KEY POINTS
- 2024 has been a significant year. Our new investigations have jumped by 25%, and our civil enforcement cases have similarly increased. In addition, we have seen a lot of ‘firsts’.
- Turning to 2025, and recognising current cost of living pressures, we have selected our enforcement priorities for the coming year with a focus on protecting consumers from financial harm.
- These priorities communicate our intent to industry and our stakeholders and give a clear indication of where we will direct our resources and expertise.
Good morning. It’s a pleasure to be here again to announce our annual enforcement priorities, and to set out for you some of the important work we have been doing over the last 12 months.
This work comes at an important time. Despite a challenging geopolitical situation, and pressing climate-related issues, all research points to cost-of-living pressures as the paramount issue of the time for Australians. Our enforcement and compliance work through 2025 will reflect that reality.
Last year I talked about the evolution of ASIC’s enforcement approach to one that is proactive, strategic and bold. I add to that now, based on our work of the last 12 months, that we are taking an increasingly confident and ambitious approach to the outcomes we are seeking.
Confident because we are unapologetically putting the interests of consumers and investors at the heart of everything we do, including, from time to time, in the face of resistance from those who have been misled about the safety or performance of their investment.
And ambitious because we seek to extend the full reach of the protective laws we administer. This year we have clarified and tested the extent of laws in unfair contract terms, the design and distribution obligations, greenwashing and crypto, and we will continue to take this approach.
Before I turn to some of our 2024 outcomes, I should remind you of why we have enforcement priorities in the first place.
- First, they respond to industry requests for transparency as to where we intend to direct our focus.
- Second, they make the Commission’s enforcement agenda clear to our staff, which helps with case selection, resource allocation and prioritisation.
- Third, the announcement of particular areas of interest has a deterrent and compliance impact in and of itself.
- Finally, they hold us to account – have we done what we said we would do?
Important as our priorities are, they do not mark the full extent of our enforcement work. Misconduct requiring our attention will inevitably emerge in the course of a year, and we will always retain sufficient capacity to respond to issues of this kind.
Highlights of 2024
2024 has been a significant year. Our new investigations have jumped by 25%, and our civil enforcement cases have similarly increased. In addition, as the Chair mentioned earlier, we have seen a lot of ‘firsts’.
We have had our first important court outcomes with significant penalties imposed in greenwashing and design and distribution matters.
We have seen what will be, if accepted by the court, one of the largest penalties imposed on a superannuation trustee, in our proceedings against Australian Super.
We have had a record penalty imposed by the Markets Disciplinary Panel against Macquarie.
And, after our teams spent time in remote Indigenous communities taking evidence from First Nations consumers, we have seen the first final stop order imposed to prevent further harm to these consumers.
We have remained resolute in our determination to halt what we consider to be unlawful business models operated by Cigno, and in a strongly contested, long-running matter against Harvey Norman and Latitude Finance, both were found to have engaged in a widespread, misleading advertising campaign across multiple media channels. Perhaps unsurprisingly, as Harvey Norman is reputed to be the most prolific advertising purchaser in the country, this outcome received muted coverage.
In the criminal area, while we are often restricted in what we can say about our cases, they are extensive and resource-intensive.
This year has seen charges laid against several individuals for alleged ‘pump and dump’ market manipulation; a former director sentenced to 11 years in prison for charges relating to the Courtenay House Ponzi scheme; a former financial adviser sentenced to 12 years in prison for causing nearly $6 million in losses to his clients; and a former financial planner sentenced to imprisonment for dishonest conduct.
Add to this Daniel Ali, former director of DanFX Trade, sentenced to more than seven years’ imprisonment for fraud and Rosemary Flegg, former company secretary of Continental Coal, convicted of stealing and forging bank statements.
Cameron Waugh pleaded guilty to insider trading relating to the gold exploration company Genesis Minerals; William O’Dwyer, former Managing Director of the Ralan Group, was sentenced to immediate imprisonment for obtaining financial advantage by deception, and just this week Brett Trevillian, investment manager at AlphaThorn, was sentenced to three years in prison for forging reports about the performance of his trading strategy.
As this list demonstrates, ASIC is an active criminal law enforcement agency. Indeed, while figures fluctuate, as at today we have more matters in the criminal courts than we do civil. We are executing warrants, freezing assets, and restricting people from fleeing the country so they can be held to account on a frequent basis.
Turning then to some of our priority areas of 2024. This year we rounded off a suite of important matters relating to the design and distribution obligations. These cases helped test and clarify the breadth of these important new laws which have been a recent feature of our enforcement work. In the first decisions in the area, we saw the court make orders against Firstmac for cross-selling a product to consumers outside of the relevant target market, and against Amex for failing to take reasonable steps to prevent the inappropriate distribution of its credit cards. It was penalised $8 million for this conduct.
In demonstrating the broad application of these laws, including in new and emerging conduct areas, the operator of the Kraken crypto-exchange was also found to have failed to comply with these obligations when offering a margin trading product to Australian consumers.
