ASIC’s 2024-2025 Corporate Plan (ASIC Corporate Plan 2024-25 or the plan) includes many of the same priorities as last year’s plan, including improving consumer outcomes with respect to the design and distribution obligations (DDO), predatory sales and lending, insurance claims handling, internal dispute resolution (IDR) processes and greenwashing.

In the plan, ASIC announced that it will be undertaking cross sector surveillance of compliance with RG 271 and industry organisations’ compliance with their obligations to publish and report complaints data under RG 271. Organisations with complaints handling and reporting obligations under RG 271 should ensure they are ready for this surveillance from ASIC in 2024-2025. If you have any questions relating to your organisation’s compliance with RG 271 and how you should be complying with the relevant requirements (including as to complaints reporting), please contact us (contact details are at the end of this article).

As we head into the last quarter of 2024 with a significant reform agenda across the financial services sector with respect to Australia’s climate reporting standards¹, data privacy² and AML/CTF regimes³ (amongst other things), organisations should be aware of ASIC’s approach to regulatory enforcement in priority areas through recent prosecutions against greenwashing, non-compliance with DDO and predatory lending (also having regards to ASIC’s enforcement priorities going forward for 2024-2025). 

ASIC has also continued to target and prosecute financial services firms that fail to lodge financial statements on time, pay ASIC levies, use their license inappropriately or inappropriately authorise representatives to operate a financial services business. 

Greenwashing  

In August 2024, ASIC issued its report 791 (24-185MR ASIC continues action on misleading claims to deter greenwashing misconduct | ASIC) informing the financial services sector of its efforts to combat greenwashing, including implementing 47 regulatory interventions to target misconduct, issuing over AU$123,000 in infringement notice payments and the commencement of two civil penalty proceedings and finalisation of one civil penalty proceeding in the Federal Court.⁴ ASIC announced in its 2024-2025 Corporate Plan that 'we will undertake ongoing surveillance activity and take enforcement action, where necessary, to prevent harms from greenwashing and other sustainable finance-related misconduct. The expected timeframe for this activity is ongoing'. Some of the key prosecutions by ASIC in 2024 have been:

• September 2024: After ASIC winning its Federal Court case against Vanguard Investments Australia in March 2024, the Federal Court ordered Vanguard Investments Australia to pay a (a record) AU$12.9 million penalty for making misleading claims about environmental, social and governance (ESG) exclusionary screens. These screens were applied to investments in the Vanguard Ethically Conscious Global Aggregate Bond Index Fund. ASIC Deputy Chair Sarah Court said, "This is an important decision and the penalty imposed is the highest yet for greenwashing conduct. Greenwashing is a serious threat to the integrity of the Australian financial system, and remains an enforcement priority for ASIC." (24-213MR ASIC's Vanguard greenwashing action results in record $12.9 million penalty | ASIC)
• August 2024: Mercer Superannuation (Australia) Limited (Mercer) was ordered to pay AU$11.3 million penalty for greenwashing. The Federal Court held that statements on Mercer’s website were false and misleading because the superfund investments were represented as being ‘Sustainable Plus’ investment options suitable for members who ‘are deeply committed to sustainability’ because they excluded investments in companies involved in carbon intensive fossil fuels like thermal coal (and the exclusions were also stated to apply to companies involved in alcohol production and gambling). However, factually and proven by ASIC, the Mercer superfund invested in companies involved in carbon intensive fossil fuels, alcohol and gambling.⁵
• June 2024: Fertoz Limited (Fertoz) paid AU$37,560 in response to two ASIC greenwashing infringement notices relating to ASX announcements about its Reforestation Project in the Philippines. On 15 November 2023, Fertoz, an ASX listed entity specialising in fertiliser mining, manufacturing and supply, made statements in a presentation published on the ASX that represented its Philippines reforestation project would obtain an offtake partner or receive funding for the project by the end of 2023, and begin planting the initial hectares in the respective area of the project in quarter 4, 2023. ASIC claimed that statements made about forecasted planting and financing for the project were false and misleading because Fertoz was not in the final stages of securing any offtake partners, planting had been delayed and no other funding had been obtained. Fertoz paid the infringement notice payments without admission of guilt or liability.⁶
• June 2024: ASIC succeeded in greenwashing case against LGSS Pty Limited as trustee of the superannuation fund Active Super (Active Super Trustee) over misleading investment representations about ESG and Russia. The Federal Court held that the Active Super Trustee made misleading statements concerning ESG credentials. The Active Super Trustee claimed in its marketing that it eliminated investments that posed too great a risk to the environment and the community, including gambling, coal mining and oil tar sands. Following the invasion of Ukraine, the Active Super Trustee also made representations that Russian investments were “out”. The Federal Court found that the Active Super Trustee made misleading statements that it did not invest in companies which generated any revenue, or revenue above a certain threshold, from various industries including gambling, oil tar sands and coal mining, as well that it made misleading claims that it would not invest in Russia after Russia invaded Ukraine.⁷

