ASX Listed Company Pays for Greenwashing Infringements
On 25 June 2024, Fertoz Limited paid $37,560 to comply with two infringement notices issued by ASIC for alleged false or misleading statements about its Philippines Reforestation Project. ASIC claims Fertoz’s statements about securing funding and starting planting in 2023 were misleading, as funding discussions had ended and no new agreements were in place.
ASIC Deputy Chair Sarah Court emphasised the importance of accurate sustainability claims.
ASIC Reminder on New Notification Obligations for AFS Licensees
On 26 June 2024, ASIC issued a reminder to all AFS licensees about the new notification obligations starting 1 July 2024. Licensees must notify ASIC within 30 business days upon receiving a written declaration from financial advisers eligible for the experienced provider pathway. Declarations received before 1 July must also be reported within 30 business days from this date. Notifications are to be lodged through ASIC Connect using the appoint and maintain functions. Failure to comply may result in criminal or civil penalties. For detailed guidance, refer to ASIC’s Information Sheet 281.
ASIC Calls on Market Intermediaries to Strengthen Supervision of Business Communications
On 26 June 2024, ASIC called on market intermediaries to enhance their supervisory arrangements for business communications to better prevent and detect misconduct. ASIC’s Information Sheet 283 addresses risks from unmonitored and encrypted communication channels, advising intermediaries to implement robust supervisory practices. ASIC Commissioner Simone Constant emphasised the need for strong controls to protect market integrity and investor confidence. Market intermediaries must periodically review their supervision systems to ensure they are effective and suitable for their business complexity.
Federal Court Freezes Assets of United Global Capital and Global Capital Property Fund
On 26 June 2024, ASIC announced that it has secured interim orders from the Federal Court to freeze the assets of financial advice licensee United Global Capital Pty Ltd (UGC) and the related property investment company Global Capital Property Fund Limited (GCPF). These measures aim to protect investor funds during an ongoing investigation.
On 20 June 2024, Justice O’Callaghan ordered that UGC and GCPF be restrained from:
- Removing property from Australia
- Selling, charging, mortgaging, or disposing of property
- Incurring new liabilities
- Withdrawing, transferring, or dealing with money in bank accounts or with financial institutions, subject to limited exceptions
At a hearing on 25 June 2024, the Court extended the compliance period for some disclosure orders and scheduled a further hearing for 11 July 2024.
UGC, based in Melbourne, has held AFS licence no. 496179 since 18 August 2017. GCPF has been an authorised representative of UGC since 25 March 2020.
ASIC Approves Enhanced Banking Code of Practice
On 27 June 2024, ASIC approved a new version of the Australian Banking Association’s (ABA) Banking Code of Practice, which will commence on 28 February 2025. Following extensive consultation, the revised Code strengthens protections for consumers and small businesses.
Key enhancements include:
- Expanding the definition of a small business from $3 million to $5 million in aggregate borrowings, benefiting an additional 10,000 businesses.
- Improved inclusivity and accessibility, including interpreter services.
- New provisions for deceased estates.
- Broadening the definition of financial difficulty.
- Enhanced protections for loan guarantors.
ASIC Chair Joe Longo emphasised that while the new Code includes significant improvements, continuous focus on customer outcomes is essential. Upcoming ASIC reports will further address banking for Indigenous Australians, credit card offerings, and scam detection and response.
The February 2025 Code will soon be available on the ABA’s website. This update follows an independent review and public consultation, ensuring robust stakeholder engagement and transparent development.
Court Appoints Independent Party to Verify Payments from the Shield Master Fund
On 27 June 2024, the Federal Court appointed Jason Tracy and Lucica Palaghia of Deloitte to oversee the bank accounts of the Shield Master Fund (Shield). The court orders from 26 June 2024 prevent Keystone Asset Management Ltd (Keystone), the responsible entity for Shield, from dealing with Shield’s assets without Deloitte’s approval for certain payments.
ASIC sought these measures to protect investor funds amid ongoing concerns about the management of Shield, including:
- Keystone’s failure to lodge audited FY2023 financial statements for Keystone and Shield.
- Significant funds directed to a fund that made loans to companies associated with Paul Chiodo, a former director of Keystone, for property developments.
- The need for independent oversight of payments.
Mr. Tracy and Ms. Palaghia will assess payment appropriateness and report on Shield’s financial position by 23 July 2024. The case will return to court in August.
Mr. Chiodo has undertaken to notify ASIC 14 days prior to any international travel and comply with ASIC notices during travel. Previous travel restraint orders from 18 June 2024 have been vacated.
