Latest Corporation Law Updates in Australia for 2024

Federal Court finds DG Institute made false or misleading representations, sole director knowingly concerned in contraventions (Australian Competition and Consumer Commission v Master Wealth Control Pty Ltd)

Date: 10 April 2024
Court: Federal Court of Australia
Judge(s): Jackman J
Judgment date: 9 April 2024
Catchwords: Consumer law – misleading and deceptive conduct – accessorial liability

Abstract:

The Federal Court has found Master Wealth Control Pty Ltd (Master Wealth Control), trading as DG Institute, made false or misleading representations in the promotion and sale of two education programs for control of wealth. Its director, Ms Dominique Grubisa, was also found liable for aiding, abetting and procuring contraventions and being knowingly concerned in and party to the contraventions.

Background

DG Institute offered two education programs relating to property and business investment to consumers called Real Estate Rescue (RER) and Master Wealth Control (MWC) from April 2017 to November 2022. Both programs were promoted through free in-person and online seminars and in videos featuring Ms Grubisa on its website.

During this period, at least 1,900 and 1,800 students were enrolled in the RER and MWC programs respectively and each paid between $4,500 to $9,200 to participate. DG Institute earned a total of over $18 million in revenue from both programs.

Corporate Finance Update – Issue 16

Date: 9 April 2024
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The recent Corporate Finance Update Issue 16 delves into a range of topics within the corporate finance sector, focusing on cybersecurity, environmental compliance, greenwashing, and significant regulatory updates.

Cybersecurity Insights: The update emphasises the partnership between the regulatory body and the Council of Financial Regulators (CFR) in conducting Cyber and Operational Resilience Intelligence-led Exercises (CORIE) with major financial organisations. These exercises aim to fortify cyber resilience by simulating realistic cyber attacks to identify and address vulnerabilities, particularly in password management and access controls. Findings reveal critical security gaps, underscoring the need for enhanced cybersecurity measures, including robust password protocols and multifactor authentication, to protect against evolving cyber threats and safeguard sensitive data within the financial services sector.

Environmental Compliance and Greenwashing: The issue sheds light on the enforcement actions taken against greenwashing. ASIC's issuance of infringement notices to entities such as Morningstar and Northern Trust highlights the regulatory focus on ensuring that companies' environmental claims are truthful and substantiated. The update details the specific allegations against these firms, pointing out the discrepancies in their environmental claims and the actual investments or practices they engaged in.

Federal Court finds Vanguard engaged in greenwashing by misrepresenting ESG credentials of investment fund (Australian Securities and Investments Commission v Vanguard Investments Australia Ltd [2024] FCA 308)

Date: 3 April 2024
Court: Federal Court of Australia
Judge(s): O’BRYAN J
Judgment date: 28 MARCH 2024
Catchwords: CONSUMER LAW – ss 12DB and 12DF ASIC Act – greenwashing – ESG representations

Abstract:

In proceedings brought by the Australian Securities and Investments Commission (ASIC), the Federal Court has found Vanguard Investments Australia Ltd (Vanguard) liable for breaching the consumer protection provisions in ss 12DB and 12DF of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) by making false or misleading representations about the ESG screening criteria for its Ethically Conscious Global Aggregate Bond Index Fund (the Fund). A hearing as to penalties will occur at a later date.

The case:

ASIC alleged that in Product Disclosure Statements (PDS), media releases, website content, a Youtube video interview and at a promotional event presentation later published online, Vanguard had made representations that the Fund offered an ethically conscious investment opportunity by seeking to track the Bloomberg Barclays MSCI Global Aggregate SRI Exclusions Float Adjusted Index (Index)) and that before being included in the Index (and thus, the Fund), securities were researched and screened against ESG criteria and those that breached the criteria were excluded or removed.

Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 introduced

Date: 3 April 2024
Source: Parliament of the Commonwealth of Australia

Catchwords: Corporations – operation of unregistered management investment scheme in contravention of s 601ED(5) of the Corporations Act 2001 (Cth) – carrying on financial services business without an Australian Financial Services Licence in contravention of s 911A of the Corporations Act – investment in cryptocurrency

Abstract:

On 27 March 2024, landmark climate reporting legislation was introduced into the House of Representatives as Schedule 4 of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Bill).

The Bill was introduced following consultation on an exposure draft of the Bill and, if enacted, would introduce a new mandatory climate disclosure reporting regime in Australia which is aligned with international standards.

The Senate has referred the provisions of the Bill 2024 to the Senate Economics Legislation Committee for inquiry and report by 30 April 2024.

Mandatory climate-related reporting regime

The specific details of the new mandatory climate disclosure requirements will be set out in new accounting standards which are currently being developed by the Australian Accounting Standards Board (AASB) and based on the International Sustainability Standards Board (ISSB) standards: IFRS S1 and IFRS S2.

There are a few key differences in the Bill compared with the exposure draft. For example, the reporting requirements which apply to Group 1 entities.

New legislation to increase the accessibility and affordability of financial advice

Date: 28 March 2024
Source: Treasury

Summary originally published by Capital Monitor

The Government has introduced the first tranche of legislation to deliver its comprehensive package of reforms to ensure Australians have access to quality and affordable financial advice, said Assistant Treasurer Stephen Jones. There are over five million Australians at or approaching retirement who need assistance to navigate the pension and superannuation systems. Unfortunately, the average cost of financial advice puts professional advice out of reach for many Australians. The Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024 implements reforms which reduce unnecessary red tape that adds to the time and cost of preparing financial advice.

Update on consultation draft for 5th Edition of ASX’s Corporate Governance Principles and Recommendations

Date: 25 March 2024
Source: Australian Securities Exchange (ASX)

Abstract:

The ASX Corporate Governance Council is consulting on the proposed 5th Edition of its Corporate Governance Principles and Recommendations. Consultation is open until 6 May 2024.

