Action against 11 SMSF auditors – October 11, 2023
Eleven self-managed superannuation fund (SMSF) auditors have been found breaching their obligations, which included breaches of auditing and assurance standards, independence requirements and registration conditions.
Between July 1, 2023 and September 30, 2023, ASIC:
- disqualified Carlo Celisano, Eamon Lynch and Brian Townhill. Their names have been placed on ASIC’s public banned and disqualified register, and they are not eligible to reapply for registration;
- imposed additional conditions on Anthony Boys, Laurence Carwardine, Gurjeet Singh, Bruno Sternberg, and Mark Turner;
- cancelled the registration of Jeffrey Leahy, James Ulrich, and Lou Varalla.
Condor Blanco Mines fined A$100,000 for financial report failures – October 10, 2023
Condor Blanco Mines Limited, a mining exploration company, has been convicted and fined A$100,000 ($64,135) for failing to lodge five annual financial reports (2018 to 2022) with ASIC. The company, which was first delisted from the ASX in August 2018 after failing to pay its annual listing fee, was convicted on five charges in its absence to appear before the Court on September 19, 2023.
“The fine reflects the seriousness of the offences. It is important that accurate and timely reports are lodged to assist shareholders, creditors and the public in making informed decisions when dealing with entities.”
ASIC
Former CEO charged with aiding and abetting fraud – October 10, 2023
Arunesh Narain Maharaj, the former Chief Executive Officer of stockbroking firm BBY Limited (BBY), has been charged with aiding, abetting, counselling or procuring fraud.
Allegedly, Maharaj aided, abetted, counselled or procured offences by a former BBY staff member, who, by deception, gained financial advantage via an overdraft facilitation account for BBY from St George Bank, a division of Westpac Banking Corporation.
He has been charged with two counts contrary to sections 192E(1)(b) and 346 of the Crimes Act 1900 (NSW), each of which carries a maximum penalty of 10 years’ imprisonment.
Director sentenced for falsifying company books – October 9, 2023
The director Gary Cutcliffe has been convicted after pleading guilty to five offences of falsification of company books in contravention of s1307(1) of the Corporations Act 2001.
As the sole director of ice vending machine company 24-7 Ice Pty Limited, Cutcliffe agreed to had falsified books in May 2017 after the company went into administration earlier in April. He instructed a staff member to amend lease agreements, and to make false sales/loan agreements and a false invoice.
Cutcliffe was released without sentence after entering into a recognizance release order to be of good behaviour for 18 months, and to pay a security of A$500 ($318). With the conviction, Cutcliffe is also automatically disqualified from managing corporations for five years.
ASIC news week 41
Annual report
Last week, the Commission released its 2022–23 Annual Report, which shows a strong focus on enforcement actions in the last financial year.
During the period, ASIC made 35 criminal convictions, and gathered almost A$190m ($120m) in civil penalties and fines. More than 130 new investigations were also commenced.
“ASIC remains focused on maximising our regulatory impact by addressing areas of greatest harm,” said Chair Joe Longo. “Our priorities reflect the key trends and emerging issues in our regulatory environment, including the growth in sustainable finance, Australia’s ageing population, emerging and disruptive digital technologies and associated risks, and product design and distribution.”
Key actions include the Commission’s first enforcement action for alleged greenwashing, disrupting predatory conduct against vulnerable customers and small businesses, stopping badly designed products with its ‘stop order powers’, taking actions against breaches of directors’ duties, and working on scam prevention and detection by the major banks.
During the last seven years, ASIC has overseen more than A$7 billion ($4.4 billion) of remediation to about 8.42 million consumers for failures across the Australian financial services industry.
Chair Longo hinted there would be more actions. “There are a significant number of ongoing investigations and surveillance activities that we will report on in the year ahead.”
Speech
In a speech at the Insurance Council of Australia (ICA) Annual Conference on October 12, Karen Chester, ASIC’s Deputy Chair, called for action from insurers to get the basics right for insurance pricing promises, product design and distribution, and claims handling.
Photo: ASIC
During the last year, ASIC has issued more than 80 stop orders across investment, credit, insurance and OTC derivatives, and 11 products have been withdrawn from the market. To date, 39 interim stop orders have been made for the insurance industry.
Chester also talked about the importance of how well design and distribution obligations (DDO) are being met by insurers.
“Now in its second full year of operation, we had hoped DDO would be better-embedded. But our review of more than 100 insurance TMDs (the TMD blitz) found compliance with the obligations to be nascent at best,” Chester said.
“Many got the basics wrong. Target market descriptions were vague or overly broad. Most did not properly consider or explain how the product issuer considered a consumers’ financial situation, objectives and needs.”
Landmark victory
Last week, ASIC won a landmark continuous disclosure case against New Zealand Banking Group Limited (ANZ). ANZ was found to have breached continuous disclosure laws when it undertook a A$2.5 billion ($1.6 billion) institutional share placement in 2015 and did not disclose material placement subscriptions allocated to underwriters. The share placement had bought nearly a third of the shares, worth between A$754m and A$791m ($476m-$499m).
ASIC says that this landmark case “reaffirms the importance of the continuous disclosure rules to maintain market integrity”.
ASIC Deputy Chair Karen Chester countinued: “Today’s decision is significant. ASIC has stayed a long course to achieve this outcome. Proper disclosure is fundamental to fair and efficient markets and price formation. Investors need to be fully informed about information that is likely to have a material impact on the price or value of a security.”
ASIC will now make submissions on appropriate penalties, which will be determined by the Court later.
The maximum penalty for a single breach of continuous disclosure laws (sub-section 674(2) of the Corporations Act) by a body corporate in 2015 was A$1m ($631,000) – which increased in 2019 to the greatest of:
- 50,000 penalty units, currently A$15.65m – ($9.9m);
- three times the benefit obtained and detriment avoided; or
- 10% of annual turnover, capped at 2.5 million penalty units (currently A$782.5m ($494m).
Legislative instrument updates
ASIC has published the financial reporting legislative instrument ASIC Corporations (Financial Reporting by Stapled Entities) Instrument 2023/673, which continues the relief previously provided under ASIC Class Order [CO 13/1050] Financial reporting by stapled entities, which ceased on October 1, 2023.
The ASIC Credit (Amendment) Instrument 2023/675, which extends the operation of ASIC Credit (Electronic Precontractual Disclosure) Instrument 2020/835, has been temporary extended for 12 months until October 1, 2024, pending law reform.
