In this Funds Update for 17 January 2025:
- Federal Court finds unconscionable conduct re obligations of AFS licensee
- Court ordered EU re oversight of AFS licence representatives
- ASIC action alleging failure to protect customers from scams
Federal Court finds unconscionable conduct re obligations of AFS licensee
On 20 December 2024, the Federal Court of Australia found that a collapsed contracts for difference issuer (Issuer) and two of its former corporate authorised representatives had engaged in, amongst other things, systemic unconscionable conduct.
In what ASIC has referred to as ‘an Australian first’, Justice Wigney held that the general obligations of Australian financial services (AFS) licensees are not limited to financial services provided to customers in Australia. The Court found that Issuer breached its general obligation to ensure that the financial services covered by its AFS licence were provided ‘efficiently, honestly and fairly’, where it offered those services to customers in China, and it knew, or ought reasonably to have known, that those customers were likely be contravening Chinese law, and it failed to take any reasonable steps to warn its customers that it was exposing them to potential civil and criminal liability in China.
The full judgment can be found here and the ASIC media release can be found here.
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Court ordered EU re oversight of AFS licence representatives
On 23 December 2024, ASIC released a media release in relation to having obtained a court ordered enforceable undertaking (EU) in relation to AFS licence compliance of the Australian arm of a South African financial services conglomerate (Licensee). At one point, the Licensee had 42 corporate authorised representatives (CARs) and 71 authorised representatives operating under its AFS licence.
ASIC found that the Licensee had failed to adequately supervise its many authorised representatives and that the Licensee:
- did not have adequate review processes to assess whether its representatives complied with financial services laws;
- had limited risk management systems that did not address the distinct risks for each division of its financial services business;
- had inadequate human resources dedicated to risk management and compliance;
- had an inadequate number of responsible managers with suitable expertise to cover the diversity of the financial services offered by its CARs; and
- failed to implement a training program to assess its authorised representatives’ skills.
The Licencee’s compliance processes will be reviewed by an independent expert under the EU.
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ASIC action alleging failure to protect customers from scams
On 16 December 2024, ASIC filed documents in the Federal Court of Australia alleging that a bank had failed to:
- adequately protect customers that had been scammed out of millions of dollars;
- have adequate controls in place to prevent and detect unauthorised payments; and
- comply with its obligations to investigate customer reports of unauthorised transactions within the specified timeframes required, and to promptly reinstate their banking services in a timely manner.
ASIC is seeking declarations of contraventions, pecuniary penalties, adverse publicity orders, and costs. The originating process can be found here.
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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.