Background

The 4th Edition was issued in 2019, shortly after the release of the final report from the Royal Commission into Misconduct into the Banking, Superannuation and Financial Services Industry.

The 5th Edition consultation draft is intended to respond to evolving investor and community expectations around issues such as corporate conduct, culture, management of risk, stakeholder relationships, reporting, and remuneration. It is intended to reinforce entities’ frameworks, and not to create parallel regulatory regimes.

The 5th Edition maintains the existing 8 Principles, with some changes to expression. It contains 33 general Recommendations, with 7 additional Recommendations that apply only in limited cases (eg for entities established outside of Australia).

The consultation draft and a mark-up against the Fourth Edition are available on the ASX website. ASX has also released a background paper with consultation questions, as well as a webinar summarising the key proposed changes.

ASIC commences first proceedings against director for failing to obtain DIN

Date: 25 March 2024
Source: Australian Securities and Investments Commission

The Australian Securities and Investments Commission (ASIC) has commenced proceedings against a director for failing to obtain a director identification number (DIN).

The DIN regime, administered by the Australian Business Registry Services and enforced by ASIC came into effect on 1 November 2021 and existing company directors had until 30 November 2022 to apply for a DIN.

Failure to have a DIN is both a civil contravention and a criminal offence (s1272C(1) Corporations Act 2001 Cth) This is the first time proceedings have been brought against a director for contravening section 1272C(1). The defendant faces a maximum penalty of $13,320.

Read ASIC’s media release here.

Financial Accountability Regime commences today (15 March 2024)

Date: 15 March 2024
Source: Australian Prudential Regulation Authority (APRA)

Abstract:

The Financial Accountability Regime (FAR) has commenced for the banking industry. As noted in our previous update, on 8 March 2024 the regulators, APRA and ASIC, released final rules and further guidance to support the financial services industry in implementing the FAR regime.

The regulator’s information package released on 8 March 2024 (and updated on 14 March 2024) includes:

• the Regulator rules, which prescribe information for inclusion in the FAR register of accountable persons;
• the Transitional rules, which prescribe information to be provided by authorised deposit-taking institutions (ADIs) in relation to their existing accountable persons under the BEAR at the transition point to the FAR;
• an Information paper for ADIs, including the information ADIs and their authorised NOHCs must provide to APRA and ASIC;
• an Information paper for accountability entities, including an overview on how the regulators will jointly administer the FAR and how the regulators will use their regulatory and enforcement powers;
• Accountability statement guidance and template; and
• reporting form instruction guides to assist banking entities in providing the required information to APRA and ASIC.

ACCC’s 2024 compliance and enforcement priorities reinforce focus on consumer protection

Date: 12 March 2024
Source: Australian Competition & Consumer Commission (ACCC)

On 7 March 2024 the Australian Competition and Consumer Commission released its compliance and enforcement priorities for 2024/25. ACCC Chair Gina Cass-Gottlieb announced the priorities in her address to the Committee for Economic Development Australia.

The ACCC’s priorities span across both competition and consumer law. Many of the issues identified in the ACCC’s 2022 and 2023 compliance and enforcement priorities remain a focus for the ACCC again this year. Other priorities have gained further prominence due to prevailing economic trends and conditions including the cost-of-living crisis (and price increases across a range of products and services) and the drive towards green and sustainable alternatives for the benefit of consumers and the environment.

Exclusive arrangements by firms with market power and competition and consumer issues relating to digital platforms and in global and domestic supply chains are among the enforcement priorities from 2023/4 that were not listed in the 2024/5 priorities.

ASX pays $1M+ penalty for information transparency failure

Date: 7 March 2024
Source: Australian Securities and Investments Commission

Abstract:

The Australian Securities Exchange Ltd (ASX) has paid a $1,050,000 penalty after an Australian Securities and Investments Commission (ASIC) investigation found the market operator to have failed to comply with the Market Integrity Rules.

The investigation concluded that ASX had breached Market Integrity Rule 6.1.2, which requires market operators to make certain information available in the pursuit of pre-trade transparency, on 8,417 occasions between 4 April 2019 and 22 December 2022.

In determining the penalty, ASIC considered that the incorrect system which investors were presented with contained lessor information regarding price formation, liquidity and investment opportunities. ASIC found that whilst there was no evidence of other losses being suffered due to ASX’s failure to comply with the rule, the damaged caused to public confidence in the operation of the market was an aggravating factor. Also viewed as an aggravating factor was ASX’s failure to detect the issue and escalate it for remediation.

This is the first time that ASIC has issued an infringement notice to a market operator.

Read ASIC’s full media release here.

ASIC issues infringement notice for greenwashing to fund trustee Melbourne Securities

Date: 28 February 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The The Australian Securities & Investments Commission (ASIC) has issued an infringement notice to Melbourne Securities Corporation Limited (Melbourne Securities) as trustee and responsible entity of the Bloom Fund for alleged greenwashing conduct. Melbourne Securities has paid $13,320 to comply with the notice.

Between March 2022 and June 2023, Melbourne Securities made several statements in the Bloom Fund’s PDS representing that the Fund would seek to avoid investments in various excluded activities such as fossil fuels.

However, contrary to the statements in the PDS, the Bloom Fund utilised revenue thresholds that ASIC alleges were not disclosed to investors, which applied a negative screening process allowing it to invest in companies that derived up to 33% revenue from such excluded activities.

For example, according to ASIC, between March 2022 and May 2023, the Fund acquired and held a direct investment in General Electric Co which derived 16% of its revenue from fossil fuels in the 2022 financial year.

Greenwashing in financial services has been a clear focus for ASIC in the past 18 months.

