Well what a week it has been, angry shareholders, ASIC lawyers working overtime as the litigation funders and class action lawyers continue to feast on corporate carcasses.

Shareholders voice their anger at excessive executive remuneration

AGM season is well underway and the shareholders of EDI Downer and Qantas let their respective boards know in no uncertain terms what they thought about their executive remuneration strategies.    In the US, the Obama administration has taken steps to slash executive salaries by up to 90%, in companies such as Citigroup, AIG and GM which were the beneficiaries of government bail-outs.

ASIC shakes off its corporate plod reputation

ASIC lawyers have been very busy.    First it issued proceedings in the NSW Supreme Court against the managers of the boutique Astarra Strategic Fund as well as obtaining an urgent interim order forcing the responsible entity of the fund to remove its PDS from its website.    Not much information flowing at this stage with ASIC being barred by the Judge from commenting on the case.

Then, in a move several commentators described as “terrifying for directors”, ASIC launched legal action against the entire 2007 board of Centro claiming that their accounts failed to classify more than $2 billion of debt.  What’s $2 billion amongst friends?

With these types of strikes ASIC might even start to shake is reputation as “the corporate plod”.

Class action lawyers feast on corporate carcasses of Centro and ABC Learning

We often say to clients that “regulators are the least of your problems” and wasn’t this proved to be the case this week with the administrators of ABC Learning, backed by ligitation funder IMF, lining up former directors of ABC Learning, its auditor Pitcher Partners, as well as Com Bank (alleging a $500,000,000 preference payment).

On the same day Maurice Blackburn, class action lawyers acting for aggrieved Centro shareholders, announced that they are considering a direct claim against auditor’s PWC.  PWC are already the subject of a counter claim by Centro.

Also during during the week the liquidators of Babcock & Brown took further steps towards investigating a possible breach of directors’ duties and insolvent trading claims arising from its collapse, as well as a $40 million loan to broking firm Tricom.

Fair Work Ombudsman keeps up the heat

No one can accuse the Fair Work Ombudsman of taking it easy.  The FWO’s enforcement activities seem to be heating up in the lead up the transition to the Modern Awards on 1 January 2010.  During the week it announced that it had successfully claimed $113,000 back-pay for 32 Casino workers accidentally underpaid since 2006.  This followed its announcement that a Ballarat company and director were fined $105,000 for underpaying a young apprentice.

This followed news that unfair dismissal claims had nearly doubled in first 10 weeks of the remedy becoming available to small business employees on 1 July 2009.

National Health & Safety Laws Draft Exposure Released

Finally, if businesses didn’t already have enough on their plates a further draft of the new national health safety laws was released for comment. The new laws are due to commence on 1 Jan 2012.

Digital advice: ASIC provides guidance on AFSL compliance

One of the biggest innovations in recent years within the Financial Services industry is the introduction of digital or ‘Robo’ advice – that is, the provision of automated financial product advice using algorithms and technology without the direct involvement of a human adviser.

In response to queries from market participants, ASIC has released RG 255: providing digital financial product advice to retail clients (RG255).

Unlike the fintech industry it is seeking to assist, ASIC’s latest Regulatory Guide is far from cutting edge. RG 255 is really just a summary of existing ASIC Regulatory Guides designed to group some of the issues that businesses providing digital advice to retail clients need to consider – from initial AFS licence conditions through to ensuring ongoing compliance.

There are a few key takeaways from RG 255 that the industry will find useful. In particular:

  • How ASIC will consider an AFS licence application for digital advice and criteria it will look for;
  • How the ‘organisational competence’ obligation applies to digital advice licensees;
  • Factors to consider when outsourcing the technology component;
  • Risks associated with cyber security, and methods to maintain your cyber integrity;
  • Guidance on stress testing of algorithms; and
  • How AFS licensees could meet the best interest duty when providing scaled advice.

Far from being prescriptive, ASIC has taken a consultative approach in developing its guidance in RG 255 and recognises that the activity of digital advice is fluid and rapidly evolving. ASIC has invited the industry to consult with it on other ways (other than those outlined in RG 255) that they may achieve compliance in what is a rapidly changing environment.

ASIC mystery shopper exercise results in the banning of Responsible Managers

ASIC often reminds industry that it undertakes surveillance activities but it is not often that the regulator provides details of these activities and the resulting enforcement action. However, the recent banning of two Responsible Managers from The Sharemarket College (TSC) did provide a working example of ASIC’s surveillance activities.

Posing as potential investors, ASIC undertook its surveillance on TSC and during that surveillance, TCS shared with ASIC’s investigators stories of its own success when trading on the share market. One particular story it shared was a real investment portfolio it operated with a capitalisation of $100,000, which was achieving returns of 60 per cent per annum. The TSC made representations to ASIC’s investigators that results like this could be achieved by enrolling in TSC training courses.

ASIC’s investigation established there was no investment portfolio and that the claims were false and misleading. ASIC also found that TSC had made similar claims about the investment portfolio and the returns achieved to members of the public.

As a result, ASIC has banned two Responsible Managers of TSC for a period of three and four years respectively for the following:

  • Making misleading or deceptive statements in relation to financial products and services;
  • Acting outside their AFS licence conditions by providing personal advice when they were only authorised to provide general advice;
  • And failing to maintain competence to provide financial services authorised under it AFS licence.

How CompliSpace can help

Australian Financial Services Licence holders are inundated with a raft of corporate governance obligations and an ever-growing compliance burden, which can easily distract focus away from core business activities.

CompliSpace delivers industry specific web-based policies, programs and procedures that can be quickly tailored and configured to suit an organisation’s needs and are kept up-to-date with legal and regulatory changes by our team of specialists.


Our team of compliance professionals and lawyers combine extensive expertise with practical technology-enabled solutions to simplify the complexity of the regulatory environment and allow our clients to focus on allocating resources toward improving financial performance.

Please contact James Cozens to discuss your AFSL requirements further.

This blog is a guide to keep readers updated with the latest information. It is not intended as legal advice or as advice that should be relied on by readers. The information contained in this blog may have been updated since its posting, or it may not apply in all circumstances. If you require assistance or advice please contact us on (02) 9299 6105 and we will be happy to assist.