Australian Financial Services Regulatory Update - Financial Services - bdsthanhhoavn.com

Australian Financial Services Regulatory Update – Financial Services


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This edition of the Update covers:

  • Recent legal and regulatory developments, including the release
    of regulatory guidance on crypto asset-related investment products,
    the imposition of additional licence conditions on the ASX
    following the market outage, ASIC’s report on the cyber
    resilience of financial markets firms, the adoption of
    Magnitsky-style targeted sanctions in Australia and ASIC’s
    surveillance of investment switching by super fund executives;

  • Recent financial services litigation, including the imposition
    of a $30 million penalty on the Mayfair 101 Group for misleading
    investors through its advertising, a $20 million penalty on
    Colonial First State Investments Limited for misleading
    superannuation members through a communications campaign, the
    agreement reached between ASIC and Westpac on six regulatory
    matters and the commencement of proceedings by AUSTRAC against
    Crown Melbourne and Crown Perth; and

  • Other regulatory enforcement action including a $110,250
    infringement notice issued by the ASIC Markets Disciplinary Panel
    to BGC Partners (Australia) Pty Ltd, an investment broker, for
    noncompliance with the ASIC Market Integrity Rules (Futures
    Markets) 2017
    .

KEY LEGAL AND REGULATORY DEVELOPMENTS

Financial Markets

ASIC Releases Guidance on Crypto Asset-Related
Investment Products

On 29 October 2021, the Australian Securities and
Investments Commission (“ASIC”) released guidance for
product issuers and market operators on how they can meet their
regulatory obligations in relation to crypto asset exchange-traded
products (“ETPs”) and other investment products. The
guidance covers product admission and monitoring standards, custody
of the assets, pricing methodologies and risk management. Moving
forward, responsible entities that intend to hold underlying assets
that comprise of crypto assets will need to hold an authorisation
in relation to crypto assets in order to hold those assets directly
or indirectly. ASIC has also introduced a new ‘crypto
asset’ category in the Australian Financial Services
(“AFS”) licence application for responsible entities.
ASIC’s guidance can be found here.

The final report of the Senate Select Committee on Australia as
a Technology and Financial Centre was also released in October
2021, and included recommendations on the regulation of digital
assets. As part of the government response to that report, on 21
March 2022, Treasury released a consultation paper, Crypto
asset secondary service providers: Licensing and custody
requirements
. The consultation paper seeks feedback on
proposals and options to support minimum standards of conduct by
crypto asset secondary service providers and safeguards for
consumers. Deadline for submissions closed on 27 May 2022.

ASIC Imposes Additional Licence Conditions on the ASX
Following Market Outage

On 24 November 2021, ASIC announced it had concluded its
investigation of the November 2020 market outage at the Australian
Securities Exchange (“ASX”) and had determined to impose
additional licence conditions on three licences held within the ASX
Group. The licence conditions are directed at mitigating risks for
future upgrades, with specific emphasis on the oversight of the
CHESS Replacement Program, due to go live in April 2023. ASIC’s
media release can be found here.

On the same day, ASIC also released Report 708 ASIC’s
expectations for industry
, which examines the broader context
behind the market outage and the subsequent inability or reluctance
to maintain trading through other venues. The report outlines
ASIC’s expectations of market operators and participants, aimed
at ensuring future continuity of operations and trading, especially
in the event of a future incident. ASIC’s Report 708 can be
found here.

Cyber Security

ASIC Reports on Cyber Resilience Assessments of
Financial Markets Firms

On 6 December 2021, ASIC released Report 716: Cyber
resilience of firms in Australia’s financial markets:
2020-21
, which provides an update on organisations’ cyber
resilience in the two years since the publication of Report 651:
Cyber resilience of firms in Australia’s financial
markets
in November 2018-19. ASIC’s findings in Report 716
indicate that while there has been a small but steady improvement
in the cyber resilience of firms operating in Australia’s
financial markets (in particular, in small and medium-sized
enterprises), the increase of 1.4% falls far short of the 14.9%
improvement targeted for the period. ASIC also found that the
confidence of larger firms in their own cyber resilience has fallen
slightly because of increased complexity in their business
operating models and heavy reliance on supply chain partners.
ASIC’s Report 716 can be found here.