ASIC’s appeal successful in its misrepresentation case against ACBF and Youpla (Australian Securities and Investments Commission v ACBF Funeral Plans Pty Ltd (in Liq))

Date: 4 March 2024
Court: Federal Court of Australia – Full Court
Judge(s): Murphy, O’Bryan and Shariff JJ
Judgment date: 29 February 2024

Catchwords: Consumer law – Alleged false and misleading representations and misleading or deceptive conduct in marketing and selling funeral insurance plans to Indigenous communities

Abstract:

The Australian Securities and Investments Commission (ASIC) has successfully appealed against ACBF Funeral Plans Pty Ltd (ACBF) and Youpla Group Pty Ltd (Youpla), with the Full Federal Court finding that their representation that they were under Aboriginal ownership or management from 1 January 2015 to 30 November 2018 was false.

Background

ACBF, a Youpla subsidiary, offered, promoted and sold their funeral expenses insurance policy named the “Aboriginal Community Funeral Plan” (ACF Plan) primarily to Aboriginal consumers and promoted the plan as “Australia’s only funeral insurance plan dedicated to the Aboriginal community”.

In 2017, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry made adverse findings against ACBF.

ASIC issues interim stop order to retailer for Centerpay deductions

Date: 4 March 2024
Court: Federal Court of Australia
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The Australian Securities and Investments Commission (ASIC) has issued an interim stop order under s 739 of the Corporations Act 2001 (Cth) (Corporations Act) to Coral Coast Distributors (Cairns) Pty Ltd (CCD), which operates Urban Rampage retail stores, to halt its practice of having customers enter into credit agreements for purchases through Centrepay deductions.

As these deductions constituted a credit facility, CCD was required to adhere to the design and distribution (DDO) regime, contained in Pt 7.8A of the Corporations Act by publishing a Target Market Determination (TMD) to identify the class of consumers for whom the product was suitable and taking steps to ensure it would be marketed to that class. ASIC considered that CCD's Target Market Determination (TMD) lacked detail, particularly regarding consumers' financial capacity assessment and that this resulted from CCD’s inability to ensure that this form of credit facility was suited to the needs of the consumers identified in the TMD.

ANZ/Suncorp acquisition to proceed as Tribunal overturns ACCC decision

Date: 20 February 2024
Source: Australian Competition & Consumer Commission

The Australian Competition Tribunal (Tribunal) has set aside the Australian Competition & Consumer Commission’s (ACCC) decision to deny authorisation of ANZ's proposed acquisition of Suncorp's banking business.

The Tribunal is the review body for decisions made by the ACCC and applies the same authorisation test as the ACCC, granting authorisation if either: 1) the conduct would not have the effect or be likely to have the effect of substantially lessening competition; or (2) the public benefit would outweigh the detriment.

The acquisition will now proceed to Treasurer Jim Chalmers for final approval and also requires modifications to existing legislation through the Queensland parliament

The ACCC’s decision

The ACCC denied authorisation for the acquisition in 2023, stating that it was not satisfied that the proposed acquisition was not likely to substantially lessen competition in the critical banking markets impacted by the acquisition (see our previous Latest Legal Update ACCC denies ANZ acquisition of Suncorp Bank). One of the ACCC’s key arguments was that the deal would make it more likely that the major banks would coordinate in the future.

Federal Court finds crypto fintech engaged in unlicensed financial services (Australian Securities and Investments Commission v Web3 Ventures Pty Ltd)

Date: 16 February 2024
Court: Federal Court of Australia
Judge(s): Jackman J
Judgment date: 9 February 2024

Catchwords: Corporations – operation of unregistered management investment scheme in contravention of s 601ED(5) of the Corporations Act 2001 (Cth) – carrying on financial services business without an Australian Financial Services Licence in contravention of s 911A of the Corporations Act – investment in cryptocurrency

Abstract:

In Australian Securities and Investments Commission (ASIC) v Web3 Ventures Pty Ltd [2024] FCA 64, the Federal Court of Australia held that fintech company Block Earner had engaged in unlicensed financial services conduct in contravention of ss911A(1) and (5B) of the Corporations Act 2001 (Cth) (the Corporations Act) and operated an unregistered managed investment scheme contrary to ss 601ED(5) and (8) of the Corporations Act. The decision clarifies the application of financial services law to crypto products.

Background

Block Earner operates an online platform through its website, offering various products. Between March to November 2022, Block Earner offered an ‘Earner’ which allowed consumers to earn fixed yield returns from different crypto-assets. From March 2022 onward it Block Earner has offered a second product, ‘Access’ offers consumers streamlined access to peer-to-peer finance.

Westpac ordered to pay $1.8 million penalty for unconscionable pre-hedging in interest rate swap deal

Date: 12 February 2024
Court: Federal Court of Australia
Judge(s): Lee J
Judgment date: 31 January 2024

Catchwords: Corporations – unconscionable conduct – insider trading – pre-hedging – Corporations – breach of financial services licensee obligations – services not provided efficiently, honestly and fairly

Abstract:

The Federal Court has ordered Westpac Banking Corporation (Westpac) to pay penalties of $1.8 million for unconscionable conduct in an $12 billion interest rate swap deal and $8 million towards for the Australian Securities and Investments Commission’s (ASIC) costs.

Background

On 20 October 2016, Westpac executed the largest interest rate swap in Australian financial market history (Swap Deal) to allow a consortium of investors from the IFM group and AustralianSuper to acquire a 50.4% interest in Ausgrid. Westpac had previously quoted the consortium an execution margin on the basis that it would not receive notice of the Swap Deal to prevent on-market pre-hedging.

Despite awareness of its clients’ concerns regarding potential pre-hedging, Westpac made internal plans to pre-hedge up to 50% of the interest rate and failed to disclose these plans to the consortium.