DDO non-compliance

In September, ASIC issued Report 795 providing an overview of its surveillance of DDO compliance (including reasonable steps obligations) by 19 issuers of high-risk investment, insurance and credit products between October 2023 and August 2024 finding (amongst other things):

• many issuers had limited due diligence arrangements to assess and monitor third party distributors,
• many issuers used poor quality consumer questionnaires,
• some issuers of high-risk products were reliant on broad search terms in online marketing, and
• few issuers monitored consumer outcomes and product performance.⁸

ASIC announced in its 2024-2025 Corporate Plan that ‘we will continue to take action against poor product design and distribution practices to reduce consumer harm. We will also use the design and distribution obligations as a tool to improve consumer outcomes’. Some of the key prosecutions in 2024 have been:

• August 2024: ASIC wins in the Federal Court against Bit Trade Pty Limited (Bit Trade) which has been found to have breached its DDO obligations. The Federal Court found that Bit Trade’s “margin extension” product has been available to customers trading on the Kraken exchange without a target market determination (TMD), as required by law, resulting in a contravention of s994B(2) of the Corporations 2001 (Cth) (Coporations Act) each time it made the product available to a customer. ASIC Deputy Chair Sarah Court said, "This is a significant outcome for ASIC involving a major global crypto firm. We initiated proceedings to send a message to the crypto industry that we will continue to scrutinise products to ensure they comply with regulatory obligations in order to protect consumers."
• July 2024: ASIC wins its first DDO case against Firstmac Limited (Firstmac) with the Federal Court ruling that conduct in a ‘cross-selling strategy’ of marketing investment products under a product disclosure statement to consumers in its term deposits breached DDO. The Federal Court found that Firstmac had not taken reasonable steps to ensure this conduct was consistent with the target market determination TMD.⁹
• July 2024: American Express Australia Limited (Amex) receives AU$8 million penalty for breach of DDO obligations relating to the distribution of two credit cards to customers outside the TMD. The Federal Court held that Amex should have known that high rates of application cancellations ‘reasonably suggested that the TMDs were no longer appropriate’ and their conduct in continuing to issue the credit cards after failing to review the TMDs in response to the ‘review triggers’, was found to be in breach of the DDO obligations.¹⁰
• June 2024: ASIC issues interim DDO stop order against Australian Unity Funds Management. The stop order was issued in relation to a questionnaire sent to retail customers when applying for interests in the mortgage fund, where the questionnaire was used to capture clients in the TMD. Retail clients were alerted when a particular answer would take them outside the target market and were later given the chance to change their answers so that they would be in the target market.¹¹

Predatory lending¹²

In its 2024-2025 Corporate Plan, ASIC is focusing again on high-cost credit and predatory lending to consumers and small businesses (as it similarly did in last year’s plan). Some of the key prosecutions in 2024 have been:

• October 2024: ASIC cancelled the ACL of Ferratum after Ferratum was ordered to pay AU$16 million in penalties by the Federal Court which found in ASIC’s favour that Ferratum breached the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) and the National Credit Code (NCC) in respect of small amount credit contracts. Ferratum’s loan product imposed prohibited fees on customers, incorrectly calculated payout amounts for its customers and failed to implement systems to ensure customers received proper payouts.
• May 2024: ASIC won case against Cigno Australia Pty Ltd and BSF Solutions Pty Ltd and respective directors Mark Swanepoel and Brenton Harrison for engaging in unlicensed credit activity and charging prohibited fees to consumers.¹³
• April 2024: ASIC made a stop order against Coral Cost Distributors (Cairns) Pty Ltd under the DDO regime. The stop order provided that customers can no longer be signed-up into Centrepay credit arrangements in its Urban Rampage stores, as a supplier of household items. The decision comes after ASIC found that those arrangements were unsuitable for consumers in Coral Coast’s target market.¹⁴ ASIC Commissioner Alan Kirkland said, “Coral Coast targeted First Nations consumers who received Centrelink payments. After entering into Centrepay credit arrangements at Urban Rampage stores, many of these consumers found themselves without money to pay for essentials. It is unacceptable for businesses to use credit-like facilities in a way that places vulnerable customers into hardship."
• April 2024: ASIC won case against Sunshine Loans for charging customers prohibited fees. The Federal Court found that, between July 2016 and November 2020, small amount lender, Sunshine Loans entered into over 670,000 contracts which included an amendment or rescheduling fee that is not permitted by the NCC. The Federal Court found Sunshine Loans required the payment of these fees by consumers over 12,000 times and accepted payments on over 8,000 occasions. Sunshine Loans received nearly AU$300,000 from customers, even though the fees were prohibited under the NCC.¹⁵

Other ASIC enforcement priority focus areas

• Continuous disclosure: August 2024: ASIC successfully argued that Noumi Limited (Noumi) failed to comply with continuous disclosure obligations. The Federal Court ordered the ASX listed food manufacturing company to pay AU$5 million for overstating the value of inventories in its financial reports for FY19 and half of FY20. ASIC has also brought civil proceedings against two former directors which are still in progress.¹⁶
• Failure to pay ASIC levies: August 2024: ASIC has suspended and canceled the Australian credit licence (ACL) of entities that have failed to comply with licensing regulations: Accumulus Capital Pty Ltd has had its ACL cancelled as it failed to pay the ASIC industry funding levies and related payments within the requisite timeframe and had not engaged in credit activities since the licence was granted in December 2014.
• Failure to comply with duties: July 2024: ASIC has suspended the ACL of ACL holder John Adicho, CEO of Australiasia Resource Development Pty Limited and Investment Manager at JA Investments (Vic) Pty Ltd: Suspension occured after ASIC found that Mr Adicho had not met the duties and obligations required by credit legislation and could not be relied upon to fulfill these responsibilities. ASIC exercised its right under section 55 of the NCCP Act to suspend Mr Adicho’s ACL for a period of six months until December 2024.
• Licensed conduct: May 2024: ASIC successfully argued that BPS Financial Limited (BPS) engaged in unlicensed conduct when offering the ‘Qoin Wallet’ – a non-cash payment facility which used a crypto-asset token, ‘Qoin’. In proceedings initiated by ASIC, the Federal Court found that BPS contravened the Corporations Act because it did not hold an AFSL, nor was it appropriately authorised to issue or provide financial advice about the Qoin Wallet (under relevant authorised representative agreements). ASIC Chair Joe Longo said ‘These proceedings should send a message to the crypto industry that their products will continue to be scrutinised by ASIC to ensure consumers are protected and that they comply with regulatory obligations. Entities should not be making claims about features, or the regulatory status of their offerings, that are false or misleading.'  There are other aspects of findings by the Federal Court with respect to the scope of authorisations of an authorised representative arrangement which are being appealed by ASIC (in the federal court of Australia (asic.gov.au)) – information about this issue with respect to this case will be provided by us in a separate article.
• Non-compliance issues: May and June 2024: ASIC cancelled and suspended certain AFSLs for non-compliance:
  • AFSL of Libertas Financial Planning Pty Ltd was cancelled following compensation paid to a consumer by the Compensation Scheme of Last Resort (CSLR) after a determination was made by the Australian Financial Complaints Authority (AFCA). Where the CSLR pays compensation to an eligible consumer in relation to an AFCA determination and notifies ASIC of the details of the firm that failed to pay the compensation, ASIC must cancel the AFSL of the firm. This was the first time ASIC has cancelled an AFSL following a payment by the CSLR.
  • AFSL of Guildfords Funds Management Pty Ltd was cancelled for reasons including that the company dealt in contracts for difference as trustee of unregistered management investment schemes without the requisite authorisation and failed to comply with its self-reporting breach reporting obligations.¹⁷
  • AFSL of Id Funds Management Limited was suspended until 28 February 2025 for failure to meet statutory audit and financial reporting lodgement requirements for FY22 and FY23.
  • AFSL of Aurora Funds Management Limited was suspended until 20 September 2024 for failure to meet audit and financial reporting obligations for itself and the 6 registered managed investment schemes that Aurora is the responsible entity for (noting that ASIC permitted day-to-day operations of the managed investment schemes to continue to protect investors.)¹⁸
  • Octillion Partners Pty Ltd had its AFSL cancelled after ASIC determined that the company did not take reasonable steps to ensure that its representatives complied with their obligations and did provide its financial services in accordance with the standards prescribed by the Corporations Act.¹⁹