ACSC and ASIC Urge Organisations to Urgently Adopt an
Enhanced Cyber Security Position

On 23 February 2022, the Australian Cyber Security Centre
(“ACSC”) issued an alert to all Australian organisations
encouraging them urgently to adopt an enhanced cyber security
position and set out a list of priority actions that should be
taken to defend against malicious cyber activity. In response to
the ACSC’s alert, ASIC issued a media release to all regulated
entities reiterating its expectations that all boards, senior
management, licensees and other regulated entities pay heightened
attention to their entity’s exposure to the current cyber
security environment. ASIC emphasised that regulated entities
should be reviewing and enhancing detection, mitigation and
response measures. The ACSC’s alert can be found here. ASIC’s media release can be found here.

Anti-Money Laundering and Sanctions

AUSTRAC Statement 2021: De-Banking

On 29 October 2021, AUSTRAC released an update on the
state of de-banking in Australia, discouraging indiscriminate and
widespread closure of bank accounts across entire financial
services sectors and noting that higher-risk businesses (including
remittance services, digital currency exchanges, nonprofits and
fintech) are disproportionately facing bank account closures.
AUSTRAC emphasised the importance of these services to the
Australian economy and commented that AUSTRAC expects banks to take
a case-by-case approach to managing money laundering/terrorism
financing risk. AUSTRAC considers that traditional institutions
should be able to manage high-risk customers with appropriate
systems and processes in place without having to resort to
indiscriminate account closures. AUSTRAC’s media release is
available here.

The final report of the Senate Select Committee on Australia as
a Technology and Financial Centre also included recommendations on
de-banking. As part of the government’s response to that
report, on 21 March 2022, Treasury released Terms of Reference for
advice from the Council of Financial Regulators (“CFR”)
on potential policy responses to address the issue of de-banking
for financial technology firms, digital currency exchanges and
remittance providers. CFR’s advice on policy options is due by
the end of June 2022.

Australia Enacts Magnitsky-Style Laws

On 8 December 2021, the Autonomous Sanctions Amendment
(Magnitsky-style and Other Thematic Sanctions) Act 2021
(Cth)
(“Amendment Act”) commenced after being passed by both
Houses of Parliament in late November 2021. The Amendment Act
operates to expand Australia’s existing country-specific
autonomous sanctions regime to allow sanctions targeted at broad
thematic categories of conduct, including human rights violations,
malicious cyber activity and serious corruption. Targeted sanctions
are considered to be a more proportionate response to address
unacceptable behaviour as compared to country or sector-wide
sanctions, which often impact innocent parties. The enactment of
Magnitsky-style laws in Australia and in other major economies will
increase the global sanctions risk generally for Australian
companies, and in particular financial institutions.
Australia’s enactment of Magnitsky-style laws in the form of
the Amendment Act has been discussed in detail in a previous Jones
Day Commentary which can be found
here.

Governance

Senate Standing Economic Legislation Committee Reports
on FAR

On 15 February 2022, the Senate Standing Economics
Legislation Committee (“Committee”) issued their final
report following an inquiry into a number of legislative bills,
including the Financial Accountability Bill 2021 (“FAR
Bill”), which will introduce the Financial Accountability
Regime (“FAR”). The Committee noted the broad support for
the FAR as well as its intention to improve the operating culture
of regulated entities and increase transparency, both in relation
to prudential and conduct-related matters, and ultimately
recommended that the FAR Bill be passed. The Committee’s report
on the FAR Bill can be found here. The FAR has been discussed in detail in
a previous Jones Day Commentary which can be found here.

The FAR Bill lapsed when the election was called. The Minister
for Financial Services in the new government has indicated that the
FAR Bill is a priority for reintroduction; however, some changes
are under consideration.

Consumer Protection

ASIC Consults on Extension of Its CFD Product
Intervention Order

On 18 October 2021, ASIC released Consultation Paper 348:
Extension of the CFD Product Intervention Order (“CP
348”) seeking feedback on a proposal to extend its product
intervention order imposing conditions on the issue and
distribution of contracts for difference (“CFDs”) to
retail clients until it is revoked or sunsets on 1 April 2031. The
current product intervention order will expire on 23 May 2022,
unless it is extended with the approval of the Minister. The
consultation period closed on 29 November 2021. CP 348 can be found
here.