Listed@ASX Compliance Update - 1st edition 2024

Date: 5 February 2024
Source: Federal Register of Legislation

Abstract:

The recent Listed@ASX Compliance Update details material updates to the Australian Securities Exchange (ASX) admission procedures and other compliance requirements. These updates, effective from 5 February 2024, aim to streamline processes for entities seeking admission to the ASX's official list and enhance clarity and efficiency in compliance and reporting. Below is a summary of the key changes and updates as outlined in the announcement:

1. Changes to ASX’s Admission Procedures:

• Spread Requirement Compliance: Entities must now use a standardied spread register template provided by ASX to demonstrate compliance with the spread requirement under Listing Rule 1.1 condition 8, ensuring at least 300 non-affiliated security holders, each with securities valued at a minimum of $2,000. A legal attestation confirming compliance with this requirement is also needed.
• Escrow Documentation Standardization: The documentation required to demonstrate compliance with escrow requirements has been standardized and reduced. The ASX will now accept a restriction notice in place of restriction deeds for ASX-imposed escrow, although restriction deeds may still be used voluntarily or if specifically required by ASX.

Climate-related financial disclosure - Exposure draft legislation

Date: 22 January 2024
Source: Treasury

Summary originally published by Capital Monitor.

This consultation follows the government's announcement of the final policy design for corporate climate-related financial disclosure requirements, as outlined in the Policy Statement. The Exposure Draft legislation seeks to amend parts of the Australian Securities and Investment Commission Act 2001 and the Corporations Act 2001 (Cth) to introduce mandatory requirements for large businesses and financial institutions to disclose their climate-related risks and opportunities. Treasury is seeking views on the Exposure Draft legislation and accompanying explanatory materials by 9 February 2024. Late submissions cannot be considered.

ALRC recommends confronting complexity in corporations and financial services legislation

Date: 19 January 2024
Source: Australian Law Reform Commission

Summary originally published by Capital Monitor.

The Australian Law Reform Commission (ALRC) Final Report, Confronting Complexity: Reforming Corporations and Financial Services Legislation (Report 141, 2023), was tabled in Parliament by the Attorney-General, the Hon Mark Dreyfus KC MP. The report found that the legislation governing Australia's financial services industry is a tangled mess - difficult to navigate, costly to comply with, and unnecessarily difficult to enforce. Judges have described the current laws as being like 'porridge', 'tortuous', 'treacherous', and 'labyrinthine'.

Statutory Declarations Regulations 2023 (Cth) give effect to new Commonwealth statutory declaration regime from 1 January 2024

Date: 4 January 2024
Source: Federal Register of Legislation

Abstract:

Following the passing of the Statutory Declarations Amendment Act 2023 (Cth) (Amendment Act) allowing Commonwealth statutory declarations to be made and witnessed electronically from 1 January 2024 (including through certain online digital verification platforms), the Governor-General has made the Statutory Declarations Regulations 2023 (Cth) (Regulations).

The Regulations repeal and replace the Statutory Declarations Regulations 2018 (Cth) from 1 January 2024 and give effect to the amendments made to the Commonwealth statutory declaration regime by the Amendment Act, including by prescribing:

• who can witness Commonwealth statutory declarations; and
• the technical requirements for making Commonwealth statutory declarations under the new digital statutory declaration provisions.

Prescribed witnesses

The Regulations do not change who can witness a Commonwealth statutory declaration.

As with the previous regulations, the Regulations provide that a Commonwealth statutory declaration can be witnessed by any of the following “prescribed persons” in person or by video link:

• a person enrolled as a legal practitioner on the roll of a state or territory Supreme Court or the High Court of Australia;

Higher fees for foreign investment in housing

Date: 11 December 2023
Source: Treasury

The Treasurer has announced the following proposed changes to the fees payable on foreign investment applications and actions involving land and land entities:

• *tripling the fees payable when a foreign person purchases an established residential dwelling;
• *doubling vacancy fees for all foreign-owned dwellings purchased since 9 May 2017;
• *strengthening the enforcement regime administered by the Australian Taxation Office;
• *applying the commercial foreign investment fees for investment applications and actions for Build to Rent projects from 14 December 2023 onwards.

Legislation will be required to implement the changes and is expected early in 2024.

Listed@ASX Compliance Update: December 2023

Date: 11 December 2023
Source: Australian Securities Exchange (ASX)

Abstract:

ASX has released its latest Compliance Update for December 2023. Key updates include:

• The 2024 Market Announcements Reporting Calendar is now available, serving as a reference guide for listed entities with 30 June or 31 December balance dates, outlining key reporting dates under the Listing Rules.
• Insights from the AGM season: ASX observed common issues in draft notices of meeting submissions. The majority of these reviews occur in September and October for entities with a 30 June balance date.
• Entities are reminded to submit complete documentation for review at the same time. This includes proxy forms and any other relevant documents that are part of the notice of meeting package.
• Clarification on voting exclusion statements: Entities must ensure these statements align with Listing Rule 14.11 and exclude all votes as required by the rules.
• Issues of securities under an agreement: Notices of meeting should accurately reflect agreements for issuing securities, adhering to Listing Rules 7.1, 7.1A, and related guidance notes.
• Listing Rule 7.1A mandate: Entities seeking additional capacity under this rule must include specific information in their notice of meeting as per Listing Rule 7.3A.

Federal Court orders ANZ to pay $900,000 penalty for continuous disclosure breach

Date: 11 December 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

Australia and New Zealand Banking Group Limited (ANZ) has been fined $900,000 by the Federal Court for breaching its continuous disclosure obligation. This courts decision that ANZ had breach section 674(2) of the Corporations Act pertains to a 2015 institutional share placement worth $2.5 billion where ANZ failed to notify the Australian Securities Exchange (ASX) that its underwriters were to acquire ANZ shares valued at approximately $754 million to $790 million as part of this placement. Justice Moshinsky emphasized the gravity of the contravention and the need for a substantial penalty to serve as a deterrent.

The court's decision emphasised the significance of continuous disclosure in financial markets with ASIC Deputy Chair Karen Chester remarking that this ruling sends a strong message to both ANZ and the broader market. ANZ was also ordered to cover ASIC's legal costs.

For more, see the media release here.

