Regulatory Highlights: August 2023

Posted On: 3 November, 2023 Xiaoshu Liu

Welcome to our Regulatory Highlights for August 2023.


Financial Services Highlights


ASIC v eToro: DDO


ASIC initiated proceedings in the Federal Court against eToro Aus Capital Limited AFSL 491139 (eToro), alleging the following:

  • eToro has breached design and distribution obligations (DDO), by
    • Setting its target market way too broad in light of the high-risk and volatile nature of contracts for difference (CFDs); and
    • Adopting screening test was entirely inadequate to assess whether a retail client would be within the target market. The test was difficult to fail. Prospective clients could amend their answers without limitation and would receive indications which answers would result in a failure of the test.
  • eToro has failed to do all things necessary to ensure that the financial services covered by its license were provided efficiently, honestly and fairly.


Deputy Chair’s speech on ASIC’s strong focus on enforcement


Ms Sarah Court, the ASIC Deputy Chair, in her recent speech at the General Counsel Summit, emphasised the regulator’s focus on law enforcement.

  • ASIC’s 2023 enforcement priorities include greenwashing, DDOs breaches, pricing promises in insurance, protecting financially vulnerable consumers from predatory lending practices or high-cost credit, and directors’ duties and governance failures.
  • ASIC’s enforcement approach:
    • Adopting a proactive and strategic stance rather than reactive: matters with a broach reach, likely to have a deterrent effect beyond the particular issue we are prosecuting… must send a strong signal of deterrence to the sector more broadly.
    • Avoiding conservatism in case selection by taking on cases where the outcomes are not necessarily guaranteed.
    • Committing to be an active public communicator with respect to these matters with respect to actions and the reasons behind such decisions.


ASIC v Active Super: Greenwash


ASIC has brought civil penalty proceedings against LGSS Pty Limited (Active Super), alleging misrepresentation and misleading conduct with respect to its environmental, social, and corporate governance (ESG) claims, including:

  • Representations on its website that it has eliminated investments posing too much risk to the environment and the community, such as tobacco manufacturing, oil tar sands and gambling, and that it has excluded Russia.
  • 28 holdings held by Active Super held between 1 February 2021 and 30 June 2023 exposed its members to securities it claimed to restrict, including gambling, tobacco, Russian entities, oil tar sands and coal mining.
  • Representations on its website from May 2022 that it would cease investments in Russian companies while maintaining holdings in Russian securities as of 30 June 2023.
  • The alleged ESG representations were made on Active Super’s website, disclosure documents and social medial accounts, such as LinkedIn, Instagram, and Facebook.


ASIC v CBA & Colonial: Conflicted remuneration appeal dismissed


The Commonwealth Bank of Australia (CBA) and its wholly owned subsidiary Colonial First Statement Investments Limited (Colonial) had arrangements under which Colonial paid CBA for the distribution of Colonial’s Essential Super product to retail clients through CBA’s branch and electronic channels.

These arrangements were included into the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry as a case study and referred to ASIC in the Final Report.

ASIC brought civil penalty proceedings against CBA and Colonial in June 2020, alleging that the defendants contravened the conflicted remunerations provisions under ss 963E and 963K of the Corporations Act. The proceedings were dismissed in September 2022. ASIC appeal against that decision, and the appeal was dismissed by the Federal Court.

Conflicted remuneration means any monetary or non-monetary benefit, given to an AFSL holder that provides financial product advice to retail clients, and due to the nature of the benefit and the circumstances in which the benefit is given could be reasonably be expected to influence the choice of financial product recommenced by the licensee or its representative to the retail clients, or the financial product advice given to the retail clients by the licensee or the representative.


Helio Lending sentenced: false ACL claim


Helio Lending Pty Ltd (Helio) has been sentenced to a non-conviction bond for making a false claim that it held an Australian credit licence (ACL) when it did not: it claimed on the Helio website in August 2019 that it held ACL 391330, whereas it was neither an ACL holder nor the representative of an ACL at the time.

ACL 391330 has been held by Cashflow Investments Pty Ltd since 2011.

Helio offered loans to consumers backed by cryptocurrencies as security during this period.


ASIC’s open letter to lenders: Financial hardship


ASIC issued an open letter to lenders, and also directed the letter directly to the top 30 lenders, calling on them to adequately support customers experiencing financial hardship, setting out the regulator’s expectations, including:

  • Proactive communication with respect to when and how customers can obtain assistance.
  • Genuine considerations of the customers’ circumstances to resolve the matters where possible.
  • Regular communications with the customers during and at the conclusion of the assistance period.


ASIC v Directors of Youpla Group: Breaches of Directors Duties


ASIC has commenced proceedings against Youpla Group directors and officers from September 2017 to November 2018, Ronald Joseph Pattenden (director), Jonathan Glen Law (director), Michael Brendan Wilson (director), Bryn Elwyn Jones (CEO) and Geoffrey Peter Clayton (COO), alleging that they maintained insurance policies with a Vanuatu-based company beneficially owned and controlled by two of the directors, Mr Pattenden and Mr Law, which was not in the interest of the Aboriginal Community Benefit Fund Entities, but rather to benefit Mr Pattenden and Mr Law.

ASIC seeks declarations of contraventions of ss 180, 181 and 182 of the Corporations Act, pecuniary penalty orders and disqualifying orders to prohibit the defendants from managing corporations.


ASIC v Bakken Holdings & Mansfield (director): Debt Management


ASIC has brought actions against Bakken Holdings Pty Ltd, trading as Solve My Debt Now (SMDN), alleging that unconscionable conduct, false and misleading representation to consumers with respect to the quality and benefits of the service, and carrying on financial services businesses without an appropriate licence. The alleged conduct include:

  • SMDN offered to manage its customers’ debts in situations that the latter were experiencing financial hardships and were close to default on their credit facilities, by collecting funds from the customers, on-paying to the creditors and managing negotiations with the creditors to reduce debts.
  • Between April and June 2022, SMDN collected $3.6 million from its customers while only disbursed $1.1 million to creditors, leaving 64% of customers without any repayments made on their behalf.
  • The fees that SMDN charged, in many cases, were higher than the debt reduced, leaving the consumers worse off. 5.3% of the customers achieved a debt reduction net off fees.

The actions include those against Dr Merrilyn Mansfield, the director and co-owner of the company, for her involvement in some of the company’s misrepresentations with respect to promises to manage and reduce consumer debt.