In this Funds Update for 31 May 2024:
- ASIC issues DDO stop orders re reasonable steps obligations
- ASIC announces launch of new professional registers search
- ASIC suspends RE’s AFSL for audit/financial reporting failures
ASIC issues DDO stop orders re reasonable steps obligations
On 23 May 2024, ASIC announced that it had made two interim stop orders against a contracts for difference and margin foreign exchange issuer, for failing to take reasonable steps likely to result in its retail product distribution conduct being consistent with its target market determinations (TMDs).
ASIC considered that the issuer had relied upon an inadequate retail investor questionnaire for compliance with its reasonable steps obligations, and lacked other controls in its onboarding process to assess whether investors were likely to be in the target market.
ASIC considered the issuer’s use of poorly designed and inadequate questionnaires:
- did not adequately enquire into the prospective investors’ financial situation, risk tolerance, investment objectives and technical understanding of the product to enable the issuer to adequately assess whether the prospective investors are likely to be in the target market;
- had significant design flaws, including warning messages prompting investors to review their answers, allowing them to submit alternative answers so they would meet the target market;
- gave investors two attempts to pass the questionnaire every 24 hours for an indefinite period and prompted investors with a tick-box acknowledgement that they had certain attributes.
As of 23 May 2024, ASIC has issued a total of 86 interim stop orders and one final stop order under the DDO regime.
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ASIC announces launch of new professional registers search
On 28 May 2024, ASIC announced that it will be launching a new professional registers search (PRS) in late June 2024.
The new PRS will allow users to search all of the professional registers databases with just one search, rather than the multiple searches, and searches of the following registers:
- Australian financial services (AFS) licensees;
- AFS licensees’ authorised representatives;
- credit licensees and credit representatives; and
- registered managed investment schemes.
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ASIC suspends RE’s AFSL for audit/financial reporting failures
On 29 May 2024, ASIC announced that it had suspended the AFS licence of a responsible entity (RE) of six registered management investment schemes (MIS). ASIC found that the RE had failed to meet audit and financial reporting lodgement requirements for itself and the MISs, for the 2022 and 2023 financial years.
ASIC recently announced a focus area of 30 June 2024 financial reporting and audit surveillance.
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