ASIC roundup: Insider trading, misleading insurances and new Commissioners

The Australian Securities & Investments Commission’s latest actions and news, August 21 – 25, 2023.

IAG charged for misleading on pricing discounts – 25, August 2023

The IAG-subsidiaries, Insurance Australia Limited (IAL) and Insurance Manufacturers of Australia Pty Limited (IMA), have been charged for misleading customers about loyalty discounts for certain types of home insurance.

Between January 2017 to December 2022, IAL and IMA renewed over one million home insurance policies – within the SGIO, SGIC and RACV brands.

Allegedly, the loyalty discounts were misleading as they encouraged customers to renew their home insurance policies – where loyal customers may have had their premiums increased before the discounts were applied. Between August 25, 2017 and August 24, 2023, statements were made on websites and in other documents:

  • IAL stated, about its SGIO and SGIC branded home insurance policies, that SGIO and SGIC customers would receive a ‘Loyalty Discount’; and
  • IMA stated, about RACV branded home insurance policies, that RACV customers would receive a ‘Years of Membership Discount’ and/or a ‘Multi-Policy Discount’.

IAG’s pricing algorithm was also claimed to have operated inconsistently with its discount promises, and therefore failed to operate efficiently, honestly and fairly.

With the charges, ASIC seeks declarations of contravention, pecuniary penalties and adverse publicity orders against IAL and IMA.

Earlier this summer, IAL was fined a record A$40m over pricing discount failures – the largest penalty ever handed down against an insurer for breaches of financial services laws. This action was a part of ASIC’s work calling on general insurers to pay back A$815m to more than 5.6 million consumers for broken pricing promises.

The Commission has also commenced court action against RACQ for allegedly misleading statements in relations to price discounts on certain optional insurance covers.

“The way they operated their pricing algorithm meant that some longer term or more loyal customers were allocated, or may have been allocated, higher premiums before the promised discounts were applied.”

ASIC Deputy Chair Sarah Court

Melbourne man charged over alleged insider trading – August 24, 2023

Duncan Stewart has been charged with multiple insider trading offences in relations to share market purchases that were made in Kidman Resources Ltd in 2019.

Allegedly, Stewart engaged in insider trading twice in April 2019, when he bought shares in Kidman Resources while having inside information that Wesfarmers Ltd was to acquire Kidman Resources before it was public knowledge.

ASIC also allege that he encouraged a family member to commit insider trading on two occasions using the same information.

When the Wesfarmers proposal went public in May 2019, the Kidman Resources’ share price jumped from A$1.29 to A$1.84 ($0.83–1.19) – with an allege profit A$68,114 ($44,051) for Stewart.

At the time of the offence, each breach of section 1043A of the Corporations Act carried a maximum penalty of either 10 or 15 years in prison.

Frozen assets of former Sydney financial adviser – August 22, 2023

The Commission has commenced “urgent proceedings” in the Federal Court against the former Sydney financial adviser David Valvo, and the related company, Your Financial Freedom Pty Ltd.

The Court decided also to make orders to freeze Valvo and the company’s assets, and restrained Valvo from leaving Australia, including having him surrender his passport.  

ASIC is currently investigating the financial services provided by both him and the company between January 1, 2015 to September 21, 2021, in relations to fees charged to client superannuation funds.

The orders were varied on July 7 and August 4 with Valvo’s consent.

The matter is listed for a case management hearing on September 29, and the investigation of David Valvo and Your Financial Freedom Pty Ltd is ongoing.

ASIC news week 34

Three new Commissioners have been appointed to ASIC this week.

  • Katherine O’Rourke, who worked at ASIC between 2003 to 2017, and is currently a First Assistant Secretary at Treasury, will start as Commissioner on September 11, 2023.
  • Alan Kirkland, currently the CEO of leading consumer group CHOICE, will start on November 20, 2023. He is also a member of ASIC’s Consultative Panel.
  • Simone Constant, currently the Chief Risk Officer, Institutional Bank and Markets at the Commonwealth Bank of Australia, will also start on November 20. She also served as Deputy Secretary of NSW Treasury and led the NSW Department of Education’s COVID Taskforce.

ASIC Chair Joe Longo said the new Commissioners will bring exceptional experience and skills to the force. “The new Commissioners strengthen and reinforce the expertise of the Commission at a time of significant and complex change in our regulatory environment.”

“Kate, Simone and Alan each have considerable experience in areas relevant to ASIC’s strategic priorities. They join the Commission as we embark on a program of work to become a leading data-informed regulator and strengthen our commitment to strong and decisive enforcement of the law,” Longo added.

Departing from the Commission is Commissioner Danielle Press, who will leave ASIC when her term expires on September 16, 2023.

Federal Court dismisses liquidator case

An ASIC case against Jason Bettles, a registered liquidator and Partner at Worrells Solvency and Accounting, has been dismissed by the Federal Court. In 2019, ASIC, via the Serious Financial Crime Taskforce (SFCT), filed an application requesting a court inquiry where ASIC believed Bettles failed to discharge his liquidator obligations, including not acting with care and independence – n alleged conduct which was believed to have led to the improper transfer of Members Alliance Group assets.

“ASIC took on this case as part of our work with the Serious Financial Crime Taskforce. Taking action against suspected phoenixing remains a key priority of the Taskforce and we will carefully review the judgment,” said ASIC Deputy Chair Sarah Court.

The case against Bettles was dismissed, however, more charges await four former company officers and one lawyer associated with Members Alliance and Benchmark Groups, which faces a total of 72 criminal charges. In July 2016, eighteen group companies were placed into liquidation with a A$26m ($16.7m) debt owing to the Australian Tax Office.

Since the Serious Financial Crime Taskforce (SFCT) started its operation in July 2015, it has progressed cases that have resulted in:

  • completion of 1,851 audits and reviews;
  • conviction and sentencing of 27 people;
  • raised liabilities of A$1.855bn ($1.19bn); and
  • collected A$730m ($469m).