Unpacking the corporate regulator’s FY24 enforcement action

ASIC has released its annual report for the 2023–24 financial year, as the number of formal investigations it launched rose higher.

In its annual report for FY2023–24, the regulatory body commenced 168 formal investigations over the 12-month period. This was up by 25 per cent compared to 134 investigations in the previous financial year, ASIC stated.

These investigations led to 18 criminal convictions, six people being imprisoned, and a total of
$936,000 in fines ordered by the courts. It also saw an additional 23 individuals charged by the Commonwealth Director of Public Prosecutions (CDPP) for criminal offences.

In terms of civil enforcement, 32 civil proceedings were commenced involving actions against 69 defendants. More than $90 million in civil penalties were imposed by the courts, the annual report stated.

Moreover, 64 individuals or companies were removed or restricted from providing financial services.

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“Over the past year, ASIC has continued to deliver on its vision for a fair, strong and efficient financial system for all Australians,” ASIC chair Joe Longo said.

“We have used the full suite of our regulatory tools to promote compliance and accountability, and enforce the law. We achieved a number of regulatory firsts, such as the first court-imposed penalty for greenwashing, the first stop order on a life insurance product, and the first infringement notice issued to a market operator, the ASX.”

An example that ASIC highlighted in the investment management space was the enforcement action it took against current and former directors of Linchpin Capital Group Limited and Endeavour Securities. This resulted in an order to pay $390,000 in penalties for breaching their duties as officers of a responsible entity of a registered managed investment scheme.

The case was a reminder to directors of entities which operate managed investment funds that they must act in the best interests of members, the annual report stated.

Alleged misconduct

Moreover, ASIC responded to 11,678 reports of alleged misconduct in FY24, a 43 per cent rise compared to 8,149 in FY23. Approximately 23 per cent of this related to those operating an unregistered managed investment scheme or providing financial services without an AFSL.

Misconduct action included proceedings against Select AFSL which resulted in a $13.6 million penalty. The Federal Court has imposed a combined $13.5 million penalty on Select AFSL, BlueInc Services, and Insurance Marketing Services for engaging in unconscionable conduct.

ASIC’s case concerned the mis-selling of life, funeral, and accidental injury insurance over the phone to consumers, including First Nations consumers from remote communities, where English is not their first language.  

“ASIC receives a large number of reports of alleged misconduct from a range of sources. However, ASIC is not a complaint resolution body. Its purpose is not to resolve individual consumer disputes and complaints,” it stated.

“Like all regulators, we can only progress a finite number of actions. ASIC’s purpose is to gather information from many sources, across the range of entities that we regulate, and use it to make strategic decisions about when to intervene and how to do so.”

The Financial Services and Credit Panel (FSCP) also has powers to react and respond to misconduct by financial advisers, and this body made 18 decisions during the period.

Reportable situations

ASIC received 25,455 reportable situation form lodgements from licensees, and 156 from licensees reporting about another licensee.

This was down 10 per cent from the 28,493 reportable situation form lodgements from licensees, and 160 reportable situation form lodgements from licensees reporting another licensee in FY23.

“This year, we have closely monitored compliance with the reportable situations regime and continued to work with stakeholders to improve the consistency and quality of reporting practices. We expect to report on compliance in late 2024.”

Some 269 AFSLs were cancelled or suspended during FY24 – 29 were cancelled by ASIC, 212 were cancelled at the firm’s request, and 28 were suspended. The figure was an 18 per cent decrease from 2022–23.

Moreover, it received 1,531 licensing and registration applications, and finalised 874 new and variation AFSL applications. This was a 2 per cent increase in applications, but a 17 per cent decrease in finalisations on the previous year.