ASIC Releases Guidance and Examples on Limited
Advice

On 1 December 2021, ASIC released INFO 267: Tips for
giving limited advice
(“INFO 267”) and an example of
an annotated statement of advice to assist financial advisers,
advice licensees and other providers of personal limited advice in
meeting their financial obligations, best interest duty and ethics
obligations. INFO 267 provides further guidance as to best
practices in these areas, including in areas of advice scoping,
record-keeping and avenues for client expectation management. INFO
267 can be found here.

ASIC Consults on Proposed Intervention Orders for
Short-Term Credit and Continuing Credit Contracts

On 9 December 2021, ASIC released Consultation Paper
335:Product Intervention Orders: Short Term Credit and
Continuing Credit Contracts
(“CP 335”) seeking
feedback on the proposed use of product intervention powers to
address high-cost predatory lending in the short-term credit and
continuing credit contract industries. CP 355 outlines ASIC’s
proposal to make product intervention orders which prohibit these
products from being provided in circumstances which involve
unreasonably high costs, in excess of the cost caps in the relevant
exemptions in s 6(1) and s 6(5) of the National Credit Code. The
consultation period closed on 21 January 2022. CP 335 can be found
here.

APRA Issues Climate Risk Self-Assessment Survey

On 2 March 2022, APRA issued a cross-industry letter
advising on the purpose and timing of a voluntary climate risk
self-assessment survey that will be undertaken with medium-to-large
APRA-regulated entities. The survey assesses the alignment between
current entity approaches to considering the financial risks of
climate change, as well as the expectations set out in APRA
Prudential Practice Guide 229: Climate Change Financial
Risks
and the Taskforce on Climate-Related Financial
Disclosure, or TCFD. APRA’s letter can be found here.

Superannuation

ASIC Reports on Its Surveillance of Investment Switching
by Super Fund Executives

On 17 October 2021, ASIC released the findings of its
surveillance of personal investment switching by directors and
senior executives of superannuation trustees. ASIC looked at a
sample of 23 trustees (including trustees of industry and retail
funds), and focused on conduct during the time of increased market
volatility arising from the COVID-19 pandemic. ASIC reports that
its surveillance revealed conduct that fell below ASIC’s
expectations, including (i) failure to identify investment
switching as a risk; (ii) disparity in board-level engagement on
the issue of conflicted investment switching; (iii) lack of
preventative controls, such as trade pre-approvals or switching
blackout periods; (iv) inadequate oversight of investment
switching; and (v) lack of oversight of related persons (such as a
spouse) of directors and executives.

On 6 April 2022, ASIC confirmed that based on the evidence
obtained during its surveillance, it was satisfied that no further
action was warranted against any individuals in relation to the
identified transactions. ASIC has written to the 23 trustees who
were reviewed, outlining its concerns and requesting that they take
steps to improve existing policies and procedures. ASIC also states
that it will continue to work with APRA on ensuring that trustees
have appropriate policies and procedures in place to manage
possible conflicts of interest. ASIC’s media release is
available here.

APRA Releases 2021 MySuper and Choice Heatmap

On 16 December 2021, APRA released its superannuation
heatmaps for 2021 for MySuper and choice products. The heatmaps
provide information on the returns, fees and costs, and
sustainability of default investment options-the MySuper
products-and now also information on the returns, fees and
sustainability of multisector choice investment options. The
MySuper Heatmap incorporates the first annual Your Future Your
Super
performance test in August 2021, consisting of an
assessment of investment performance and administration fees.
Thirteen MySuper products failed the first annual performance test
(comprising 1 million member accounts and $56 billion in
members’ benefits). Three of the 13 trustees have since exited
the market and transferred their members and assets to other funds.
At least two more have announced their intent to do so, and APRA
has imposed licence conditions on two others to require them to
seek a new home for their members. APRA has indicated that trustees
can expect a relentless focus on holding trustees to account for
what they are delivering to members. The 2021 superannuation
heatmaps can be found here. APRA Member Margaret Cole’s remarks
on the heatmaps can be found here.

