ASIC’s Enforcement Findings of the Financial Services and Credit Industries

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Each year ASIC focuses on a small number of enforcement issues to better regulate the financial services and credit industries. ASIC’s Corporate Plan is the foundation for the enforcement areas of focus.

Between July – December 2016 (the period), ASIC’s enforcement focus areas were:

  1. Misalignment of retail product design and distribution with consumer understanding
  2. Cross-border businesses, services and transactions
  3. Gatekeeper culture and conduct in financial services and credit
  4. Gatekeeper culture and conduct in markets
  5. Digital disruption
  6. Cyber threats.

Misalignment of retail product design and distribution with consumer understanding

ASIC continues to focus on the provision of financial products to retail clients and the way such products are marketed to retail clients. In particular, ASIC has been focusing on the mis-alignment of a retail client’s understanding of the financial product as well as the design, disclosure and marketing of the financial products. ASIC will continue to monitor these practices and will take action against industry practices that jeopardise a client’s financial outcomes.

Cross-border businesses, services and transactions

With the increasing popularity of cross-border businesses, services and transactions, ASIC has focused on the interconnectedness of markets globally. ASIC is concerned that such issues will dissolve market integrity and client trust and confidence in the Industry globally.

Gatekeeper culture and conduct in financial services and credit

The provision of poor financial advice to retail clients is a topic which has featured time and time again in ASIC’s media releases over the past few years. Throughout the period ASIC brought enforcement action against industry participants who continued to provide inappropriate advice, engaged in irresponsible lending as well as mis-selling to retail clients. ASIC continued to focus on these non-compliant operations of the industry in an attempt to increase trust and confidence in the industry.

Throughout the period, ASIC issued 54 infringement notices for breaching consumer credit provisions. These infringement notices required payment of penalties totalling $1.8m.

Gatekeeper culture and conduct in markets

ASIC continued its focus on culture and incentives in the industry which promoted poor conduct. Poor conduct throughout the industry can undermine the good governance and risk management practices which ASIC believes are imperative to maintaining market integrity.

ASIC accepted an enforceable undertaking for the National Australia Bank and the Commonwealth Bank of Australia in relation to their failure to ensure their systems and controls were adequate in preventing, detecting and responding to inappropriate conduct.

Digital disruption

The rapid rate of technological development and the way such change impacts the industry was another enforcement focus for ASIC. ASIC aims to manage the risks which are associated from structural change and disruption arising from technological development. This is particularly prevalent in the emerging fintech space where the industry runs the risk that newly developed products and services are poorly designed and implemented, undermine market integrity, client trust and confidence in the medium to long term.

Cyber threats

ASIC continued and will continue to focus on alleviating the risks associated with cyber threats. ASIC is focused on ensuring the increasing incidence, complexity and scope of cyber threats does not undermine the Industry. Most importantly, ASIC is concerned that such cyber threats will destabilise the Industry and decrease client trust and confidence.

Earlier this year, ASIC released their enforcement report for the July – December 2016 period. The Report 513 entitled “ASIC enforcement outcomes: July to December 2016” (Report 513) detailed the enforcement results for the relevant period as outlined above.

This article follows on from our blog entitled ‘Financial Services Sector to Remain in the Spotlight Throughout 2017‘ where we discussed ASIC’s enforcement objectives for the January – June 2017 period.

About The Author

Sarah Murray

Sarah works with the Compliance Team with a particular focus on compliance and legal services. Sarah works with the Legal Team providing ongoing assistance in drafting and reviewing documentation as well as legal research. Sarah assists clients with AFSL and ACL applications, variations and also assists in the implementation of compliance reviews. She provides ongoing compliance support in the form of compliance program implementation and reviews.

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