Investment scams, financial ‘influencers’, “greenwashing” and predatory lending have ranked high on the list of focus areas for the Australian Securities and Investment Commission (ASIC) for the coming year. Attwood Marshall Lawyers’ Commercial Litigation Senior Associate Georgia Taylor explores the regulator’s enforcement plans to see how it aims to protect consumers from financial harm in 2023.
Introduction
For the first time, ASIC has published a list of target areas that its regulatory enforcement team intends to focus on in 2023. With the surge of investment scams, misinformation, and misconduct in the credit, insurance and superannuation industries front, it is no surprise that these are priority areas for the regulatory body.
The regulator has said that it will work with other regulators and social media platforms as it seeks to penalise bad behaviour that targets and can ruin unsuspecting consumer’s financial futures, as well as target the most vulnerable in our society.
Lending Practices and High-Risk Products
Between June 2020 and June 2022, ASIC received over 2,200 reports of misconduct related to crypto currency assets or “crypto scams”. As such, combating and breaking up investment scams has become a top priority, as well as keeping an eye out for conduct that conceals the risk or performance of a financial product.
The securities watchdog will also be focusing on directors who fail to protect investors from significant loss, with a particular focus on the promotion of property investment schemes that have a history of collapse.
It’s said there has been an uptick in the use of high-cost credit for consumers who are feeling the follow-on financial effects of the COVID-19 pandemic and the increased costs of living. Similarly, the ascension of the reserve bank interest rates in the later half of 2022 and the tightening belts of top-tier lenders as a flow on from the Banking Royal Commission, is forcing consumers in difficult financial situations to look elsewhere for capital.
According to ASIC research, more than 40% of Australians have two or more credit products and the regulator expects there will be further demand for credit cards, personal loans and short-term credit arrangements in 2023. With that demand, consumers need to be wary of unlicensed operators that may emerge from the woodwork, and the regulator has bumped such activities up its radar.
Misinformation
ASIC said when announcing its 2023 enforcement list that it will be taking a stricter approach to unlicensed individuals misinforming the public about investment products through social media. The move will target financial influencers, or “finfluencers,” who use apps such as Tik Tok, Instagram and YouTube to promote financial products.
Finfluencers are generally paid to share their opinion on investment strategies or investment products in the hope that young people make decisions based on their post. Their sponsored content is usually also coupled with an incentive to join specific investment or everyday banking platforms that do not advertise or inform of the general risks.
Unfortunately, finfluencers also generally have no formal qualifications and are self-taught in financial literacy, which puts consumers at risk. Due to the inherent dangers of these advertisements and of signing up for various financial products, ASIC recently announced that finfluencers could face up to five years imprisonment and $1 million in fines if they are not licensed to provide the advice given on their social media platforms.
Sustainable Finance
The growing popularity of so-called sustainable finance was also marked out as a key focus. In particular, the watchdog said it would be targeting misleading claims made about the environmental benefits of new products and solutions, known as “greenwashing.”
Sustainable finance involves investors taking the environmental, social and governance (ESG) factors of a financial product or investment strategy into account before pouring any money in.
Greenwashing occurs when those factors are misrepresented to entice consumers to invest or sign up for their product, and ASIC has confirmed that it is currently investigating several ASX listed firms, super funds and managed funds over their “green credentials”. In fact, it recently issued its first action for greenwashing against listed energy firm Tlou Energy Ltd.
Superannuation
The superannuation market will also feel the brunt of heightened scrutiny, with enforcers keen to take a stand against any misleading conduct or poor governance in that sector.
Specifically, ASIC said it will take enforcement action where the design, pricing and distribution of financial products is lacking and not up to the regulatory standard.
Insurance
As in the case for superannuation, enforcers will be targeting the poor design, pricing and distribution of financial products in the insurance sector too. They will also be keen on sanctioning insurers who don’t meet their pricing promises, and those firms who include unfair terms in their contracts, ASIC said.
Markets
Finally, the regulator is keen to stamp out manipulation in the energy and commodities derivatives markets, after noticing poor market conduct where traders are protecting their positions to avoid insolvency.
Many of the 12 areas of focus that feature on ASIC’s 2023 enforcement list have some cross over with the regulator’s five “enduring” priorities that direct its oversight activities. These are:
- misconduct that damages the financial markets,
- misconduct that impacts First Nations people,
- misconduct that involves a high degree of harm to consumers,
- the systemic failure of large financial institutions that can lead to widespread consumer harm, and
- new or emerging conduct risks within the financial markets
Attwood Marshall Lawyers – helping consumers understand their rights
If a consumer suspects or has evidence that the advice they were given over a financial product is inaccurate or misleading, they may be entitled to compensation.
ASIC for example also oversees a remediation program for consumers that fall victim to harmful sales or practices. The corporate watchdog recently reported that it has been able to return over $5.6 billion to about seven million Australian consumers in the six years up to September 2022.
At Attwood Marshall Lawyers, we will fight for consumers who have suffered significant financial loss as a result of a business breaching the ACL. Our Commercial Litigation lawyers want to help you obtain justice, and are well-versed in dealing with bank, finance, and lending institution matters. We use reputable forensic accountants to assess the conduct of the banks and financial institutions and calculate the losses you may have suffered because of their advice or behaviour.
If you are involved in a consumer related matter, please contact our Commercial Litigation Department Manager, Amanda Heather, on 07 5506 8245, email aheather@attwoodmarshall.com.au or free call 1800 621 071 any time to find out where you stand.
