Lead auditor of Greensill Group suspended – December 2024
Registered company auditor Joseph John Santangelo has been suspended until June 2026 by the Companies Auditors Disciplinary Board. He was found to have failed in the performance of his duties as auditor related to group audits of the financial statements of the corporate entity comprising Greensill Capital Pty Ltd and its subsidiaries.
“Auditors are a critical part of the governance framework and are in a unique position to identify and limit misconduct.”
Deputy Chair Sarah Court
Santangelo was also ordered to provide various undertakings to ASIC, and to pay the Commission’s costs of A$375,000 ($238,789).
Rex and four directors sued for serious governance failures – December 11, 2024
Legal proceedings have commenced against Regional Express Holdings Limited (Rex) for engaging in misleading and deceptive conduct and violating continuous disclosure obligations.
Rex, which has had administrators appointed, is the third largest airline in Australia.
Rex allegedly released a misleading ASX announcement on February 28, 2023, claiming that it was optimistic that “the Group will have positive operating profits for the full FY23 barring any further external shocks” – even though it had incurred operating losses in the financial year up to that date. The company had not prepared a financial forecast before issuing the statement.
On June 20, 2023, Rex announced a downgrade forecasting a A$35m ($22.4m) operating loss for the FY ending June 30, 2023. ASIC allege that Rex breached its continuous disclosure obligations by failing to disclose the material downgrade.
Former executive chair Lim Kim Hai was also allegedly involved in Rex’s continuous disclosure breach, and additionally contravened his directors’ duties alongside The Hon John Sharp AM, Lincoln Pan and Siddharth Khotkar.
“Our case will allege serious governance failures at Rex. Rex’s directors had a responsibility to take reasonable steps to ensure the company complied with the law and we will seek to hold them to account.”
ASIC Chair Joe Longo
ASIC seeks leave to commence the proceedings against Rex as it is in administration, but will only seek a declaration of contravention and not pecuniary penalties against the company.
It will however seek declarations, pecuniary penalties and disqualification orders against all four individuals concerned.
Court updates
Vaughan Bowen not guilty of insider trading
Former Vocus Group Limited chair Vaughan Bowen has been found not guilty of insider trading charges following a trial in the Melbourne County Court.
ASIC had alleged that Bowen sold the shares while in possession of inside information relating to the withdrawal of a takeover bid by EQT Infrastructure IV Fund, when he had disposed more than 5.5 million Vocus shares on June 4, 2019.
Operator of Kraken to pay A$8m – December 12, 2024
Bit Trade Pty Ltd, the operator of the crypto exchange Kraken, has been ordered to pay A$8m ($5.1m) for unlawfully issuing a credit facility to more than 1,100 Australian customers.
Since October 2021 the company had offered customers a ‘margin extension’ product without making a target market determination (TMD).
In August the Federal Court found that Bit Trade’s product was a credit facility and required a TMD for offering the extensions in national currencies. The company was therefore deemed to have breached its design and distribution obligations each time it offered the extension product without an appropriate TMD.
“Those customers Bit Trade targeted suffered trading losses of more than $5m, including one investor who lost almost $4m.”
ASIC Chair Joe Longo
Justice Nicholas also pointed out that Trade “did not turn its mind to the requirement of the DDO regime until these were first drawn to its attention by ASIC” and that “the failure to consider that matter points to a seriously deficient compliance system.”
Bit Trade was also ordered to pay ASIC’s costs related to the court proceedings.
Former BCU Director and CEO sentenced for dishonest conduct – December 12, 2024
Lyndon Allen Kingston, former Director and CEO of Bananacoast Community Credit Union Limited (BCU), has been sentenced to 18 months’ imprisonment after being found guilty of four dishonesty offences between December 2015 and August 2017.
Kingston was found guilty of:
- two counts of dishonestly using his position with the intention of gaining an advantage; and
- two counts of providing misleading information to BCU’s auditor.
Kingston was conditionally released after serving six months in prison.
