Morningstar has paid two infringement notices in greenwashing case – December 1, 2023
The Product Disclosure Statement for Morningstar Internation Shares (unhedged) Fund claimed that certain securities or sectors would be excluded based on ESG factors listed in the firm’s ESG policy. The ESG policy stated that the Fund would not have exposure to “controversial weapons companies.”
Despite this the Fund was exposed to securities in the following companies for brief periods in 2022 and 2023:
- Honeywell International Inc;
- General Dynamics Corp;
- Leidos Holdings Inc;
- Northrop Grumman Corp;
- Raytheon Technologies Corp.
The “controversial weapons” in this case are nuclear weapons and their components according to Sustainalytics, Morningstar’s ESG research arm.
Morningstar has paid A$29,820 ($19,568) without admitting guilt or liability in this case.
Auditing a spouse’s income is a clear breach of auditor independence requirements – December 1, 2023
The Administrative Appeals Tribunal (AAT) has upheld the ASIC’s decision to disqualify Ms Janette Townshend from being an approved self-managed superannuation fund (SMSF) auditor. A disqualified SMSF auditor is placed on ASIC’s public banned and disqualified register and is not eligible to reapply for registration.
The AAT found that there was “no doubt that Ms Townshend was in breach of auditor independence requirements when she audited her spouse’s SMSF for six income years.”
RACQ to pay $10m for pricing discount failures – November 30, 2023
RACQ Insurance Limited (RACQ), has been ordered to pay a A$10m ($6.6m) penalty for potentially misleading product disclosure statements (PDS) about pricing discounts for certain types of insurance cover.
Between March 2017 and March 2022, RACQ was found sending out misleading PDSs on at least 5 million occasions. And about 458,746 customers missed out on approximately A$86,476,339 ($57m) in discounts they should have received.
RACQ has admitted to the contraventions, and was also ordered to pay ASIC’s costs of the proceedings.
Director charged with breach of director duty offences – November 30, 2023
The sole director of Equitable Financial Solutions Pty Ltd, Usman Siddiqui, has been charged with four counts of breaching his director duties. Allegedly, Siddiqui had A$1.75m ($1.15m) of company funds diverted for his own benefit.
He was arrested on November 2 after charges for contravening section 184(2)(a) of the Corporations Act 2001, and has been granted bail with conditions imposed preventing him from leaving Australia. The maximum penalty for breaching section 184(2) of the Corporations Act is 15 years’ imprisonment.
Cancelled AFS license of Remi Investment Services – November 30, 2023
The AFS licence has been cancelled for Remi Investment Services Pty Ltd because it no longer carry’s on a financial services business.
A$5m penalty for fees for no service misconduct – November 29, 2023
The superannuation trustee OnePath Custodians Pty Ltd has been ordered to pay a A$5m ($3.3m) penalty for making false or misleading representations about charging fees, and for deducting fees when it was not entitled to do so.
Between December 2015 and November 2021, OnePath made faulty representations of the superannuation product ‘Integra Super’ about Adviser Service Fees, and deducted A$3.8m ($2.5m) in fees for advice services members did not receive.
During this period, the company sent letters to about 766 members and annual statements to 15,962 members, which contained false or misleading representations.
Besides the penalty, OnePath has also repaid A$3.8m in fees (plus interest) to affected members.
“Members should be confident that their retirement savings are not reduced over time by superannuation trustees making deductions from their accounts they are not entitled to make.”
ASIC Deputy Chair Sarah Court
This is the second fees for no service-related penalty lately, where Mercer Financial Advice was penalised A$12m for charging fees to customers it was not entitled to charge.
ASIC Deputy Chair Sarah Court also announced that member services failures and misconduct resulting in the erosion of superannuation balances will be focused on in the Commission enforcement priorities for 2024.
Fong Financial Planners sentenced for dishonest conduct – November 29, 2023
Fong Financial Planners Pty Ltd has been convicted and sentenced for three counts of dishonest conduct while carrying on a financial services business, including a fine of A$100,000 ($66,197).
As an authorised representative of AMP (Australian Mutual Provident Society), Fong Financial Planners dishonestly recorded information for three months in 2014 it knew to be false on forms of client insurance applications.