Prudential Requirements

APRA Releases Annual Report on Counter-Cyclical Capital
Buffer

On 17 December 2021, ASIC released its annual report on
the counter-cyclical capital buffer (“CCyB”), confirming
that it maintained the CCyB at 0% of risk-weighted assets
(“RWA”) in 2021. The CCyB is an additional amount of
capital that APRA can require authorised deposit-taking
institutions (“ADIs”) to hold or release at certain
points in the economic and financial cycle. It is one of the tools
in APRA’s macroprudential policy framework to reinforce bank
resilience, which can be relaxed during stress to provide banks
with additional flexibility to maintain their lending. The CCyB has
remained at 0% since its introduction in 2016, but will rise to 1%
of RWA from 1 January 2023.

In the annual report, APRA confirms that it views financial
stress in the banking sector as low. Nevertheless, APRA is becoming
increasingly concerned with rising housing prices, credit growth
and increasing high-level, debt-to-income mortgage lending.
APRA’s annual report on the CCyB is available here.

Licensing

ASIC Consults on Licensing Requirements for Corporate
Collective Investment Vehicles

On 17 March 2022, ASIC released Consultation Paper 360:
Corporate collective investment vehicles: Preparing for the
commencement of the new regime
(“CP 360”) seeking
industry feedback on its proposed licensing requirements for
corporate collective investment vehicles (“CCIVs”), which
are a new type of company limited by shares. CCIVs share similar
characteristics to some other internationally recognised investment
structures and are designed to increase the international
competitiveness of Australia’s managed funds industry. CP 360
sets out ASIC’s proposal on how it will administer AFS licence
obligations that will apply to persons operating a CCIV and/or
dealing in CCIV securities. CP 360 can be found here.

Regulatory Priorities

Annual Update on APRA and ASIC’s Engagement

In December 2021, APRA and ASIC released their annual
engagement update. In 2021, APRA and ASIC worked closely on a
number of matters of mutual interest in relation to cross-industry
and industry-specific issues in 2021, including:

  • ASIC and APRA began to develop the joint administrative
    framework for implementing the FAR. The FAR focusses on improving
    standards of governance and risk management in the banking,
    insurance and superannuation sectors, and increasing transparency
    and accountability across these sectors. APRA and ASIC are working
    together to develop the framework for jointly administrating the
    FAR to enable collaboration and coordination, and to minimise
    duplication, in areas of joint regulatory interest. The FAR was
    discussed in more detail in a previous Jones Day
    Commentary which can be found here; and

  • ASIC and APRA have undertaken strategic work to strengthen
    cooperation on enforcement matters. An example of this cooperation
    was the agencies’ engagement during their respective
    investigations in relation to AMP superannuation funds. The court
    enforceable undertaking accepted by APRA in November 2021 was
    designed to address regulatory concerns of both APRA and ASIC with
    AMP Super.

ASIC and APRA’s annual engagement update can be found here.

APRA’s Policy and Supervision Priorities for
2022

On 1 February 2022, APRA released its policy and
supervision priorities for the next 12 to 18 months. Consistent
with APRA’s 2021-2025 Corporate Plan, key priorities are
forward-looking and centred around APRA’s two strategic
themes-“protected today” and “prepared for
tomorrow”, which were discussed in detail in a previous Jones
Day Commentary found
here. APRA’s key priorities feature a heightened emphasis
on new and emerging financial risks, practices and business models
that are testing traditional regulatory boundaries and supervisory
practices. In response to these changes, which include the rapid
digital evolution of the financial system, APRA will commence a
major multiyear initiative to modernise its prudential
architecture.

In the area of supervision, APRA’s top priorities include
(i) rectifying substandard industry practices in superannuation and
eradicating unacceptable product performance; (ii) cyber risk
preparedness and responsiveness across all industries that APRA
regulates; (iii) a continued focus on risk culture, including
rolling out a risk culture survey to benchmark perceived risk
behaviours and the effectiveness of risk structures within
entities; and (iv) upgrading contingency and continuity frameworks,
particularly in the banking sector. APRA’s policy and
supervision priorities can be found here.

