- ASIC commences first civil penalty action re RG 271 compliance
- Exposure draft legislation to amend conflicted remuneration and ongoing fee provisions
- ASIC confirms its DDO focus is turning to reasonable steps
- Greenwashing continues to be an enforcement priority for ASIC
- Follow-on consultation on derivative transaction reporting rules
- Charges laid against three people in relation to Sterling Income Trust
On 6 November 2023, ASIC announced that it has commenced civil penalty proceedings in the Federal Court against the trustee of a superannuation fund (Trustee), alleging it failed to comply with internal dispute resolution (IDR) requirements under certain enforceable provisions of ASIC’s Regulatory Guide 271 – Internal dispute resolution (RG 271), including the requirement to respond to superannuation complaints within 45 days (unless an exception applies).
ASIC alleges that 40% of the Trustee’s responses to complaints during the relevant period did not comply with its IDR procedures and that non-compliance contributed to the Trustee failing to do all things necessary to ensure that it provided financial services efficiently, honestly and fairly.
On 14 November 2023, Treasury released exposure draft legislation proposing amendments to a number of statutes in relation to the payment of fees.
The draft legislation proposes to:
- amend the definition of conflicted remuneration in section 963A of the Corporations Act to clarify that monetary or non-monetary benefits given by a retail client are not conflicted remuneration and to remove associated client paid exceptions to the ban on conflicted remuneration, to respond to recommendations 13.1 and 13.3 of the Quality of Advice Review published in December 2022 which we had reported on in our Funds Update of 16 June 2023; and
- replace the rules regarding the termination, disclosure and renewal of ongoing fee arrangements in Subdivision B of Division 3 of Part 7.7A of the Corporations Act, with a consolidated and a new streamlined consent process when a client enters or renews an ongoing fee arrangement, to respond to recommendation 8 of the Quality of Advice Review.
The consultation on the draft legislation is open until 6 December 2023.
On 16 November 2023, ASIC’s Deputy Chair, Sarah Court, announced in a speech that ASIC is turning its design and distribution obligations (DDO) focus to the reasonable steps obligations.
In the coming months, ASIC stated that it will begin to review:
- how product issuers distribute their products, including interacting with any product distributors, to ensure they are not straying beyond their target market;
- how product issuers monitor product governance arrangements; and
- how product issuers review data to ensure customers are receiving suitable products on a continuing basis.
This focus on reasonable steps is consistent with HSF’s article published 30 October 2023, available here.
On 7 November 2023, ASIC announced that future enforcement action on greenwashing may move beyond misleading and deceptive conduct and towards licence obligations, directors’ and officers’ duties, and other obligations.
ASIC’s key areas of future interest are likely to include:
- net zero statements and targets;
- use of terms such as ‘carbon neutral’, ‘clean’ or ‘green’; and
- the scope and application of investment exclusions and screens.
On 15 November 2023, ASIC announced its Consultation Paper 361a (CP 361a), which proposes to introduce changes to data elements and other minor amendments to the ASIC Derivative Transaction Rules (Reporting) 2024 (Reporting Rules).
CP 361a proposes changes to the 2024 Reporting Rules to:
- include additional data elements and provide clarifications and administrative updates to the data elements;
- make consequential changes to Chapter 2: Reporting Requirements in the Reporting Rules; and
- make other administrative updates, including updating references to the location of definitions in the Corporations Act 2001 which have been moved by the Treasury Laws Amendment (2023 Law Improvement Package No.1) Act 2023.
This third consultation follows ASIC’s second consultation on proposed amendments to simplify the Reporting Rules in Consultation Paper 361 announced on 16 May 2022.
Comments on CP 361a are due by 15 December 2023.
On 3 November 2023, ASIC announced that three people face criminal charges following ASIC’s investigation into the collapsed group of companies involved with the running of the Sterling Income Trust in relation to aiding and abetting the trust’s manager to engage in dishonest conduct in relation to a financial product or service in breach of section 1041G of the Corporations Act. The matter is being prosecuted by the Commonwealth Director of Public Prosecutions.