ASIC enforcement update Q4 2021

In the final quarter of 2021, the Australian Securities and Investments Commission (ASIC) continued to take action against misconduct.

Investigations into matters arising from the Financial Services Royal Commission were completed, proceedings against Westpac and ANZ were commenced, and multiple directors were disqualified or charged for misconduct.

This article explores the key enforcement actions as outlined in the ASIC quarterly update: October to December 2021.


Finalising Financial Services Royal Commission investigations

The Financial Services Royal Commission exposed a range of conduct which was investigated by ASIC, and a number of proceedings were filed following the investigations. Six of these proceedings were either finalised or being litigated in the last quarter of 2021.

ASIC’s action against ANZ Bank on 9 December 2021 marks the final civil case arising from the Royal Commission.

As at 9 December 2021, ASIC had received a total of 13 referrals from the Royal Commission and issued civil penalties exceeding $79 million. A summary of the current state of referrals is provided below:

Referrals made to ASIC for investigation by the Royal Commission Number
Total referrals 13
Civil cases filed from referrals 6
Criminal cases prosecuted by the Commonwealth Director of Public Prosecutions from referrals 2
Referrals investigated that concluded with no further action 5
Number of matters completed 5
Combined total of civil penalties so far $79M
Number of matters still before the Federal Court or under prosecution by the Commonwealth Director of Public Prosecutions 3


Proceedings against Westpac for system and compliance failures

ASIC commenced six civil penalty proceedings against Westpac in the Federal Court in November 2021 for widespread compliance failures, which spanned multiple Westpac businesses over a number of years and affected thousands of consumers. Westpac will remediate approximately $80 million to affected customers after admitting to the allegations.

The six matters filed against Westpac concern:

  • Fees for no service charged to deceased customers.
  • Duplication of insurance policies.
  • Charging members insurance premiums that included commission payments, despite commissions having been banned under the Future of Financial Advice reforms.
  • Inadequate fee disclosure regarding financial advice provided to customers.
  • Allowing deregistered company accounts to remain open and continuing to charge fees on those accounts.
  • Selling consumer credit card and flexi-loan debt to debt purchasers with incorrect interest rates.

ASIC Deputy Chair Sarah Court said “It is unprecedented for ASIC to file multiple proceedings against the same respondent at the same time.”


Proceedings against ANZ for consumer credit breaches

ASIC commenced proceedings in the Federal Court against ANZ in November 2021 for breaches of the Credit Act arising from referrals through its home loan “introducer program” which involved home loan referrals to ANZ from third party “introducers” from various professions, such as cleaners and real estate representatives.

ASIC alleges that ANZ breached consumer protection credit laws by accepting customer information and documents (some of which were fraudulent) from introducers and other unlicensed individuals.

ASIC Deputy Chair Sarah Court said “ASIC is concerned that as a result of this conduct some loans may have been granted by ANZ based on false information and some consumers may have entered into home loans that were beyond their ability to pay”.


Taking action against misleading advertising

In December 2021, the Federal Court ordered four companies in the Mayfair 101 Group to pay a combined penalty of $30 million after finding the companies engaged in misleading or deceptive conduct and made false or misleading representations when promoting certain Fixed Income Notes on websites and via Google search advertising.

For example, the Court found that the companies indicated that the products were comparable to, and of similar risk profile to, bank term deposits, when they were of significantly higher risk. The companies have now been restrained from using certain words and phrases such as “term deposit” and “certainty” in any future advertising.


Addressing pricing failures in insurance

ASIC launched civil penalty proceedings in the Federal Court against Insurance Australia Limited (IAL) in October 2021 alleging IAL misled some NRMA Insurance customers by stating that customers were eligible for certain discounts on renewal of their home and motor insurance policies and then failing to apply those discounts. At least 596,000 customers were affected, not receiving promised discounts totalling around $60 million.

ASIC also commenced Federal Court civil penalty proceedings in November 2021 against MLC Limited (MLC) alleging unpaid insurance benefits, premiums being charged without notice, and underpaid refunds, resulting from poor systems and controls. ASIC alleges MLC’s conduct led to over $17.5 million in financial harm to over 260,000 customers.


Key takeaways

In the final quarter of 2021, ASIC continued to take action against misconduct, finalising referrals from the Financial Services Royal Commission and commencing proceedings against a range of corporations, including big banks Westpac and ANZ. The range of misconduct enforced included system and compliance failures, consumer credit breaches, misleading advertising, and pricing failures in insurance.

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