ASIC’s Corporate Governance Priorities for
2022

On 3 March 2022, ASIC Chair Joseph Longo presented to the
Australian Institute of Company Directors Australian Governance
Summit, outlining the three corporate governance priorities of ASIC
for 2022, namely (i) governance failures relating to nonfinancial
risk that result in significant harm to consumers and investors,
including failures by directors to identify and manage the risk
attaching to a company’s business activities, failures to
ensure that appropriate resources are allocated to deal with risks
and failures to respond to indicators that risks are not being
properly managed; (ii) cyber governance and resilience failures, as
demonstrated by the proceedings brought by ASIC against RI Advice
Group Pty Ltd (which have now settled); and (iii) egregious
governance failures or misconduct resulting in corporate collapse,
which includes instances where company money, or money belonging to
company creditors, is misapplied or misappropriated. ASIC Chair
Joseph Longo’s speech can be found here.

RECENT FINANCIAL SERVICES LITIGATION

Colonial First State to Pay $20 Million Penalty for
Misleading Superannuation Members

On 19 October 2021, Murphy J of the Federal Court of
Australia ordered Colonial First State Investments Limited
(“Colonial”), as trustee for the Colonial First State
FirstChoice Superannuation Trust, to pay a penalty of $20 million
for designing and implementing a communications campaign in which
it made false or misleading representations about members’
entitlements in relation to their superannuation investments. The
Federal Court found that Colonial (i) made false or misleading
representations in contravention of ss 12DB(1)(h)-(i) of the
Australian Securities and Investments Commission Act 2001
(Cth) (“ASIC Act”); (ii) engaged in conduct that was
misleading or deceptive or likely to mislead or deceive in
contravention of s 1041H(1) of the Corporations Act
2001
(Cth) (“Corporations Act”); (iii) provided
general advice to members and failed to give appropriate warnings,
in contravention of s 949A of the Corporations Act; and (iv) failed
to comply with financial services law and to provide the financial
services covered by its AFS licence efficiently, honestly and
fairly in contravention of ss 912A(1)(a)-(c) of the Corporations
Act. ASIC and Colonial filed a Statement of Agreed Facts and
Admissions in which Colonial admitted liability for the
abovementioned contraventions. The Federal Court accepted the
parties’ joint submission that the appropriate penalty for the
admitted contraventions was $20 million. The Federal Court’s
judgment can be found here.

ASIC Commences Proceedings Against ANZ Over
‘Introducer Program’ Home Loan Referrals

On 26 November 2021, ASIC commenced proceedings in the
Federal Court of Australia against ANZ for breaches of the
National Consumer Credit Protection Act 2009(Cth)
(“NCCP Act”). ASIC alleges that between June
2016 and March 2018, ANZ accepted customer information and
documents from individuals who were engaging in credit activity
without an Australian Credit Licence (“ACL”). As a
result, ASIC alleges that (i) by engaging in a credit activity, in
the course of which it conducted business with referrers who did
not hold an ACL, ANZ contravened s 31(1) of the NCCP Act in respect
of 79 loan applications referred to them; (ii) by failing to take
reasonable steps to ensure that its representatives complied with s
31(1) of the NCCP Act, ANZ contravened s 47(1)(e) of the NCCP Act;
and (iii) by repeatedly contravening s 31(1) of the NCCP Act, and
failing to take steps to ensure its representatives complied with
that provision, ANZ failed to do all things necessary to ensure
that the credit activities authorised by its ACL were engaged in
efficiently, honestly and fairly, in contravention of s 47(1)(a) of
the NCCP Act. In an ASX media release on the same day, ANZ
announced it has cooperated with ASIC during its investigation and
has established a customer remediation program as well as
continuously improving its home loan processes and controls.

ASIC and Westpac Reach Agreement on Six Regulatory
Matters

On 30 November 2021, ASIC and Westpac announced they had
reached agreement to resolve six separate longstanding matters
through agreed civil penalty proceedings filed in the Federal Court
of Australia.

The matters follow regulatory investigations conducted by ASIC,
many instigated following the issues being self-reported by
Westpac, including some which were raised during the Financial
Services Royal Commission. Westpac admitted the allegations in each
of the proceedings and will make remediation payments to customers
totalling approximately $80 million. ASIC and Westpac prepared
Statements of Agreed Facts and announced that they would jointly
submit agreed proposed penalties for each of the six proceedings,
totalling $113 million. The six proceedings are as follows:

  • Debt sales:Investigation into the provision of
    incorrect interest rate information provided by Westpac to debt
    purchasers.

