ASIC has released the second of its six-monthly enforcement reports, detailing enforcement outcomes achieved by ASIC in the period 1 January 2012 to 30 June 2012.
The report summarises ASIC’s actions against a range of “gatekeepers” in the Australian financial system. The report includes statistics and case studies where gatekeepers such as financial advisers, auditors and directors have been banned, convicted or subject to enforcement action for harming the interests of consumers.
ASIC Deputy Chairman Belinda Gibson said, ‘While ASIC is focused on proactive regulation to minimise the opportunity for misconduct, our enforcement activities remain an important part of our regulatory approach.’
ASIC’s powers include disciplinary action, removal from the industry, monetary fines and in more serious cases, imprisonment.
ASIC has used the report to demonstrate its focus on four key attributes of financial gatekeepers:
- act honestly
- be competent to advise
- be diligent
- properly manage your conflicts of interest.
Case Study – failing to act in consumer’s interests
Financial advisers must have a reasonable basis for advice given. This requires advisers to properly consider the particular circumstances of their clients. This is not only good practice, but is their legal duty under the Corporations Act.
The Corporations Act also requires advisers to give their clients certain information and documentation as part of the advice-giving process.
Inappropriate advice In March 2012, the Administrative Appeals Tribunal (AAT) affirmed ASIC’s decision to ban Don Nguyen from providing financial services for seven years, after an ASIC delegate earlier found he had failed to comply with financial services laws.
In March 2011, ASIC banned Mr Nguyen after an investigation identified breaches including:
- • failing to have a reasonable basis for advice given;
- • failing to provide Statements of Advice (SOAs) or Product Disclosure Statements;
- • failing to provide additional information when recommending the replacement of one financial product with another;
- • making statements that were false or misleading in a material particular; and
- • inducing clients to deal in financial products by making statements or forecasts that were misleading, false or deceptive.
The AAT found that a seven-year banning was appropriate for the protection of the public and for maintaining public confidence in the financial services profession.
Case Study- Bank misleads consumers
The Bank of Western Australia (Bankwest) agreed to make changes to advertising for their Bankwest Breeze MasterCard following concern raisedby ASIC that the advertisements were misleading or likely to mislead.
Bankwest claimed in print advertisements that the Breeze Mastercard was ‘Australia’s cheapest credit card’. The advertisement prominently disclosed that this claim was based on a recent award the Breeze MasterCard received from Money magazine.
ASIC reviewed the award issued by Money magazine and discovered that the Breeze MasterCard was only the cheapest credit card when compared with credit cards offered by other banks. In fact, there were some other credit card issuers (such as credit unions) that offered cheaper credit cards. Bankwest has been proactive in responding to ASIC and is taking a number of steps to address the concerns, including:
- • amending the advertisements; and
- • contacting consumers who have taken out the Breeze MasterCard since the advertisements were published to more accurately explain the
- nature of the claim.
Appendix 1 of Report 299 ASIC enforcement outcomes: January to June 2012 (REP 299) provides statistics about ASICs enforcement activities. These figures demonstrate the wide range of activity targeted by ASIC over the six month period.
The Report shows a slight increase in enforcement activity. While the total number of enforcement outcomes in this report is comparable to that reported in the previous period, the number of pending outcomes is higher. ASIC note that comparisons between the two reports have some limitations as no two enforcement actions are the same.
The first enforcement report, Report 281 ASIC enforcement outcomes: July to December 2011 (REP 281) is also available.
ASIC is authorised by the Corporations Law and other legislation to take whatever action it can take, and is necessary, to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it. This report summarises key enforcement outcomes achieved by ASIC as part of its legislative mandate.