In this Funds Update for 25 August 2023:
- NSW bill introduced to address trustee benefits and section 249E Crimes Act
- ASIC proposes to extend design and distribution obligations instrument
- ASIC consults on extending its short-term credit and continuing credit contracts product intervention orders
- ASIC commences a greenwashing case against a superannuation fund
- Full Federal Court dismisses ASIC appeal regarding conflicted remuneration
NSW bill introduced to address trustee benefits and section 249E Crimes Act
On 22 August 2023, NSW Parliament introduced the Crimes Amendment (Corrupt Benefits for Trustees) Bill 2023 (Bill) to address concerns with the breadth of the application of section 249E of the Crimes Act 1900 (NSW) (Crimes Act) in the context of a trustee receiving a benefit in connection with their retirement, as illustrated in recent Court decisions such as Application of MLC Investments Limited [2022] NSWSC 1541.
Section 249E of the Crimes Act makes it an offence for:
- a person to offer or give a benefit to a person entrusted with property (such as a trustee); or
- a person entrusted with property to receive or solicit a benefit,
without the consent of each person beneficially entitled to the property (i.e. the unitholders of the trust) or the Supreme Court.
The Bill seeks to:
- limit the offence to the offer or receipt of benefits that are 'corrupt', which would include dishonestly offering, giving, receiving or soliciting the benefit; and
- make the amendments with retrospective effect, to apply to conduct that occurred before the commencement of the amendments.
The Bill had its second reading on 22 August 2023 and is now awaiting debate.
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ASIC proposes to extend design and distribution obligations instrument
On 15 August 2023, ASIC announced that it is consulting on a proposal to extend the operation of the ASIC Corporations (Design and Distribution Obligations Interim Measures) 2021/784 instrument (Instrument) for a further five years.
The Instrument, which was initially made for a period of two years, granted relief from (amongst other things) the nil reporting obligation in relation to complaints.
ASIC is proposing to make the following changes to the Instrument:
- extending the expiry of the Instrument until 5 October 2028; and
- removing an exemption for cashless welfare arrangements that is no longer necessary, following the making of the Corporations Amendment (Design and Distribution Obligations – Income Management Regimes) Regulations 2023.
Submissions on the proposal should be sent to ASIC by 25 August 2023.
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ASIC consults on extending its short-term credit and continuing credit contracts product intervention orders
On 10 August 2023, ASIC announced that it has released Consultation Paper 371 Product intervention orders: Short term credit facilities and continuing credit contracts (CP 371) seeking feedback on proposals to extend two product intervention orders so that they will remain in force until they are revoked or they sunset on 1 October 2032 (rather than expiring on 15 January 2024). These orders came into effect on 15 July 2022 and prohibit the provision of short-term credit and continuing credit contracts to retail clients where the fees exceed the cost caps imposed by the National Credit Code.
ASIC invites feedback on CP 371 until 31 August 2023.
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ASIC commences a greenwashing case against a superannuation fund
On 11 August 2023, ASIC announced that it has commenced civil penalty proceedings in the Federal Court (Court) against the trustee of a superannuation fund (Trustee), alleging misleading conduct and misrepresentations to the market.
The Trustee is alleged to have made representations on its website that it:
- had eliminated investments that posed too great a risk to the environment and the community; and
- had added Russia to its list of excluded countries, following the invasion of Ukraine.
ASIC alleges that from 1 February 2021 to 30 June 2023, the Trustee held 28 holdings, either directly or indirectly, which exposed members to securities the Trustee claimed to restrict.
ASIC alleges misrepresentations were made on the Trustee’s website, disclosure documents and social media platforms. ASIC is seeking declarations, pecuniary penalties, adverse publicity orders and an injunction against the Trustee from the Court.
This is the third greenwashing civil penalty proceeding commenced by ASIC in 2023, after the corporate regulator announced on 28 February and 25 July that it had taken action against two others funds.
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Full Federal Court dismisses ASIC appeal regarding conflicted remuneration
On 17 August 2023, ASIC reported that the Full Federal Court had dismissed ASIC’s appeal against an earlier Federal Court decision to dismiss ASIC’s case against an Australian deposit-taking institution (ADI) and its subsidiary for allegedly breaching conflicted remuneration laws. The Full Federal Court judgment can be found here.
In dismissing ASIC’s appeal, Justice O’Bryan held that “ASIC failed to discharge its burden of proving that [the ADI’s] staff made statements to retail clients that satisfied the definition of financial product advice”.
ASIC has 28 days to lodge any application for special leave to appeal to the High Court.
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Disclaimer
The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.