  • Deceased estates:Investigation into the
    charging of advice related fees to deceased customers.

  • General insurance:Investigation into the
    incorrect issuing of duplicate general insurance policies (home and
    contents and landlord insurance policies) without a customer’s
    consent.

  • Contribution fees:Investigation into
    inadequate disclosure of advisor fees received for certain super
    and investment products.

  • Deregistered companies:Investigation into the
    process for identification and management of deregistered
    customers, and the subsequent rectification.

  • Insurance in super:Investigation into
    insurance in superannuation products, where customers were charged
    insurance premiums that included banned commission payments.

The decision of the Federal Court was handed down on 22 April
2022, and Westpac was ordered to pay the agreed amount of $113
million in penalties.

ASIC and ANZ Reach Agreement on Investigation Into
ANZ’s ‘Breakfree’ Package

On 9 December 2021, ASIC and ANZ announced they had
reached an agreement to resolve an investigation into ANZ’s
failure to provide certain benefits it had agreed to give customers
with offset transaction accounts or a ‘Breakfree’ package
through agreed civil penalty proceedings. ANZ has admitted
contraventions of the ASIC Act and Corporations Act and is
undertaking customer remediation programs. ASIC and ANZ have filed
a Statement of Agreed Facts and joint submissions on an agreed
proposed penalty of $25 million.

ASIC Commences Proceedings Against OnePath for Fees for
No Service

On 15 December 2021, ASIC commenced proceedings in the
Federal Court of Australia against OnePath Custodians Pty Ltd
(“OnePath”), the trustee of the superannuation fund
OnePath Master Trust, for allegedly charging fees for no service
and making false or misleading representations to fund members.
ASIC alleges that from December 2015, OnePath incorrectly charged
more than $4 million in fees to more than 18,000 fund members when
it was not entitled to do so. OnePath was a subsidiary of ANZ
Limited until 31 January 2020 when it was sold to IOOF Holdings
Ltd, now known as Insignia Financial Limited. ASIC’s media
release is available here.

Mayfair 101 Group to Pay $30 Million Penalty for
Misleading Advertising

On 22 December 2021, Anderson J of the Federal Court of
Australia ordered Mayfair Wealth Partners Pty Ltd, Online
Investments Pty Ltd (trading as Mayfair 101), M101 Nominees Pty Ltd
and M101 Holdings Pty Ltd (together, “Mayfair 101 Group”)
to pay a combined penalty of $30 million for misleading
advertising. The Federal Court found that the Mayfair 101 Group
deliberately misled investors through its advertising into
investing in its M+ and M Core Fixed Income Notes
(“Notes”) under the belief that they would be of low risk
when in fact the Notes were highly speculative and carried very
substantial risk. In addition to the imposition of civil penalties,
the Federal Court also permanently restrained the Mayfair 101 Group
from using certain words and phrases (such as ‘term
deposit’ and ‘certainty’) in any future advertising.
The Federal Court’s judgment can be found here.

Statewide to Pay $4 Million Penalty for Misleading
Correspondence and Failure to Report Breach

On 17 January 2022, the Federal Court of Australia handed
down the reasons for its December 2021 decision in which it ordered
Statewide Superannuation Pty Ltd (“Statewide”) to pay a
penalty of $3.5 million for misleading correspondence sent to
members, and $500,000 for failing to report the issue to ASIC. On
the basis of an Agreed Statement of Facts, the Federal Court made
declarations that (i) Statewide issued annual statements to members
containing misleading information regarding members’ insurance
coverage in contravention of s 1041J of the ASIC Act and ss 12DA(1)
and 12DB(1) of the ASIC Act and, through its conduct, breached its
general obligations as an AFS licensee under ss 912A(1)(a) and (c)
of the Corporations Act; and (ii) by failing to lodge a written
report with ASIC relating to the breaches of its general
obligations as an AFS licensee within 10 days of becoming aware of
such breaches, Statewide contravened ss 912D(1B) and 912D(3) of the
Corporations Act. This is the first civil case in which the Federal
Court has imposed a civil penalty on an AFS licensee for failing to
report breaches to ASIC since the new penalty powers were
introduced in 2019. The Federal Court’s judgment can be found
here.

