directors in regard to the company’s continuous disclosure obligations. The company’s announcement that it had secured $6 billion in funding for the Oakajee port and rail infrastructure project was found to be misleading and deceptive.
Poor listing standards - Sino Australia Oil and Gas was found to have made false and misleading representations in its prospectus documentation and failed to make timely disclosure of variations in its profit forecasts. In addition, the company’s former Chairman was disqualified from managing corporations for 20 years.
Protecting retail investors and financial consumers - The 21st Century Group was involved in the promotion and sale of interests in five land banking developments . The Courts found that the conduct amounted to unregistered management investment schemes and as the entities were not licensed, they were carrying on a financial services business without an AFS Licence.
Holding Gatekeepers to Account - Maintaining surveillance of potential illegal phoenix activity.
Consumer credit - Cash Converters failed to make reasonable inquiries into consumers’ income and expenses when processing small amount credit contracts through its website.
Should you have any queries, please contact Jeremy Danon, director of Ariel & Associates Pty Ltd on (02) 8223 3355 or at jeremy@ariel.associates.