High Court finds class action waiver clause unfair, allows Ruby Princess appeal

Date: 6 December 2023
Court: High Court
Judge(s): Gageler CJ, Gordon, Edelman, Gleeson, Jagot JJ
Judgment date: 6 December 2023

Catchwords: CONSUMER PROTECTION - Extraterritorial application of s 23 of Australian Consumer Law - Whether s 5(1)(g) of Competition and Consumer Act 2010 (Cth) extended application of s 23 of ACL to contract- Whether class action waiver clause constituted unfair term under s 23 of ACL and void.

REPRESENTATIVE PROCEEDINGS - Whether class action waiver clause unenforceable as contrary to Pt IVA of Federal Court of Australia Act 1976 (Cth)

PRIVATE INTERNATIONAL LAW – Forum – Exclusive jurisdiction clause – Whether strong reasons not to grant stay of proceedings.

Abstract:

In Karpik v Carnival plc [2023] HCA 39 the High Court determined an interlocutory application arising out of representative brought on behalf of passengers of the Ruby Princess cruise ship against Carnival plc and Princess Cruise Lines Ltd (Princess) claiming losses caused by illness and deaths caused by the COVID-19 outbreak. The main proceedings were recently determined by the Federal Court in In Karpik v Carnival plc (The Ruby Princess) (Initial Trial) [2023] FCA 1280.

ASX announces product based solution for CHESS replacement – industry consultation on next phase to commence in 2024

Date: 24 November 2023
Source: Australian Securities Exchange

Summary originally published by Capital Monitor.

ASX has entered into an agreement with TCS for the delivery of its TCS BaNCS for Market Infrastructure product, which offers a modular technology platform for clearing and settlement services. ASX considers that the chosen product will allow it to provide a reliable, supportable and scalable platform that meets the needs of the Australian market now and into the future. It can satisfy the licence obligations of ASX Clear and ASX Settlement, and is capable of supporting potential new services and innovation from ASX or other providers.

ASIC announces 2024 enforcement priorities

Date: 24 November 2023
Source: Australian Securities and Investments Commission

Summary originally published by Capital Monitor.

ASIC announced its enforcement priorities for 2024, indicating its enforcement focus for the coming year and communicating its intent to industry and stakeholders. In 2024, two new priorities have been added in relation to the superannuation industry, including a focus on member services failures and misconduct relating to the erosion of superannuation balances. New priorities relating to insurance claims handling, compliance with financial hardship obligations and the reportable situation regime have also been added. In addition, ASIC will be taking action against misconduct relating to used car financing to vulnerable consumers and gatekeepers such as auditors, registered liquidators and financial services and credit licensees who do not comply with their legal obligations.

ASIC and RBA acknowledge ASX's CHESS solution design announcement

Date: 24 November 2023
Source: Australian Securities and Investments Commission

Summary originally published by Capital Monitor.

The product-based solution and vendor announced by ASX is a foundational step in getting the CHESS replacement program back on track. This follows advice provided by the ASX Cash Equities Clearing and Settlement Advisory Group (Advisory Group), a small group of recognised industry leaders established to advise ASX Clear and ASX Settlement on strategic clearing and settlement issues led by independent chair Alan Cameron AO. ASIC Chair Joe Longo said, `It will be critical for ASX to now focus on engaging with the market on the detailed design of the CHESS Replacement program with a realistic and achievable timeline for implementation.'

Electronic signing, remote witnessing and digital verification of Commonwealth statutory declarations from 1 January 2024

Date: 17 November 2023
Source: Parliament of Australia

The Statutory Declarations Amendment Act 2023 (Cth), allowing Commonwealth statutory declarations to be made and witnessed electronically, has received Royal Assent. The amendments will commence on 1 January 2024.

In addition to allowing for electronic signing and remote witnessing, the amendments introduce a new way of executing Commonwealth statutory declarations through a digital verification process conducted on a prescribed online platform.

Nature-related risks pose a risk for directors

Date: 16 November 2023
Source: Commonwealth Climate and Law Initiative

Abstract:

The question as to whether directors’ existing duty under section 180 of the Corporations Act 2001 (Cth) (Corporations Act) permits or requires directors to consider nature-related risks has been recently considered in a legal opinion: “Nature-related risks and directors’ risks” authored by Sebastian Hartford-Davis and Zoe Bush (Opinion). The Opinion was commissioned by the global climate and nature investment and advisory law firm Pollination in collaboration with the Commonwealth Climate and Law Initiative.

The Opinion follows on from previous landmark opinions by Noel Hutley and Sebastian Hartford-Davis in 2016 and 2019 and a supplementary opinion in 2021 which concluded that directors’ had a duty under the Corporations Act to address climate-related risks or face legal consequences. These opinions are considered to have influenced the prioritisation of climate risk issues by directors and it is expected that the Opinion will have a similar impact on the prioritisation of nature-related risks across board rooms in Australia.

Statutory Declarations Amendment Bill passes both houses of Parliament

Date: 10 November 2023
Source: Parliament of Australia

The Statutory Declarations Amendment Bill 2023 (Cth), allowing Commonwealth statutory declarations to be made and witnessed electronically, has passed both houses of Parliament. The amendments will commence on the later of 1 January 2024 and the day after Royal Assent.

In addition to allowing for electronic signing and remote witnessing, the amendments introduce a new way of executing Commonwealth statutory declarations through a digital verification process conducted on a prescribed online platform.

Read the full text of the Bill and the explanatory memorandum on the Parliament of Australia website.

Treasury releases Australia’s Sustainable Finance Strategy for consultation

Date: 5 November 2023
Source: The Treasury

Abstract:

On 2 November 2023 the Federal Treasury released Australia’s Sustainable Finance Strategy for consultation. The Sustainable Finance Strategy supports Australia’s transition to net zero and affirms the Government’s commitment to driving sustainable finance and investment in Australia. The Sustainable Finance Strategy includes 12 policy priorities across three key pillars.

Pillar 1: improving transparency on climate and sustainability:

1. Establishing a framework for sustainability-related financial disclosures.
2. Developing a sustainable finance taxonomy, providing a common language and classification system for identifying and reporting on sustainable economic activities and investments.
3. Supporting credible net zero transition planning.
4. Developing a labelling system for investment products marketed as sustainable.