RI Advice to Pay $6 Million Penalty for the Conduct of
Its Authorised Representative

On 3 February 2022, the Federal Court of Australia ordered
RI Advice Group Pty Ltd (“RI Advice”) to pay a $6 million
penalty for failing to take reasonable steps to ensure that its
authorised representative provided appropriate financial advice,
acted in his clients’ best interests and put clients’
interests ahead of his own, in contravention of s 961L of the
Corporations Act. The Federal Court also ordered the authorised
representative to pay a penalty of $80,000 for his conduct, which
involved inappropriately advising clients to invest, and stay
invested in complex structured financial products. The Federal
Court’s judgment can be found here.

Aware Financial Services to Pay $20 Million Penalty for
Charging Fees for No Service

On 17 February 2022, the Federal Court of Australia
ordered Aware Financial Services Australia Limited (formerly State
Super Financial Services Australia Limited) (“Aware FS”)
to pay a $20 million penalty for charging more than 25,000
customers a total of $50 million in fees for financial services it
did not provide, in contravention s 12DI(3) of the ASIC Act. On the
basis of an Agreed Statement of Facts and Admissions, the Federal
Court declared that by charging fees for no service and failing to
have internal procedures, measures and controls in place to monitor
compliance, Aware FS also breached its obligations as an AFS
licensee to act efficiently, honestly and fairly, and to comply
with financial services laws in contravention of ss 912A(1)(a) and
(c) of the Corporations Act. After self-reporting the conduct to
ASIC, Aware FS implemented a remediation program and admitted
liability. ASIC and Aware FS jointly submitted to the Federal Court
that a penalty of $20 million was appropriate. The Federal
Court’s judgment can be found here.

AUSTRAC Commences Proceedings Against Crown Melbourne
and Crown Perth

On 1 March 2022, AUSTRAC commenced proceedings in the
Federal Court of Australia against Crown Melbourne Ltd (“Crown
Melbourne”) and Burswood Nominees Ltd (“Crown
Perth”). AUSTRAC alleges that Crown Melbourne and Crown Perth
engaged in serious and systemic noncompliance with their
obligations under the Anti-Money Laundering and
Counter-Terrorism Financing Act 2006
(Cth) (“AML/CTF
Act”). In particular, AUSTRAC alleges that (i) Crown Melbourne
and Crown Perth each contravened s 81 of the AML/CTF Act, by
failing to adopt and maintain and adequate AML/CTF program, on an
innumerable number of occasions on and from 1 March 2016; (ii)
Crown Melbourne and Crown Perth contravened s 36 of the AML/CTF
Act, by failing to conduct adequate ongoing customer due diligence.
AUSTRAC is seeking declarations of contravention and pecuniary
penalties. AUSTRAC has commenced the proceedings following
inquiries in New South Wales, Victoria and Western Australia into
various entities within the Crown Resorts Limited Group.
AUSTRAC’s concise statement can be found here.

OTHER REGULATORY ENFORCEMENT ACTION

BGC Partners Pays $110,250 Infringement Notice

On 16 December 2021, the ASIC Market Disciplinary Panel
(“Panel”) issued an infringement notice to BGC Partners
(Australia) Pty Ltd (“BGC”), an investment broker,
requiring the payment of a $110,250 penalty. The infringement
notice follows findings made by the Panel that on two occasions on
22 March 2019, BGC transacted pre-negotiated business orders on the
ASX 24 market without making the required enquiry through the
trading platform’s message facility. The Panel noted that there
had been previous compliance failures of this type by BGC Partners.
As a result, the Panel found there were reasonable grounds to
believe that BGC had failed to comply with Rule 3.3.1A(1) of the
ASIC Market Integrity Rules (Futures Markets) 2017as
required by s 798H(1) of the Corporations Act. Compliance with the
infringement notice is not an admission of guilt or liability, and
BGC Partners is not taken to have contravened s 798H(1) of the
Corporations Act. ASIC’s media release can be found here.

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