Enforceable undertaking from pawnbroker Lend NT Pty – December 9, 2024
ASIC has accepted a Court enforceable undertaking from pawnbroking business Lend NT Pty Ltd and its sole director Laddawan Te Maro after concerns about it offering unlicensed credit.
The regulator found that the company was not operating within the scope of its pawnbroking license, and both Lend NT and Te Maro admitted that the company violated sections 29 and 32 of the National Credit Act by providing Drive Away Loans to consumers.
Lend NT and Te Maro have been required to implement a remediation program – including offering compensation of approximately A$49,685 ($32,094)to 58 customers. This represents a refund of prohibited fees, charges and interest charged.
Cancelled AFS licenses
Patrick Joseph O’Neill – December 13, 2024
Patrick Joseph O’Neill AFS license was cancelled after he failed to comply with licence obligations, including not:
- complying with the obligations to be a member of an external dispute resolution scheme;
- lodging annual financial statements with ASIC for the financial years ending June 30, 2018 to 2023; and
- paying outstanding industry funding levies to ASIC.
Macgill Financial Services Pty Ltd – December 13, 2024
The AFS license of Macgill Financial Services Pty Ltd has been cancelled because the company has ceased to carry on a financial services business.
ASIC news week 50
Focus areas for December 2024 financial reports
The deadline for submitting financial reports for the year ending December 31, 2024, is coming up, and ASIC is urging directors, preparers of financial reports, and auditors to be aware of the ongoing focus areas in its proactive surveillance of such reports.
This period’s areas of regulatory focus include:
- impairment and asset values;
- provisions;
- events after year end and before completing the financial report; and
- disclosures in the financial report and Operating and Financial Review.
This is also the first financial year for December year-end reports on consolidated entity disclosure statement.
If the relevant obligations are not complied with, action could be taken taken against the offending companies indicated Commissioner Kate O’Rourke.
“ASIC is aware that some formerly grandfathered large proprietary companies may not be lodging financial reports, despite being required to do so since years ending 31 December 2022 or 30 June 2023. We will be contacting a number of these entities and, in certain circumstances, may take action against companies for failing to comply with their reporting obligations.”
The new sustainability and climate reporting requirements will – for some entities – commence for FY beginning on or after January 1, 2025.
Moneysmart: Christmas spending
ASIC is urging consumers to avoid “a post-Christmas spending hangover” as a result of costly debts. Australian consumers are set to spend almost A$800 ($512) each to fund gifts, holidays and celebrations this year, new research shows.
To fund the holiday, research showed that 75% are using their savings, 31% are charging the costs to credit cards, and 16% are using buy now pay later services, and that:
- 74% set a budget for Christmas, yet only 29% manage to stick to their plan.
- 44% regretted their spending in previous years.
- 35% intended to reduce their spending this year.
- 49% are planning to spend the same amount as before.
- 16% are planning to spend even more this year.
“Even with the best intentions, sticking to a budget can be especially challenging during the festive season, leaving many at risk of falling into costly debt traps,” Commissioner Alan Kirkland said and added it is easy to feel pressured into spending more than planned.
Those surveyed said that it would take close to four months to pay off a A$1,000 debt.
Proposal to remake relief instrument for 31-day notice term deposits
ASIC is proposing to remake Class Order 14/1262 Relief for 31-day notice term deposits which is due to sunset on April 1, 2025.
The Commission thinks that the relief is necessary and useful, but is proposing to address concerns from authorised deposit-taking institutions where some are finding it difficult to comply with the existing one business day timeframe required for post-maturity notices.
ASIC is proposing to combine the pre and post-maturity notices into a single notice – which must be given to the depositor at least seven days, and no longer than 14 days, before maturity.
Feedback on the proposals can be submitted until February 7, 2025.
Regulatory Guide 133 reissued
The Regulatory Guide 133 Funds management and custodial services: Holding assets – which provides the latest guidance to asset-holding AFS licensees has been reissued.
RG 133, which replaces the guidance that was issued in June 2022, includes updates on:
- references to relevant legislative instruments – such as legislative instruments imposing financial requirements; and
- good practices for crypto-assets holders, including keeping information security controls and risk management processes.