The company also intentionally did not disclose all relevant personal information of the clients, including health details and medical history.
The director and former financial adviser David Fong, who was an authorised representative of AMP, was also permanently banned from providing financial services or engaging in credit activities in 2017 due to the dishonest conduct.
Former BBY employee charged with aiding and abetting company conduct – November 28, 2023
Yat Nam (April) Yuen has been charged with aiding and abetting former stockbroking firm BBY Limited (BBY) to engage in dishonest conduct. Allegedly, in June 2014, Yuen instructed St George Bank to transfer A$6,8m ($4.5m) of client funds out of BBY’s Futures client segregated account, and then to other accounts. Which was believed to have been with the intention to fund a margin payment to ASX Clear Pty Ltd – breaching BBY’s obligation to hold client money on trust.
Furthermore, Yuen instructed the bank again in March 2015 to transfer A$350,000 ($232,474), and A$1,6m ($1,062,745) from BBY’s Saxo Buffer account, also a client account, to BBY’s Operating Account at National Australia Bank Ltd.
Yuen was charged with two offences for breaching sections 1041G(1) and 1311 of the Corporations Act 2001 (Cth), and section 11.2 of the Criminal Code (Cth), which each carries a maximum penalty of 10 years’ in prison, or a fine of 4,500 penalty units (A$765,000 – $506,751) or three times the total value of benefits obtained (or both).
BBY was placed into voluntary administration in May 2015, and the investigation into the company is ongoing.
ASIC news week 48
Speeches
Recently joined ASIC Commissioner Alan Kirkland delivered the opening statement at the Rural and Regional Affairs and Transport References Committee’s Inquiry into bank closures in regional Australia.
The Commissioner drew attention to ASIC’s formal submission to the inquiry focusing on its understanding of the impact of branch closures as a result of the work done on its Indigenous Outreach Program.
He also pointed out that ASIC is currently consulting on a draft updated Banking Code of Conduct and that signatories to the Code have committed to compliance with the Branch Closure Support Protocol, which came into force on July 1, 2023.
ASIC Chair Joe Longo spoke on November 28 at the Australasian Investor Relations Association Forum, where he addressed the evolving regulatory landscape, and the implications for Australasian listed entities.
“Transparency and engagement are at the heart of business – and especially at the heart of investor relations. This means there should be a special focus on keeping those front of mind when it comes to continuous disclosure obligations, sustainable finance reporting, and shareholder responsibility and activism.”
Court decisions
The Southport Magistrates Court has found Geoffrey Anthony Shannon not guilty of managing a corporation while disqualified.
Shannon was an undischarged bankrupt from December 16, 2013 to February 20, 2017, and was therefore automatically disqualified from managing corporations during this period. Allegedly, between December 20, 2013 and March 1, 2015, Shannon made or participated in making decisions regarding Business and Personal Solutions Pty Ltd, while he was disqualified.
ASIC acknowledges ASX’s release of new reports
On November 27, ASIC acknowledged Australian Securities Exchange’s (ASX) release of a Special Report, along with an external Audit Report, on its Portfolio, Program and Project Management Frameworks (PPPM Reports).
The PPPM Reports are relevant to ASX’s delivery, implementation and governance of the CHESS replacement solution design.
With the PPM Reports, ASX has now published all three of the special reports and audit reports it was required to provide to ASIC under notice. The Commission will now consider if further regulatory action is required.
“Replacing CHESS is a complex and technical program of work for ASX and industry. We expect the appointed solution integrator will be key to augmenting ASX’s project delivery capabilities, providing ASX additional capacity to manage technology delivery,” said ASIC Chair Joe Longo.
New requirements and guidance
From February 1, 2024, financial advisers and time-share advisers, excluding provisional relevant providers, who provide personal advice to retail customers on relevant financial products have to be registered with ASIC.
- Information Sheet 276 FAQs: Registration of Relevant Providers gives guidance to AFS licensees and Relevant Providers about registration requirement and process, registrations ceasing and multiple registrations.
- Information Sheet 277 Registration of Relevant Providers: Guidance on Making Declarations provides guidance to AFS licensees about the required declarations when applying to register their Relevant Providers.
