ASIC roundup: Greenwashing claims, substantial consumer harm

The Australian Securities & Investments Commission’s latest actions, August 7 – 11, 2023.

Greenwashing procedures against Active Super – August 11, 2023

LGSS Pty Limited (Active Super) has been charged over allegedly misleading conduct and misrepresentations on its website and social media by claiming to be an ethical and responsible superannuation fund.

Active Super claimed to eliminate investments that posed too great a risk to the environment and the community, such as tobacco manufacturing, oil tar sands and gambling. The company also claimed to have added Russia to its list of excluded countries.

Yet ASIC alleges that Active Super exposed its members to funds they claimed were restricted or eliminated.  

Allegedly, from February 1, 2021 to June 30, 2023, Active Super held, either directly or indirectly, 28 holdings that exposed members to securities it claimed to have restricted. Some of the holdings included: 

  • Gambling: Skycity Entertainment Group Limited, PointsBet Holdings Limited, The Star Entertainment Group Limited, The Lottery Corporation Limited and Tabcorp Holdings Limited.
  • Tobacco: Amcor PLC. 
  • Russian entities: Gazprom PJSC and Rosneft Oil Company. 
  • Oil Tar Sands: ConocoPhillips. 
  • Coal Mining: Coronado Global Resources Inc., New Hope Corporation Limited and Whitehaven Coal Limited. 

In May 2022, Active Super said it had stopped investments in Russian companies, yet the company had holdings in Russian securities up until June 30, 2023.

With the proceedings, ASIC seeks declarations, pecuniary penalties, adverse publicity orders and an injunction against Active Super.

This is ASIC’s third greenwashing civil penalty action. Earlier actions have been against Mercer Super and Vanguard Investments Australia

Debt management firm and its director sued – August 10, 2023

Bakken Holdings Pty Ltd (Bakken), an operator of the debt management business Solve My Debt Now, is facing court proceedings over concerns of substantial consumer harm by failing to pay creditors.

Allegedly, from April 2020 to June 2022, Bakken collected A$3.6m ($2.4m) from its customers but only paid out A$1.1m ($720,000) to creditors – 64% of the customers did not have payments made to their creditors at all.

In many cases, Solve My Debt Now charged fees for its services that exceeded the amount the debts were reduced, leaving clients worse off than before. Only 5.3% of the customers of Solve My Debt Now achieved a debt reduction after fees.

Dr Merrilyn Mansfield, Bakken’s director and co-owner, has also been sued for her involvement in some of the alleged faulty or misleading statements the company made when it made promised to manage and reduce consumer debt.

According to ASIC, Bakken:

  • engaged in a conduct or pattern of behaviour which was unconscionable;
  • made false and misleading statements to customers about the its service; and
  • carried on a financial services business without holding the appropriate licence.

With these proceedings, ASIC seeks declarations, pecuniary penalties and a disqualification order from the Court.

“To have customers engage a debt management company and be worse off in their debt, as we allege here, is completely unacceptable.”

Sarah Court, Deputy Chair, ASIC

Disclosed risks for Namoi Cotton and Fluence Corporation – August 10, 2023

Namoi Cotton Limited and Fluence Corporation Limited have been found disclosing a diverse range of material business risks, including sustainability-related risks, after a review by ASIC.

In particular, the review found that:

  • Namoi Cotton made disclosures as part of its AGM shareholder presentation on July 19 2023; and
  • Fluence Corporation made disclosures as part of its quarterly business update on July 31, 2023.

The disclosures were made in response to the Commission’s concerns that “the risks had not been sufficiently disclosed in the operating and financial review of the directors’ report, following ASIC’s ongoing financial reporting surveillance program and subsequent inquiries into a selection of recent annual reports”.

“As the regulatory regime for disclosing sustainability-related risks develops, it is important to maintain market integrity and for entities to prepare for mandatory reporting changes.”

Danielle Press, Commissioner, ASIC

Mortgage and finance broker banned for six years – August 8, 2023

The Sydney-based mortgage and finance broker Qingshan Yu has been banned for six years from handling credit activities, controlling a credit business, or holding any function in relation to carrying on a credit business.

The Australian credit licence has also been cancelled for Yu’s company, Actif Pty Ltd, which provided mortgage and finance broking services, plus arranging home loans.

To set the ban, ASIC found that Yu:

  • breached credit legislation by making false disclosures to ASIC in two successive annual compliance certificates;
  • was incomplete when handling home loan applications, which made it possible to submit false documents in his name to lenders;
  • didn’t show good behaviour in line with the attributes of diligence, honesty, integrity and good judgment;
  • probably contravened credit legislation; and
  • is not a fit and proper person to participate in the credit industry.

Probis Financial Services loose AFS licence – August 7, 2023

The Australian financial services (AFS) licence has been suspended for Probis Financial Services Pty Ltd after the company was placed into voluntary administration on July 17, 2023. 

The suspension still requires the company to continue to be a member of Australian Financial Complaints Authority, and to continue with its arrangements for compensating retail clients until October 30, 2023.

Relief and consultation

In other ASIC news, on August 8, ASIC announced extended transitional relief for foreign financial services providers (FFSPs).

The Commission will now extend the relief a further 12 months for FFSPs from the requirement to hold an AFS licence when providing financial services to Australian wholesale clients.

During this 12-month period, ASIC will also consider new applications for individual temporary licensing relief, or a new standard or foreign AFS licence applications, from entities that cannot rely on the transitional relief.

ASIC has also released Consultation Paper 371 Product intervention orders: Short term credit facilities and continuing credit contracts (CP 371), where ASIC is seeking feedback on proposals to extend both product intervention orders on.

Feedback can be provided until the last of August, and if not extended, the short term credit and continuing credit contracts product intervention orders will expire on January 15, 2024.

Enforcement priorities and approach

In a speech on August 7, Deputy Chair Sarah Court talked about the Commission’s enforcement priorities and enforcement approach. She highlighted their priorities for 2023, which include topics such as:

  • greenwashing;
  • targeting the poor design and distribution of financial products;
  • pricing promises in insurance;
  • protecting financially vulnerable consumers from predatory lending practices or high-cost credit; and
  • directors’ duties and governance failures.

“We are proactive and strategic rather than reactive. We are not to investigate all potential breaches of the laws that we administer, and we need to make careful choices about which matters we take on,” Court said.