ASIC biannual enforcement report released depicting harsh penalties for transgressors


Australia’s financial markets regulator, ASIC, has today published its biannual enforcement report for the months January to June 2014, a period during which the regulatory authority has achieved 256 enforcement outcomes to protect financial consumers and enhance the fairness and efficiency of the financial markets.

This included criminal as well as civil and administrative (e.g. a banning or disqualification) actions, and negotiated outcomes, including enforceable undertakings.

There were 83 outcomes achieved in the market integrity, corporate governance and financial services areas, and 173 in the small business area.

Current areas of focus for ASIC include taking action against credit providers for misleading consumers and loan fraud, and working with our overseas counterparts to combat cross-border fraud, whereas the last report from the authority confirmed ASIC’s focus on putting an end to insider trading, an activity which the regulator has been successful in doing, partly due to its real-time surveillance system provided by First Derivatives which detects irregularities in the activites of companies and market participants.

“The National Credit Act has been in force since 2010. Industry has had sufficient time to familiarise itself with its obligations under the legislation. Where we see loan fraud or misleading conduct ASIC will take enforcement action. The last six months has seen 24 enforcement outcomes in consumer credit” ASIC Commissioner Greg Tanzer said.

“Other future and current areas of focus include the treatment of confidential information by listed companies, manipulation of financial benchmarks and improving auditor and liquidator standards, as well as the ongoing focus on advertising of financial products and the quality of financial advice.”

For the last six months some of the more notable outcomes included:

The Federal Court of Australia imposed a penalty against Newcrest Mining Limited (Newcrest) for selectively briefing analysts on market-sensitive information ahead of it being disclosed to the market. Newcrest admitted contraventions of its continuous disclosure obligations and the court accepted ASIC and Newcrest’s joint application for the imposition of a civil penalty of $1.2 million.

ASIC accepted an enforceable undertaking from BNP Paribas (BNP), which requires BNP to ensure that its participation in the setting of Australian interest rate benchmarks upholds the integrity and reliability of those benchmarks. BNP also made contributions of $1 million to fund independent financial literacy projects in Australia.

Russell Johnson, a former director of Sonray Capital Markets Pty Ltd (Sonray), was sentenced to six-and-a-half years jail for his role in the collapse of Sonray, which went to the wall owing more than $46 million. This sentence sends the message that company officers are expected to act with integrity and in the interests of the company. Mr. Johnson has appealed the severity of his sentence.

The Federal Court of Australia made declarations and ordered consumer credit provider GE Capital Finance Australia (GE Capital), which trades as GE Money, to pay a penalty of $1.5 million for making false or misleading representations to more than 700,000 of its credit card customers.

Brian Veitch, a formal financial adviser for WealthSure Pty Ltd (WealthSure), was sentenced to six years and two months imprisonment, with a four year non-parole period after pleading guilty to 22 charges brought by ASIC. The charges related to Mr Veitch fraudulently withdrawing money from client accounts, without client consent, and using that money for his own purposes.

Click here to view the full report.

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