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Financial Services Thinking – Issue 14

This edition of Financial Services Thinking highlights the latest news from the corporate regulators plus important industry developments, including a timely reminder about continuous disclosure obligations; findings from consumer research about the general advice warning; a new requirement for some providers of debt management services to hold a credit licence; and a warning that responsible entities and management must not only implement a compliance plan, but also foster a corporate culture of compliance.

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ASIC's prompt response to continuous disclosure obligations

ASIC has provided a timely reminder that listed entities are required to immediately disclose material information in certain circumstances pursuant to the Corporations Act and Listing Rules.

Regional Express Holdings (REX) was issued with an infringement notice and $66,000 fine after ASIC found REX had breached its continuous disclosure obligations.

REX attended an interview with the Australian Financial Review (AFR). Prior to the interview, REX considered what could be discussed about its proposal to expand into domestic operations. Following the interview, the AFR released an article which alerted the ASX to REX's proposed domestic operations.

REX was placed in a trading halt and soon after disclosed to the ASX it was considering the feasibility of commencing domestic operations.

A listed disclosing entity must, unless an exception applies, immediately notify the ASX of information that:

  • is not generally available, and
  • a reasonable person would expect to have a material effect on the price or value of the securities of the entity.

Information that loses confidentiality (such as when it is released to the public in a news article) must be immediately disclosed to ASX.

If you need to understand more about your continuous disclosure obligations our Funds Management lawyers can help.

Changing the 'general advice' label unlikely to prevent confusion

Findings from consumer research indicate changing the 'general advice' label alone is unlikely to prevent confusion about the nature of general advice. The findings concluded:

  • there is no evidence a change in the label will change consumers' understanding of general advice
  • no alternative labels to 'general advice' are a significantly better fit with the description of general advice
  • the circumstances where general advice is received could significantly increase the risk of consumer misunderstanding of the nature of the advice
  • consumers feel it is important to seek further information regardless of what label is used to convey general advice
  • there are other ways advice providers can clarify what is meant by 'general advice'.

Following on from the recent Westpac v ASIC High Court decision, it is clear simply providing a general advice warning once at the beginning of a conversation may not be enough for the recipient to understand they are receiving general advice.

Licensees should revisit ASIC's Regulatory Guide 244 Giving information, general advice and scaled advice and ensure they understand what type of advice they are giving in the circumstances. You can contact a member of our Funds Management team for further guidance, and read our latest article here.

Debt management services to require credit licence to operate

Under the National Consumer Credit Protection Amendment (Debt Management Services) Regulations, certain debt management services are considered a 'credit activity' for the purposes of the National Consumer Credit Protection Act.

From 1 July 2021, some providers of debt management services must hold a credit licence authorising them to provide debt management services. Those in the business of offering debt management services should be mindful of this deadline. Contact our Funds Management lawyers who can help with your credit licensing queries.

Scam alert: 'Fake news' warning

ASIC has released a warning to consumers about the increase in illegitimate advertisements and websites promoting crypto-assets and contracts for difference trading. These fake articles appear realistic and are misleadingly using ASIC logos or stating the investment is 'approved' by ASIC. Scammers are sharing links via social media and promising an investment with unrealistically high returns.

Scam alert: Self-Managed super fund rollover

ASIC has released a warning to Australians about cold callers or unsolicited emails from alleged 'financial advisers' recommending people transfer their super to a new self-managed super fund. Super balances are then transferred to bank accounts controlled by scammers.


Proposed Financial Institutions Supervisory Levies for 2021

Treasury is currently seeking consultation on the proposed financial institutions supervisory levies for 2021-2022. There is a 17.8 percent increase from the 2020-2021 budget which is largely attributable to the additional funding to APRA to boost its capacity to respond to risks within the financial system. Submissions close on 14 June 2021.

Reducing red tape for superannuation funds

Treasury is seeking consultation on the proposed changes for superannuation trustees, including removing the requirement to obtain an actuarial certificate when calculating exempt current pension income where all members of the fund are fully in retirement phase for all of the income year.

Submissions close on 18 June 2021.


Consultation response

ASX released a response to its consultation paper on proposed amendments to the ASX Clear Operating Rules and Procedures and ASX Clear Operating Rules Guidance Note 12 Trust and Client Segregated Accounts. Following the feedback received, ASX intends to remove the proposed changes to the nominated time and audit requirement.

Cases and Legislation

Warning for responsible entities and management

A recent case highlights that responsible entities (REs) and management must ensure they not only satisfy their statutory obligations to implement a compliance plan, but also foster a corporate culture of compliance and execute compliance programs and corrective measures in the event a contravention occurs.

In ASIC v Theta Asset Management Limited, the Federal Court said the first defendant, the RE of a registered scheme, contravened the Corporations Act by:

  • issuing several defective PDSs containing a misleading and deceptive statement
  • failing to comply with the scheme compliance plan.

The Court said the second defendant, the managing director of the RE, contravened the Corporations Act by:

  • authorising the issue of defective PDSs
  • failing to take reasonable steps to ensure the RE complied with its obligations under the Corporations Act.

When assessing a pecuniary penalty, the Court considered the following factors:

  • the nature and extent of the contravening conduct
  • the circumstances in which the conduct took place
  • the amount of loss or damage caused
  • whether the contravention arose out of the conduct of senior management or at a lower level
  • whether the company has a corporate culture conducive to compliance with the Corporations Act, such as compliance programs and corrective measures in response to an acknowledged contravention
  • the deliberateness of the contravention and the period over which it extended
  • whether the company has shown a disposition to cooperate with the authorities responsible for enforcing the Corporations Act in relation to the contravention.


Emma Donaghue

Emma Donaghue


Elliott Stumm

Elliott Stumm


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