Australia's current financial services regulatory & compliance landscape is changing rapidly - Clyde & Co's weekly Regulatory Roundup will ensure you are up to date with the most important changes. In each edition, we will set out key developments from the past week for you to consider.
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1. Conflicted remuneration: ASIC has succeeded in its Federal Court case that R M Capital Pty Ltd (RM Capital) failed to take reasonable steps to ensure that its authorised representative, the SMSF Club Pty Ltd (SMSF Club), did not accept conflicted remuneration. Between December 2013 and July 2016, Positive RealEstate paid SMSF Club each time a client bought a property to them using their SMSF via various referral agreements. Pursuant to s963F of the Corporations Act 2001 (Cth), an Australian financial services licensee must take reasonable steps to ensure that its representatives do not accept conflicted remuneration; the court found that both RM Capital and SMSF Club breached these obligations.
2. Celebrity scams: In 2023, Australians reported losing more than $8 million to online investment trading platform scams, with 400 reports made to Scamwatch. Scamwatch is now warning consumers to beware of fake news articles and deepfake videos of public figures that endorse online investment trading platform scams. One of the key things that caught us about this update is the changed tonality of ASIC’s heading “It’s a scam! Celebrities are not getting rich from online investment trading platforms” - the levity, from ASIC, which is attention-grabbing is something that the UK FCA has been doing for some time. ASIC watches the FCA closely, so perhaps the approach will stick (we hope).
3. Misrepresentation: The Full Court has upheld ASIC’s appeal in its case against ACBF Funeral Plans Pty Ltd (ACBF) and Youpla Group Pty Ltd (Youpla). In short, ASIC's allegation that was that ACBF misrepresented to Aboriginal consumers that it was Aboriginal owned or managed which was not the case. The Full Court’s decision part overturns an earlier decision that found that while ACBF had represented that it was Aboriginal owned and managed, ASIC had failed to prove that this representation was false. A strong action by ASIC, and hard-fought across the judicial tiers, which will provide the case law to underpin many more cases of misleading & deceptive action by the conduct regulator...
4. AML/CTF: The global Financial Action Task Force has released two key reports: 1) High-Risk Jurisdictions subject to a Call for Action – February 2024: the call for action i.e. nominating “high risk” jurisdictions in relation to the North Korea, Iran and Myanmar remains in effect; and, 2) Jurisdictions under Increase Monitoring – February 2024: which lists jurisdictions that have strategic deficiencies in their AML/CTF regimes and are actively working with the FATF. It is worth noting in this regard, that the UAE - after working with FATF - has been removed from the "grey list" after its introduction in 2022. Giving greater confidence in the financial system, it is likely to mean increased foreign capital inflows and reduced compliance costs and costs of borrowing.
5. Global perspective: The UK FCA has announced its intention to overhaul how it conducts enforcement investigations with a view to increasing transparency, strengthening the deterrent effect and disseminating best practice within the market. At the moment, very little information is published about ongoing investigations before definitive action is taken, or which do not lead to action. A key change under consultation CP24-2 is whether the FCA will proactively announce when an enforcement investigation is opened and then provide updates on the status of investigations as appropriate to allow other firms to keep track of issues under the spotlight. Rachel Cropper-Mawer, a Partner in the Regulatory & Investigations team in our London practice, comments, “The name and shame approach of the Serious Fraud Office (UK) in respect to entities and people under investigation has a serious negative impact…exacerbated by the very slow investigation process at the SFO”. As the FCA has also committed to speeding up investigations with a more streamlined caseload of investigations, we can expect ASIC to be watching closely to see how the market reacts to these changes and the consequential impact going forward.
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‘Scammers are creating fake news articles and deepfake videos to convince people that celebrities and well-known public figures are making huge sums of money using online investment trading platforms, when in fact it is a scam.’ (ACCC Deputy Chair Catriona Lowe)
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