Further, in October 2024, ASIC announced that it has cancelled 2 AFSLs and 11 ACLs (see 24-225MR ASIC cancels two Australian financial services licences and 11 Australian credit licences | ASIC), while at the same time as releasing its report on its approach to licensing (see ASIC issues 2023-24 update on licensing and professional registration activities | ASIC). ASIC Commissioner Alan Kirkland said, "ASIC’s licensing and professional registration function plays a key gatekeeping role by ensuring new licensees and registered professionals meet the necessary thresholds. The report provides guidance to AFS and credit licensees and financial services industry professionals about ASIC’s rigorous licensing and professional registration decision-making processes."

ASIC’s enforcement priorities and the rigour being applied by ASIC to license applications (as announced in ASIC’s recent October 2024 report referred to above) should be carefully considered by organisations operating in the Australian financial services and consumer credit sectors.

If you have any questions in relation to your regulatory and compliance obligations, please contact Michelle Segaert or Tim Chow.

1. Exposure Draft ED SR1 Australian Sustainability Reporting Standards – Disclosure of Climate-related Financial Information (aasb.gov.au)
2. Australian Privacy Reforms have landed with a splash, but not quite as many expected.
3. Impacts of the AML/CTF Amendment Bill on new and existing entities.
4. See ASIC media release 24-185MR published on 23 August 2024.
5. For more information, see ASIC’s media release 24-173MR published on 2 August 2024.
6. See ASIC media release 24-133MR published on 25 June 2024 for more details.
7. See ASIC media release 24-121MR published on 5 June 2024.
8. See ASIC media release 24-200MR published on 10 September 2024
9. See ASIC’s media release 24-151MR published on 10 July 2024.  
10. See the judgement here and ASIC’s media release 24-158MR published on 19 July 2024.
11. See ASIC media release 24-120MR published on 5 June 2024.  
12. See ASIC article ASIC to crack down on predatory lending | ASIC published on 8 February 2024.
13. See ASIC media release 24-111MR published on 24 May 2024.
14. See ASIC media release 24-084MR published on 26 April 2024.
15. Australian Securities and Investments Commission v SunshineLoans Pty Ltd (No 2) [2024] FCA 345.
16. See ASIC media release 24-174MR published on 5 August 2024.
17. See ASIC media release 24-138MR published on 28 June 2024.
18. See ASIC media release 24-115MR published on 29 May 2024.
19. See ASIC media release 24-100MR published on 14 May 2024.