Consumer protection a key focus | ASIC's latest enforcement update highlights the impact of the regulators' scam takedown capability

5 minute read 06.03.2024 Kate Hilder, Siobhan Doherty

Our key takeaways from ASIC's latest enforcement report - REP 780 ASIC enforcement and regulatory update: October to December 2023 – and summary of enforcement outcomes for H2 2023

Key takeouts

Consumer protection has been a key focus for the regulator over the last six months: In the second half of 2023, 3490 investment scam and phishing websites targeting consumers have been removed, with a further 350 'in the process of being taken down'.
Looking ahead, ASIC Chair Joe Longo underlined ASIC's continuing focus on consumer protection (including tackling scams). More broadly, Mr Longo has flagged the following as focus areas:

'scrutinising the way lenders comply with their hardship obligations, how banks support First Nations consumers to access low-fee accounts, and how superannuation trustees deliver important member services, such as how they handle death benefits claims'.

Overview

The Australian Securities and Investments Commission (ASIC) has released its latest enforcement activity Report - REP 780 ASIC enforcement and regulatory update: October to December 2023 (REP 780) - outlining its key enforcement actions during Q4 2023 together with a summary of enforcement outcomes for H2 2023 and an updated (indicative) regulatory developments timetable.

Disrupting scams is a key focus

Announcing the release of the report, ASIC underlined the impact that its new 'scam website takedown capability' has had since its launch in July 2023.

According to ASIC, in the second half of 2023, 3490 investment scam and phishing websites targeting consumers have been removed, with a further 350 'in the process of being taken down'.

ASIC Chair Joe Longo said that this work is particularly important in the current environment:

'Cost of living issues mean more Australians are looking for ways to make ends meet and scammers are only too happy to try and takeh advantage. That's why ASIC is stopping investment scams at the source of their promotion, removing them from the internet before they can lure in unsuspecting consumers'.

Mr Longo also flagged that going forward, ASIC plans to extend its focus on how major banks detect, prevent and respond to scams to a broader range of banks and superannuation trustees.

More broadly, Mr Longo said that ASIC is:

Enforcement outcomes: H2 2023

ASIC is 'in courts and boardrooms across Australia almost every single day of the week'

Mr Longo also underlined ASIC's continuing commitment to enforcement, including taking court action, to address misconduct, observing:

'In the half year to 31 December 2023, ASIC secured almost $60 million in civil penalties and 9 criminal convictions. We launched 83 new investigations, commenced 19 new civil proceedings, criminally charged 19 individuals and completed nearly 350 surveillances. ASIC is in courts and boardrooms across Australia almost every single day of the week'.

Below, we've highlighted some of the key points in ASIC's enforcement summary for the period July to December 2023.

The overall number of enforcement outcomes - court based and administrative - recorded for H2 2023 is somewhat down on H1 2023 across all areas (financial services, markets, corporate governance, small business).

Financial services

In H2 2023, ASIC recorded 51 financial services-related enforcement results, the majority (34) of which were administrative enforcement outcomes.

Overall, of the 51 financial services-related enforcement results reported by ASIC for H2 2023, almost half (26) concerned financial advice misconduct.

Looking more closely:

ASIC reports that there were 34 administrative enforcement outcomes recorded across a wide range of areas including: financial advice misconduct (22); investment management misconduct (6); credit misconduct (3); insurance misconduct (2); and 'other credit misconduct' (1). There were no administrative actions recorded for superannuation misconduct.
There were 14 civil enforcement outcomes recorded across a similarly wide range of areas including: insurance misconduct (6), credit misconduct (4), financial advice misconduct (2); investment management misconduct (1); and superannuation misconduct (1) There were no civil enforcement outcomes recorded for 'other financial services misconduct'
There were three criminal enforcement outcomes recorded in the areas of: financial advice misconduct (2); and credit misconduct (1).
As at 8 January 2024, ASIC reports that 33 criminal and 45 civil actions across a wide range of areas were still before the courts, with the majority relating to credit or investment management misconduct.

For context, this is down on H1 2023 when the regulator reported 74 enforcement outcomes.

Markets

In H2 2023, ASIC recorded nine market-related enforcement results:

The were eight administrative enforcement actions recorded in the areas of: 'other market misconduct' (6) and market manipulation (2)
There was one civil enforcement action recorded in the area of continuous disclosure.
There were zero criminal enforcement actions recorded.
As at 8 January 2024, ASIC reports that there are 13 criminal and 11 civil actions still before the courts. Eight – 7 criminal and one civil action) concern insider trading, and a further eight (four civil and four criminal) concern 'other market misconduct'.

The number of outcomes recorded for H2 2023 is down on the 16 outcomes recorded for H1 2023.

Corporate governance

In H2 2023, ASIC recorded 27 corporate governance related enforcement results – 26 administrative and one criminal enforcement action (concerning directors duties and governance failures). There were no civil actions recorded.
The vast majority of 27 enforcement actions for the period concern auditor misconduct (23 administrative actions)
As at 8 January 2024, a further 37 criminal and seven civil actions (most (31) of which concern directors' duties and governance failures) were still before the courts.

For context the number of outcomes recorded is down on the 457 outcomes recorded for H1 2023 (though 444 of these actions concerned 'auditor misconduct' specifically, SMSF auditors failing to lodge annual statements – the issue was identified as part of a 2022-23 compliance program).

Small business

In H2 2023, ASIC recorded 125 small business–related results: 112 criminal actions and 13 administrative actions.
As at 8 January 2024, 97 further business-related criminal matters were still before the courts.

The number of outcomes recorded in down on the 151 recorded for H1 2023.

Indicative regulatory developments timetable released

ASIC has also released an (indicative) 'regulatory developments timetable' setting out the regulator's planned timeframes for regulatory initiatives across all sectors and an indication of ASIC's priorities.

Among other things, the timetable flags that this month (by the end of Q1 2024) ASIC intends to:

Jointly publish with APRA the final Regulator rules and Transitional rules for the Financial Accountability Regime (FAR) for ADIs
Jointly publish an all-industry information paper with APRA to provide guidance on the FAR
Jointly consult with APRA on the Regulator rules for the FAR for the insurance and superannuation industries

[Sources: ASIC Media release 04/03/2024; ASIC Report 780 ASIC enforcement and regulatory update: October to December 2023 (REP 780); Summary of enforcement outcomes; Regulatory Developments Timetable]