Suspended AFS license Olritz Financial Group – September 11, 2024
The AFS licence for Olritz Financial Group Pty Ltd has been suspended until March 5, 2025, due to the fact that the company has not carried on a financial services business since May 2023.
Cancelled AFS license FXOpen AU – September 4, 2024
FXOpen AU Pty Ltd has gotten the AFS license cancelled after ASIC identified “serious concerns” regarding the lack of its human resources to provide financial services and to carry out supervisory measures.
The company, a contracts for difference and foreign exchange contracts issuer, was also found not to be:
- keeping up competence to provide financial services;
- complying with the key person condition on its licence; and
- complying with financial services laws.
Court updates
Former director of Reiwa-Capital sentenced to prison – September 9, 2024
Russell Sandiford, former director of Reiwa-Capital, has been sentenced to two years and eight months’ imprisonment, to be served by way of an Intensive Correction Order, for dishonestly using investor funds.
Between January 2020 and June 2022, Sandiford contacted and invited individuals (whose email addresses he held from his previous employment at brokerage firms) to invest in either a hedge fund or an income fund. During the period, 74 clients invested a total of A$440,909 ($294,023) – which he primary used for personal expenses instead of investing.
Only A$6,316 ($4,211) of the investor’s funds was paid back.
The Court called Sandiford’s crimes “brazen”, motivated by greed, and constituted a “serious breach of the trust that he deliberately cultivated with his customers.”
He pleaded guilty to two counts of dishonest conduct in connection with a financial product contrary to s1041G of the Corporations Act.
Rent4Keeps found overcharging vulnerable consumers – September 4, 2024
Rent4Keeps‘ business model has been found to be breaching the Credit Act. The company was overcharging vulnerable consumers on essential household goods.
Between three months in 2019, Darranda Pty Ltd – Rent4Keeps’ largest franchise, entered into 516 ‘lease’ agreements, with customers often from low socioeconomic backgrounds, where the customers paid much more for items than they lawfully should have.
According to the Federal Court, Rent4Keeps (now trading as R4K) and Darranda were setting their lending goods arrangements as “leases”, when in fact customers did keep the goods, and the contracts were found not to be leases but instead credit contracts. As credit contracts, Darranda was found contravening the 48% annual rate cap and other requirements under the Credit Act. Customers were also typically paying more than four times the market price for the goods. One example included a A$4,095 ($2,753) charge for a vacuum cleaner over 18 months – which could have been purchased for A$999 ($671).
ASIC will seek financial penalties against Rent4Keeps and Darranda.
“Customers of the Rent4Keeps franchise were charged well above the amount that could lawfully be charged, and more than four times the retail cost of the goods, and did not receive other important consumer protections.”
Sarah Court, Deputy Chair, ASIC
ASIC news September 4 – 13
Suspicious digital investment opportunities
ASIC has become aware of a new emerging trend where unlicensed entities are promoting suspicious investments in digital gold vaults, and is therefore sending a warning to customers. The entities are unlicensed, promotes themselves on social media, and ‘lures’ customers with promises of passive incomes and payments for referring new investors.
ASIC also said that it can be tricky to verify if the digital gold vaults even exist because many of the entities are operating overseas. “It is possible that the passive returns generated may actually be funds from new investors, resulting in some schemes potentially being ponzi schemes,” ASIC added.
Misconduct in banking and superannuation sectors
In a new report on enforcement and regulatory updates, ASIC was successful in 95% of its civil and criminal prosecutions during the first half of 2024, securing A$32.2m ($21.5m) in civil penalties and nine criminal convictions. During the period, the Commission also launched 63 new investigations, commenced 12 new civil proceedings and completed 550 surveillances.
The report also included a review of how 10 large home lenders are supporting customers in financial hardship, and if superannuation trustees were doing enough to strengthen members’ retirement outcomes.
“We have seen first-hand the impact on lives and livelihoods when lenders fail to appropriately support customers experiencing financial hardship. In the wake of our review, we put the lending industry on notice,” said Deputy Chair Sarah Court.
Calls on product issuers to review distribution practices
Product issuers need to ensure that they are complying with distribution obligations (DDO) surveillance practices, ASIC has said, after noticing that flawed consumer questionnaires have been the reason for some interim stop orders recently.
ASIC says that poor design and distribution puts consumers at risk, and that even though some work has been done, more improvements across the board are still required.
“Where there are opportunities to improve, we expect product issuers and distributors to reflect on the report’s findings and improve their distribution practices,” said Commissioner Alan Kirkland.
Sine the DDO obligations came to in effect in late 2021, the Commission has commenced five civil proceedings with three successful outcomes to date, and issued over 80 stop orders.
Superannuation forecasts relief instrument update
The default rate of nominal wage inflation in Instrument 2022/603 (Superannuation Calculators and Retirement Estimates) has been updated from 4% per year to 3.7% after earlier consultation.
Providers who rely on the instrument will have until the end of 2024 to update the default inflation rate.