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Volume XIII, Number 28

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ASIC Gears Up Enforcement Activity

1. ASIC takes further action on greenwashing

ASIC has issued three infringement notices to investment manager Vanguard Investments Australia Ltd (Vanguard) in further action against alleged greenwashing.

ASIC was concerned that Product Disclosure Statements for the Vanguard International Shares Select Exclusions Index Funds may have misled the public by overstating an investment screen which claimed to prevent investment in companies involved in significant tobacco sales. 

Vanguard paid $39,960 in compliance with the infringement notices.

This is a timely reminder that greenwashing is not limited to environmental claims but also extends to ethical and moral propositions.

2. ASIC flags concern over managed funds marketing

ASIC has identified concerns with the marketing of five funds and the oversight of this marketing by their responsible entities during ongoing surveillance of marketing of fund performance and risk.

ASIC’s concerns varied across funds. They included that:

  • projected fund performance must be reasonable and include prominent and proximate qualification or warnings;   

  • comparisons of funds with other products must be appropriate and reasonable; and 

  • recommendations should be attributed and testimonials should be appropriate and reasonable.  

Managed funds should ensure that they have robust marketing approval processes to ensure only approved advertising is used and that compliance plans address ongoing supervision of fund marketing.

3. ASIC issues further interim stop orders

ASIC has issued interim stop orders in respect of a further four managed funds. The interim stop orders prevent the funds from offering or distributing their products to retail investors because of deficiencies in their target market determinations (TMDs).

Of the 21 DDO interim stop orders issued by ASIC to date, 12 remain in place. Nine of the interim stop orders have been lifted following actions taken by the entities to address ASIC’s concerns or where the products were withdrawn.

4. Other enforcement

ASIC has taken action against six self-managed superannuation fund (SMSF) auditors for breaches of independence requirements and auditing standards. ASIC disqualified three SMSF auditors from being registered, imposed additional conditions on the registration of one SMSF auditor, and cancelled the registration of two SMSF auditors.

Additionally, as a result of ASIC’s ongoing financial reporting surveillance program, ASIC is calling on company directors to ensure material business risks are adequately disclosed in annual reports to better inform shareholders and prospective investors. Five listed entities have so far provided disclosure of material business risks in response to ASIC concerns.

All of these announcements indicate that financial services entities need to increase the risk rating on regulator action for 2023 and ensure that their internal processes and resources are responsive to the increased risk.

Anabelle Weinberg also contributed to this article.

Copyright 2023 K & L GatesNational Law Review, Volume XII, Number 342
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About this Author

Jim Bulling, KL Gates, financial services lawyer, funds management attorney
Partner

Mr. Bulling's practise focuses on banking and financial services and he acts for a range of entities in the financial services and funds management industry. His clients include Australian and international investment managers, banks, trustees of superannuation funds, wholesale and retail investment trusts, funds management companies and financial planning groups.

His main areas of focus include banking and financial product disclosure issues, financial services compliance issues, financial product distribution issues and superannuation and...

61-3-9640-4338
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