Pillar 2: Enhancing financial system capabilities:

5. Enhancing market supervision and enforcement.
6. Identifying and responding to potential systemic financial risks, by strengthening the financial system’s resilience to climate change and other sustainability shocks and stressors.
7. Addressing data and analytical challenges.
8. Ensuring fit for purpose regulatory frameworks.

Treasury consults on two-year review of continuous disclosure reforms

Date: 2 November 2023
Source: Treasury

Abstract:

Treasury is seeking views from interested parties as part of its review of the continuous disclosure amendments made under the Treasury Laws Amendment (2021 Measures No.1) Act 2021.

The amendments introduced a permanent fault element for civil penalty proceedings brought under the continuous disclosure regime. As a result, for:

• ASIC to succeed in a civil penalty proceeding against; or
• a plaintiff to succeed in a proceeding for damages from,

a company or its officers for alleged breaches of continuous disclosure laws, they must show that the entity or its officers acted with “knowledge, recklessness or negligence”: s 674A, Corporations Act 2001 (Cth) and s 12DA, Australian Securities and Investments Commission Act 2001 (Cth).

As set out in the consultation paper, the review will consider, among other things, whether the amendments are working in support of an efficient, effective and well-informed market.

Consultation is open until Friday 1 December 2023. Submissions may be emailed to continuousdisclosurereview@treasury.gov.au.

ASIC publishes insights on mandatory breach reporting regime

Date: 1 November 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The Australian Securities and Investments Commission (ASIC) has released its second publication in response to information it has received from financial services and credit licensees concerning mandatory breach reporting obligations (reportable situations regime). The publication notes a lack of any material progress in several areas previously highlighted by ASIC, which include:

• - A low proportion of licensees reporting, suggesting potential non-compliance
• - Extended durations taken by licensees to identify, investigate, and remedy certain breaches
• - Ongoing challenges in pinpointing and documenting the underlying causes of breaches

ASIC Chair Joseph Longo stated that the reportable situations regime has been active for over two years and thus licensees should have adjusted their operations to ensure total compliance. He emphasised that ASIC, despite providing guidance, will now adopt a more stringent stance, including enforcement actions if necessary.

Updates to WA Supreme Court Consolidated Practice Directions on schemes of arrangement

Date: 31 October 2023
Source: Supreme Court of Western Australia

Abstract:

The Supreme Court of Western Australia has released updates to its Consolidated Practice Directions providing guidance on members’ schemes of arrangement.

The updates align with the new Federal Court Schemes of Arrangement Practice Note (GPN-SOA) and the Supreme Court’s Reissued Practice Note SC EQ 04 - Corporations List, which were issued in response to the significant streamlining changes put forward by Jackman J in Re Vita Group [2023] FCA 400.

The updated Consolidated Practice Directions are available on the Supreme Court website.

More to come.

Further modernising business communications measures for corporations, competition, consumer, superannuation and insurance sectors

Date: 30 October 2023
Source: Federal Register of Legislation

Abstract:

The Governor-General has issued the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Commencement Proclamation 2023 (Cth) (Proclamation) to prescribe 1 January 2024 as the start date for the modernised publication measures under the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Act 2023 (Cth) (Modernising Business Communications Act).

The Governor-General has also made the Treasury Laws Amendment (Modernising Business Communications) Regulations 2023 (Cth) (Amendment Regulations) to modify corporations, consumer credit, insurance and superannuation regulations in line with the Modernising Business Communications Act.

Proclamation

The Proclamation fixes 1 January 2024 as the start date for the modernisation of certain publication requirements in the Corporations Act 2001 (Cth) (Corporations Act), the Competition and Consumer Act 2010 (Cth) (CCA) and other legislation, as set out in Pt 4, Sch 1 of the Modernising Business Communications Act.

On and from that date, the Corporations Act will allow:

• no liability companies to advertise the sale of forfeited shares by electronic means (rather than only through national newspapers);

Exposure Draft for Australian Sustainability Reporting Standards: disclosure of climate-related financial information

Date: 26 October 2023
Source: Australian Accounting Standards Board (ASSB)

Abstract:

The AASB has released an Exposure Draft for Australian Sustainability Reporting Standards: Disclosure of Climate-related Financial Information (ED SR1) which outlines the proposed climate-related financial disclosure requirements for Australian companies.

The ED SRI Sustainability Reporting Standards are based on the Global Sustainability Standards: IFRS1 (sustainability-related financial information) and IFRS2 (climate-related disclosures) released by the ISSB on 26th June 2023.

The AASB is inviting stakeholders to provide feedback on the sustainability standards proposed by ED SR1 by submitting a comment letter on the AASB website or completing an online survey. An invitation to a roundtable discussion will also be offered. Submissions from stakeholders will be accepted until 1st March 2024.

See the full release by the AASB here.

Please see our previous LLU on the Global Sustainability Standards released by the ISSB here.

ASIC revises licensee obligations under the reportable situations regime

Date: 20 October 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The Australian Securities & Investments Commission (ASIC) has made the ASIC Corporations and Credit (Amendment) Instrument 2023/589 (Instrument), which enacts key alterations to the reportable situations regime. Under the prior regime, Australian financial services (AFS) licensees and Australian credit licensees were mandated to notify ASIC regarding certain reportable situations, particularly ‘significant’ infringements of ‘core obligations’ under s 912D of the Corporations Act 2001 (Cth) (Corporations Act) and s 50A of the National Consumer Credit Protection Act 2009 (Cth).

Under the Instrument , certain breaches relating to misleading or deceptive conduct under subsection 1041H(1) of the Corporations Act and subsection 12DA(1) of the Australian Securities and Investments Commission Act 2001, and false or misleading misrepresentations under s12DB(1) of the ASIC Act, are no longer considered significant breaches of core obligations requiring reporting. For a breach to be eligible for these exemptions, it should:

Listed@ASX Compliance Update

Date: 20 October 2023
Source: Australian Securities Exchange

Summary originally published by Capital Monitor.