What we take from these decisions is that the laws are flexible, product-neutral, and have much work to do. Given our extensive efforts in the area, including courts cases, surveillances, regulatory guidance, and reports, we will now transition our focus here to business as usual – that is, the design and distribution obligations are now just another tool in our enforcement armoury.
Turning to another priority area, you are likely aware that the court this year imposed significant penalties on Mercer and Vanguard in separate proceedings for greenwashing misconduct. Mercer was penalised more than $11 million for misleading investors as to the sustainable nature of some of its superannuation investment options; and shortly afterwards Vanguard was subject to the highest greenwashing penalty to date, in the amount of $12.9 million.
In another proceeding, following a strongly contested hearing, the court determined that Active Super made various misleading representations about its ESG credentials. The penalty in that matter remains to be determined.
These cases have confirmed that first, when an entity uses unqualified language or unequivocal terms such as we will ‘not invest’ or we will ‘eliminate’ in relation to investments, it cannot correct those representations by relying on a consumer searching around for some investment policy that might otherwise qualify those statements.
Second, when superannuation trustees or managed investment schemes make representations as to investment screens or their green credentials, there is no valid distinction to be made between direct and indirect investments.
Going forward into 2025 we will retain our focus on greenwashing and misleading claims relating to ESG credentials, and we will particularly consider claims that are inaccurate or made without reasonable grounds. Our work will span a broad range of sectors including listed companies, managed funds, and superannuation funds.
Turning now to some important outcomes in the area of high-cost credit and predatory lending, there is unfortunately no end of demand for our work. The business models we encounter often appear to have been designed for the very purpose of avoiding consumer credit protections, and often impact the most financially vulnerable consumers.
Such a business model is at the heart of our allegations in the Oak Capital Mortgage case, where we allege that Oak Capital engaged in systemic unconscionable conduct by using a lending model requiring a company to be the named borrower for the loans, in circumstances where the company did not benefit from, or have any genuine interest in, the loan. The impact of this was that the individuals seeking these loans were required to secure them with residential property, and they had no consumer credit protections when in default.
A similar model was evident in our proceedings against Rent4Keeps, where the company sought to argue that arrangements with customers which were styled as ‘consumer leases’ were not subject to the credit laws because – despite the name of the company – the customers were purportedly not entitled to keep their products. The court found to the contrary, and that the arrangements were credit contracts, such that the consumer protection laws had been broken.
We have had a range of other like matters in court this year; and the Cigno saga that I talked about last year has continued.
The practices we see in this area are unethical, unscrupulous, and deliberate. They emerge in the form of business models designed to get around consumer credit protections, and they take advantage of those who are the most vulnerable. We will continue our focus on these issues in 2025, including holding the individuals behind these schemes to account.
Finally, in relation to our priority of tackling gatekeeper and market operator misconduct, as you are likely aware, significant proceedings were launched this year against Australia’s largest market operator, ASX Limited, for allegedly making misleading statements related to its CHESS replacement project. That matter is continuing, and followed the first infringement notice issued to ASX following an ASIC investigation into its compliance with the market integrity rules. We have also taken action against Macquarie and JP Morgan for failing to prevent suspicious client orders being placed on futures markets, with, as I mentioned earlier, a record penalty imposed.
Insurance and superannuation – observations on some emerging issues
Turning to 2025, I want to make some observations on some emerging areas of concern. Insurance and superannuation make up key parts of our regulatory remit. Both are taking on increasing importance to Australians. Insurance because of issues surrounding climate change, extreme weather events, and affordability; and superannuation because it makes up such a large part of each person’s wealth and standard of living in retirement.
In relation to insurance, I suspect many of us in this room have at one time or another faced the daunting task of trying to find a better insurance offer.
The ability to compare insurance products and pricing offers is critical for consumers seeking to purchase insurance that is both affordable and appropriate for their circumstances. Equally important is being able to rely on promises made by insurers when they send renewal notices referencing discounts for loyalty or the number of policies held.
Promises like these are why we have continued our focus on insurance this year, building on significant court outcomes in 2023. We recently instituted proceedings against QBE alleging it failed to deliver on pricing discount promises made to renewing customers on thousands of occasions. We will continue our work in this area next year, with a focus on failures by insurers to deal fairly and in good faith with their customers.
Turning to superannuation, this year we have had a number of cases in court against large superannuation trustees including Australian Super, Mercer, Active Super and Telstra Super. As of Tuesday we can add United Super or Cbus to that list. Commissioner Constant, who leads our work in this area, talks frequently about the importance of superannuation trustees delivering for their members, and member services failures in the superannuation sector will continue as an area of focus in 2025.
Further to this, we are increasingly seeing disturbing scenarios involving the partial or complete loss of superannuation savings. A common example is where a consumer is advised, enticed or misled to withdraw superannuation savings from a regulated fund, and to invest them, often through the vehicle of a self-managed super fund, into a property development scheme or cryptocurrency asset.
