Which firms got a rap on the knuckles in 1H23?
From greenwashing allegations and interim stop orders to fines and penalties, Money Management has rounded up all the disciplinary actions faced by firms in the first half of 2023.
Some of these actions include ASIC intervention, such as the 36 stop orders issued since design and distribution obligations (DDO) was introduced in late 2021, while others consist of legal actions taken by the District, State or Federal courts.
January
Early in the year, ASIC placed an interim stop order preventing Vasco Responsible Entity Services Limited from distributing the Pivotal Diversified Fund to retail investors.
The order stemmed from concerns regarding the deficiencies in the target market determination (TMD) of the fund, which invested in various managed funds including a private equity fund, hedge funds, and a fund invested in commercial and residential real estate developments.
February
The following month, National Advice Solutions was hit with a penalty for violating anti-hawking regulations. The Southport Magistrates Court in Queensland imposed a penalty of $70,000 and the advice firm was charged for making unsolicited calls to consumers between August 2019 and June 2020, encouraging them to roll over superannuation into different superannuation products.
Wilsons Advisory and Stockbroking Ltd also paid a penalty of $548,328 to ASIC after receiving an infringement notice from the Markets Disciplinary Panel (MDP). After conducting a thematic review of Trade with Price Improvement (TWPI) reported by market participants, ASIC raised concerns over a “significant number” of transactions reported by Wilsons as TWPI from 1 March 2022 to 21 March 2022 and said the transactions “did not appear to offer price improvement”.
ASIC also commenced civil penalty proceedings in the Federal Court against Mercer Super for allegedly making misleading statements regarding the sustainable nature of its investment options. It alleged Mercer made statements on its website about seven ‘Sustainable Plus’ investment options offered by the Mercer Super Trust which marketed these options as suitable for members who were ‘deeply committed to sustainability’ as it would exclude investments in companies involved in carbon intensive fossil fuels, gambling and alcohol production.
This marked the first time the corporate regulator had taken an Australian entity to court regarding alleged greenwashing conduct.
March
This month, ASIC issued a final update on the progress of remediation associated with misconduct in the financial advice space. It reported as at 31 December 2022, a total of $4.7 billion in compensation had been paid or offered to approximately 1.6 million consumers.
Roughly 23 per cent ($1.1 billion) was paid or offered in the six months from July to December 2022.
Remediation was paid by six of the country’s largest financial services firms – AMP, ANZ, Commonwealth Bank, Macquarie Group, NAB and Westpac.
ASIC also issued interim stop orders on three BT funds for design and distribution obligation (DDO) failings. The order prevented Advance Asset Management, a BT specialist fund management business, from offering or distributing the Advance Balanced Multi-Blend Fund, Advance International Shares Multi-Blend Fund and Advance Property Securities Multi-Blend Fund to retail investors because of non-compliant target market determinations (TMDs).
Towards the end of the month, it issued its largest fine for failing to lodge annual financial reports (some $123,000) against ALT Financial Group, which ASIC said “reflected the seriousness of the offence and the impact on shareholders and creditors”.
April
This month, the Federal Court ordered Ascent Investment and Coaching Pty Ltd and its unregistered managed investment scheme be wound up.
Ascent, run by Michael Jefferson Dunjey of Applecross, Western Australia, owed approximately $149 million to clients and held approximately $4 million in assets as at December 2021, when freezing orders were obtained.
The Court’s decision followed a successful application by ASIC to wind up Ascent in March 2022 and provisional liquidators being appointed in June 2022.
May
ASIC commenced its second case of alleged greenwashing, this time issuing an infringement notice against Future Super. Future Super had self-reported a Facebook post, which ASIC was concerned "may have been false or misleading by overstating the positive environmental impact of the Fund."
The next day, Ord Minnett paid out a $888,000 penalty to comply with an infringement notice from the MDP for contravening market integrity rules on two occasions when conducting a buy-back on behalf of AWN Holdings Ltd (AWN).
AustralianSuper took steps to remediate around 100,000 members after a review discovered the fund had failed to identify every instance of multiple member accounts. The total amount to be refunded to impacted members was expected to be around $70 million and the average payment to remediate was $650 per impacted member.
In a statement, it said it had undertaken a comprehensive review of its processes for managing multiple accounts held by members and identified some important areas for improvement where its process was found to not cover all instances of multiple member accounts.
AMP Life and AMP Financial Planning were issued a combined $24 million penalty by the Federal Court in relation to charging deceased clients for insurance and financial advice.
The same day, the Federal Court ordered MLC Limited a $10 million penalty for failing to pay promised benefits, resulting from a lack of appropriate systems to administer its insurance policies. Additionally, MLC Life also provided approximately $11.8 million in remediation to approximately 1,000 impacted customers.
Towards the end of the month, AUSTRAC accepted an enforceable undertaking from the Bank of Queensland Limited (BOQ) to improve its compliance with Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) laws. This followed a compliance inspection by AUSTRAC which identified concerns relating to the adequacy of BOQ’s AML/CTF systems and controls.
June
Early in the month, a trial investigating alleged misconduct by Insignia Financial Limited (formerly IOOF Holdings Limited) commenced. It examined whether the company had neglected its obligations to shareholders by failing to disclose alleged misconduct. This included insider trading; front-running; failure to manage conflicts of interest; and issues with the company’s systems, data integrity and cyber security; and whether the company’s ‘roll-up’ business model was materially compromised.
It concluded at the end of June, and Justice Stewart Anderson said he plans to come to a decision by the end of the year.
Additionally, ASIC issued interim stop orders on Spaceship Earth Portfolio, Spaceship Origin Portfolio, and Spaceship Universe Portfolio (together, the Spaceship Voyager Funds) and Spaceship Super, all run by Spaceship Capital. This was due to deficiencies in their target market determinations under DDO.
OnePath Custodians, one of four superannuation trustees owned by Insignia Financial Ltd, was fined $1.46 million by APRA for failing to direct member contributions to a MySuper product.
Wrapping up a busy first half of the financial year, AUSTRAC concluded its external audit of Bell Financial Group after more than a year and released its verdict.
The auditor was tasked with examining the three entities’ compliance with having a AML/CTF program in place, engaging in an ongoing customer due diligence program, reporting suspicious matters and maintaining enrolment details within required time frames.
After considering the reports, it will “not be taking any further regulatory action”.
AUTHOR
Rhea Nath
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Looking at this one thing stands out and that is Australian Super. Pretty much all of theses had some kind of punishment from ASIC, except of course Aus Super & probably Aware Super too. One might conclude there is a bias here.
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