ASX has made updates to Guidance Note 15- ASX Listing Fees ('GN 15') and associated fee arrangements. The key change is an update to the method used for the calculation of fees for quotation of additional securities that are quoted on different dates. Where securities are issued in multiple tranches and quoted on different dates, for example in the case of an institutional placement, rights issue and shortfall issue, each tranche will be treated separately for the purpose of calculating fees for quotation of additional securities. This change enables a consistent fee calculation approach across all event types.

Treasury consults on regulation of digital and crypto assets

Date: 17 October 2023
Source: The Treasury

Abstract:

The Federal Government has released a proposal paper that recommends making crypto exchanges and digital asset platforms subject to existing Australian financial services laws and requiring platform operators to obtain an Australian Financial Services Licence. The proposal paper also recommends requiring digital asset platforms adhere to minimum standards for holding tokens, standards for custody software, and standards when transacting in tokens. Feedback on the proposal paper is due by 1 December 2023, with further consultation on draft legislation planned for 2024.

In recent years, consumers have suffered harm and lost assets due to the collapse of crypto platforms. The proposed regulatory framework intends to increase oversight, protect consumers, support innovation, provide certainty in the industry, and ensure consistency with other jurisdictions.

ASIC's Impact in 2022–23

Date: 16 October 2023
Source: Australian Securities & Investments Commission (‘ASIC’)

Abstract:

The Australian Securities & Investments Commission (ASIC) has released its 2022–23 Annual Report, which has reinforced its commitment to robust enforcement actions to benefit consumers and small businesses while upholding trust in the financial system.

ASIC's efforts in the period resulted in 35 criminal convictions, nearly $190 million in civil penalties and fines imposed by the courts and the initiation of over 130 new investigations. ASIC noted that its’ priorities aligned with emerging trends and challenges in the regulatory landscape, including sustainable finance, the aging population, digital technology risks, and product design and distribution obligations.

New Federal Court and NSW Supreme Court practice notes on schemes of arrangement

Date: 16 October 2023
Source: Federal Court of Australia

Abstract:

The Federal Court and Supreme Court of NSW have released new guidance on members’ schemes of arrangement, following the significant streamlining changes put forward by Jackman J in Re Vita Group [2023] FCA 400.

The new Federal Court Schemes of Arrangement Practice Note (GPN-SOA) and the Supreme Court’s Reissued Practice Note SC EQ 04 - Corporations List are available on each Court’s website.

More to come.

Court rules in favour of ASIC in major ANZ continuous disclosure case

Date: 16 October 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

The Federal Court has issued a ruling against the Australia and New Zealand Banking Group Limited (ANZ), asserting that the bank had violated continuous disclosure laws (under s 674(2) of the Corporations Act) during a $2.5 billion institutional share placement in 2015. The breach resulted from ANZ's failure to disclose crucial information concerning the allocation of shares to underwriters. ASIC Deputy Chair Karen Chester highlighted that ANZ had neglected to inform the market that underwriters for the share placement had purchased nearly a third of the shares, amounting to approximately $790 million.

Ms Chester added that proper disclosure is fundamental to ensuring fair and efficient markets and investors must be fully apprised of information likely to significantly impact the price or value of a security. This significant decision reinforces the essential role of continuous disclosure rules in upholding market integrity. It also underscores that a substantial acquisition of shares by underwriters during capital raising can constitute price-sensitive information necessitating public disclosure.

Condor Blanco Mines Faces $100K Reporting Fine

Date: 10 October 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

Condor Blanco Mines Limited has been fined $100,000 for failing to submit five annual financial reports from 2018 to 2022.

The company, previously delisted from the ASX in 2018 due to non-payment of its annual listing fee, did not attend its court hearing on 19 September 2023 and was convicted and sentenced in its absence on five charges of breaching s 319 of the Corporations Act 2001 (Cth). The penalty underscores the importance of timely and accurate financial reporting in compliance with statutory obligations.

ASIC appeals Federal Court findings in case against ACBF Funeral Plans

Date: 4 October 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

In September 2023, the Federal Court of Australia ordered ACBF Funeral Plans Pty Ltd (ACBF) to pay a $1.2 million penalty for misrepresenting the sale and promotion of a funeral expense insurance policy (ACF Plan) to consumers, primarily Indigenous people, in contravention of ss 12DA(1), 12DB(1)(a) and 12DB(1)(e) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) (ACBF Funeral Plans Pty Ltd [2023] FCA 1041; BC202312500). See our previous Latest Legal Update here.

The court accepted the Australian Securities & Investments Commission’s (ASIC) claim that ACBF, by offering, promoting and selling the ACF Plan and representing that the ACF Plan provided a lump sum payout, had engaged in conduct that was misleading or deceptive and had made false or misleading representations. ASIC also alleged that ACBF falsely represented that it was owned or managed by Indigenous persons. Dismissing this claim, the court found that ACBF did make such representations, but that the representations were not false. ASIC is appealing this part of the decision.

ASIC prosecutes 36 companies for financial reporting breaches in H1 2023

Date: 4 October 2023
Source: Australian Securities & Investments Commission (‘ASIC’)

Abstract:

The Australian Securities and Investments Commission (ASIC)ASIC has provided an update on its regulatory activities in enforcing financial reporting obligations in the first half of 2023. Between January 1 and June 30, 2023 ASIC)prosecuted 36 companies, securing over $700,000 in penalties due to non-compliance with financial reporting standards. This crackdown aimed to ensure companies adhered to the requirements of lodging financial reports, holding annual general meetings (AGMs), and maintaining the proper number of directors and resident directors.