An example of this is reflected in our recent investigation into investments in the Shield Master Fund. You may have seen reporting of ASIC’s work on this matter. It makes for sobering reading. We understand that in a two-year period more than $480 million was invested in this fund by thousands of people. Potential investors were called by lead generators and referred to financial advisers. They were advised to withdraw their superannuation investments and to put part or all of them into the Shield Master Fund. This fund sat on the platforms of Macquarie and Equity Trustees, and many superannuants did so. While our work on this matter continues with great intensity, we are concerned that substantial investor funds may have been misapplied.
This is but one of several like matters that have come to our attention this year. We are therefore adding a new priority described broadly as misconduct exploiting superannuation savings. We see this as an emerging and concerning area for vigilance, and we are calling on both superannuants and superannuation trustees to exercise caution in such circumstances.
Before I turn to some new areas of focus for 2025, I want to remind you of our enduring enforcement priorities. They should be on the screen now. I won’t go through these in any detail but suffice to say that these are types of conduct we consider to be so important as to always be a priority for our work.
Let me turn to some new areas of focus for 2025.
First – auditors. Auditors play a critical role across the financial system, as the principal external check on a company's reporting. The integrity of our markets depends on performance of the auditor role with independence and integrity.
There has been considerable recent public attention on the role of auditors and audit firms, and indeed a parliamentary joint committee delivered a report on this subject just last week. Given this interest, and the important and unique role played by auditors, we propose to intensify our oversight and enforcement work in this sector.
Second, I have already set out some of the harms we are seeing in relation to the promotion and mis-selling of high-risk property schemes. This misconduct is increasingly revealing itself to be on an industrial scale. The conduct usually involves a chain of participants, with each person in the chain collecting a fee from the unsuspecting investor along the way. This can include lead generators, cold callers, financial advisers, and conflicted directors of highly speculative property schemes. The investment is often done through the vehicle of newly created self-managed super funds, and increasingly we see investments described with reference to NDIS-compatible housing, presumably to suggest guaranteed or high returns due to a purported connection with the government scheme. Accordingly, we have a new enforcement priority relating to unscrupulous property investment schemes.
Third, ASIC has award-winning real-time surveillance technology that helps to ensure that Australia has one of the cleanest markets in the world. To maximise the regulatory benefits of this surveillance, we have established a specialist team – what I might call a hit squad – to more intensively follow up and investigate our surveillance results. This team has its work well underway, and strengthening our investigation and prosecution of insider trading will be a key area of work for us in 2025.
Fourth, given the cost-of-living issues I have already referred to, we think it likely that some consumers will find it increasingly challenging to make payments for essential services. There are important consumer protections for the management and collection of debts, and we will be taking action where we see practices that fall short of these obligations. Debt management and debt collection misconduct will be a focus for us while current economic conditions prevail.
Finally, one of the obligations of holding a financial services or credit licence is to have adequate cyber security protections, and to respond appropriately to safeguard consumers’ personal information and data in the event those protections are breached. We are considering a range of matters where we consider licensees may have not adequately prepared for these events, particularly in their oversight and supervision of others. We will be further focusing on this issue next year.
Conclusion
Before I conclude, I want to touch for a moment on the concept of ‘self-reporting’. I do this because one of the most frequent questions I get following ASIC taking court action is: ‘but they self-reported, and are paying compensation – why is it necessary to take them to court?’
To this, I say three things:
First, if you have the privilege of holding an Australian financial services or credit licence the law requires you to report to ASIC as soon as you are aware there may be a material breach of the law. It is an offence not to. That is, the law requires self-reporting, and we generally do not laud people for simply complying with the law.
Second, the law also requires self-reporting to occur within 30 days. Despite this, we frequently see instances where reports to ASIC are made months, if not years, after issues are first raised internally by staff or other complainants. That’s also a breach of the law.
Third, a report to ASIC is the beginning of the process, not its conclusion. Sometimes a self-report is followed by an internal review, or an externally commissioned independent report. At some stage we will be told about the outcome of such a review. More often than not, a privilege claim is made over its contents. We are assured though that there is nothing more for us to see.
Of course, we do not accept that assurance. As a former colleague of mine once said, a good regulator should always be sceptical. We will never simply look a gift-horse in the mouth – we will look at it, open its mouth, pull out its tongue and counts its teeth. We are sceptical of what is put to us, and with good reason. There is often a good deal more to see than what is reported to us, and we will generally conduct our own investigation and make our own assessment of the misconduct. Even where there is full and prompt disclosure and remediation, it may well be appropriate for a court to determine what contravention of the law has occurred, and what appropriate penalty should be imposed. This is important for community confidence and sends deterrent messages to the industry more broadly.
Thank you for your attention today. I am looking forward to the panel discussion with my colleagues.