ASIC Bans Guildford Funds Management Director for Four Years
On 28 June 2024, ASIC banned Dr. Robert Payne, managing director of the Guildford group of companies, from providing financial services, performing any function in a financial services business, and controlling an entity that carries on a financial services business for four years. This decision follows significant and systemic failures in oversight and compliance at Guildfords Funds Management Pty Ltd (Guildfords).
Key Findings:
- Lack of Competence and Diligence: Dr. Payne failed to oversee former authorised representative Mitchell Atkins and corporate authorised representatives, Magnolia Asset Management Pty Ltd (MAM) and Magnolia Investment Management Pty Ltd (MIM), leading to unauthorised derivatives trading and investor losses.
- Failure to Comply: Dr. Payne did not understand or address the extent of Guildfords’ compliance failures and sought to minimise his responsibility.
- Involvement in Contraventions: Dr. Payne was involved in Guildfords’ breaches of financial services laws.
Additionally, ASIC has cancelled Guildfords’ Australian Financial Services (AFS) licence due to these failures. Dr. Payne’s banning is part of ASIC’s efforts to uphold high standards of judgment, diligence, and professionalism in the financial services industry. He has the right to apply to the Administrative Appeals Tribunal for a review of ASIC’s decision.
ASIC also announced the cancellation of the Australian financial services (AFS) licence of Guildfords Funds Management Pty Ltd (Guildfords) following significant and systemic failures in oversight and compliance.
Key Issues Identified:
- Lack of Oversight: Guildfords failed to supervise former authorised representative Mitchell Atkins and corporate authorised representatives, Magnolia Asset Management Pty Ltd (MAM) and Magnolia Investment Management Pty Ltd (MIM).
- Unauthorised Trading: The firm engaged in high-risk, unauthorised derivatives trading, specifically contracts for difference (CFDs), leading to investor losses.
- Compliance Failures: Guildfords did not comply with financial services laws, including failing to report breaches and maintain necessary compliance measures.
- Conflict of Interest: Dr. Payne had conflicts of interest due to his roles within Guildfords and MAM.
To minimise the impact on current clients, the licence cancellation allows Guildfords to continue providing necessary services until 30 December 2024, excluding issuing new interests in the Schemes.
ASIC Suspends Airrails AFS Licence
On 28 June 2024, ASIC announced the suspension of Airrails Pty Ltd’s (Airrails) Australian financial services (AFS) licence for three months, effective from 21 June 2024 to 21 September 2024. This suspension prohibits Airrails from providing financial services during this period.
Following an administrative hearing, ASIC found that Airrails failed to lodge its annual financial statement, auditor’s report, and audit opinion for the financial year ending 30 June 2023 within the prescribed timeframe, violating its AFS licence conditions.
Under the Corporations Act, ASIC may suspend or cancel an AFS licence if a licensee fails to meet its general obligations, including compliance with financial services laws such as the timely lodging of financial statements.
Airrails, holding AFS licence number 526878, was authorised to provide general advice and deal in basic deposit products and non-cash payment products to retail and wholesale clients.
The suspension follows ASIC’s successful application to wind up Prospero Markets Pty Ltd (Prospero) on just and equitable grounds, appointing liquidators to the company. This action stemmed from ASIC’s investigation into Prospero and Airrails after the Australian Federal Police’s Operation Avarus-Nightwolf, which resulted in money-laundering charges against former officers of Prospero and a current officer of Airrails.
Airrails has the right to apply to the Administrative Appeals Tribunal for a review of ASIC’s decision.
Defunct Payday Lender Penalised $16 Million Over Prohibited Fees and Deficient Systems
On 28 June 2024, Ferratum Australia Pty Ltd (in liquidation) was ordered by the Federal Court to pay $16 million in penalties for multiple contraventions of the National Consumer Protection Act and the National Credit Code.
Key Findings:
- Prohibited Fees: Ferratum imposed and charged prohibited fees to its customers.
- Incorrect Payout Calculations: In two-thirds of the reviewed cases, Ferratum incorrectly calculated payout amounts, including one instance where a customer was overcharged by more than 30% of their total loan amount.
- Deficient Systems: Ferratum failed to maintain adequate systems to ensure correct charges for early payouts on small amount credit contracts.
ASIC Deputy Chair Sarah Court remarked on the egregious nature of Ferratum’s conduct, which significantly impacted vulnerable customers by charging illegal fees. Justice Kennett described the breaches as “systemic and deliberate (or at least reckless)” and noted the significant financial impact on Ferratum’s customers.
The penalties take into account the control exerted by Ferratum’s parent company, Multitude SE, a Finland-based multinational. Justice Kennett stressed the need for deterrence against Multitude SE adopting similar non-compliant practices if it re-enters the Australian market.