Three companies faced notably large fines over $100,000 for compliance breaches. ALT Financial Group Ltd was fined $123,000 for failures related to reports, AGMs, and director count. TV2U International Ltd incurred a $110,000 penalty for report and directorship lapses, and RMG Ltd was fined $105,000 for similar reasons. Additionally, Adgex Ltd was penalised $83,000, while the ABM Group's 11 companies totalled a $69,000 fine.

ASIC has emphasized that financial reports are essential as they provide invaluable information to shareholders, creditors, and the public, helping in making informed decisions regarding transactions with these companies.

ASIC remakes sunsetting legislative instruments on takeovers, compulsory acquisitions and relevant interests

Date: 29 September 2023
Source: Australian Securities and Investments Commission (ASIC)

Abstract:

ASIC has remade seven legislative instruments relating to takeovers, compulsory acquisitions and relevant interests which were largely due to sunset on 1 October 2023.

The relief was remade following Consultation Paper 365 Remaking ASIC class orders on takeovers, compulsory acquisitions and relevant interests. Summaries of the responses, along with ASIC’s response, are set out in REP 773 Response to submissions on CP 365 Remaking ASIC class orders on takeovers, compulsory acquisitions and relevant interests.

The refreshed relief from the Corporations Act 2001 (Cth) (Corporations Act) is on substantially the same terms as the sunsetting instruments, subject to the following amendments.

Fintech company pays $53,280 penalty for potentially misleading representations about crypto product

Date: 27 September 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

Bobbob Pty Ltd (Bobbob), a fintech company, has paid $53,280 in response to four infringement notices issued by the Australian Securities & Investments Commission (ASIC). ASIC was concerned that Bobbob was making certain representations about a crypto-asset linked investment product (product) that had the potential to mislead consumers about the product’s approvals, risks, characteristics and benefits.

In the infringement notices, ASIC stated that it had reasonable grounds to believe that Bobbob had contravened s 12DB(1)(e) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) by making false or misleading representations about:

• whether the product was approved or licensed by ASIC;
• the similarity of the product to a bank account, including the risk profile;
• whether the product was a safe and stable investment with minimal risk of capital loss; and
• whether the product earned all customers an interest rate of 7.6% per annum from the time they invested.

Government seeks independent review of Continuous disclosure regime reforms

Date: 26 September 2023
Source: The Treasury

Abstract:

On 19 September 2023 the Federal Government announced the appointment of Kevin Lewis as an independent reviewer to evaluate recent changes to Australia's continuous disclosure regime under the Corporations Act 2001 (Cth) (Corporations Act). The review will examine the operation of the changes to the regime enacted by the Treasury Laws Amendment (2021 Measures No 1) Act 2021 (Cth) which had the effect of limiting civil liability for continuous disclosure breaches to conduct which meets a subjective fault element of knowledge, negligence or recklessness.

The Amending Act introduced a sunset provision for the reforms (sections 1683B and 1683C) which required the Minister to seek an independent review of the new provisions within 6 months of their two-year anniversary.

Mr Lewis previously served as the Chief Compliance Officer at the ASX and practiced in financial services and corporate law.

ASIC urges AFS licensees to strengthen remediation procedures

Date: 26 September 2023
Source: Australian Securities & Investments Commission (ASIC)

Abstract:

Following a review of the remediation policies and procedures of several large financial institutions, the Australian Securities & Investments Commission (ASIC) has called on Australian financial services and credit licensees to ensure that they remediate affected consumers quickly and fairly in accordance with ASIC’s Regulatory Guide 277: Consumer Remediation (RG 277). RG 277, which replaced and expanded upon the scope of Regulatory Guide 256: Client review and remediation conducted by advice licensees, offers guidance for Australian financial services and credit licensees on best practices for consumer remediation programs initiated on or after 27 September 2022.

ASIC’s review identified certain practices that were inconsistent with the obligations under RG 277 for licensees to be proactive, timely and fair in their approach to consumer remediation.

TNFD releases final recommendations for nature-related disclosures

Date: 25 September 2023
Source: The Taskforce on Nature-related Financial Disclosures (TNFD)

On 18 September 2023 at Climate Week NYC, the TNFD released its final recommendations for nature-related risk management and disclosure (TNFD recommendations). The TNFD recommendations provide a framework for reporting and assessing nature-related risks and opportunities to assist companies and financial institutions to better understand, report and act on their dependencies and impacts on nature, and to align their activities with global goals for biodiversity and climate.

The final recommendations build on the previous draft framework that was published in July 2023, and incorporate feedback received during an extensive market consultation and testing process. Consistent with the approach of the Task Force on Climate-related Financial Disclosures, the TNFD recommendations cover four pillars: governance, strategy, risk & impact management, and metrics & targets, and are designed to enable integrated nature-related and climate-related disclosures. The TNFD also provides additional guidance for financial institutions and specific biomes.

To assist companies and financial institutions in (voluntarily) adopting its recommendations, the TNFD has also published implementation guidance and other supporting materials including guidance on the identification and assessment of nature-related issues, found here.

Illegal phoenixing activity prompts ASIC to disqualify shadow director, Mr Philip Whiteman, from managing companies for five years

Date: 25 September 2023
Source: ASIC disqualifies Philip Whiteman from managing corporations for maximum five years after engaging in illegal phoenix activity

Investigations by the Australian Securities & Investments Commission (ASIC) into the role of Mr Philip Whiteman in five business advisory companies that entered liquidation over a 4-month period have prompted the regulator to disqualify Mr Whiteman from managing companies five years allowed under s 206F, Corporations Act 2001 (Cth).

ASIC found that Mr Whiteman was a shadow director of A&S Services Australia Pty Ltd (ACN 165 857 321), Bolton & Swan Pty Ltd (ACN 153 647 360), ACN 147 341 991 Pty Ltd (ACN 147 341 991), Armstrong and Shaw Pty Ltd (ACN 148 949 375), and Ainslie Harding & Wood Solicitors Pty Ltd (ACN 607 552 741), and that in that role, he breached various directors’ duties.