What's on the Corporate Regulator's Mind in 2024? Part Two.

ASIC has recently published an enforcement and regulatory update for the first half of 2024. We considered ASIC 2024 enforcement priorities last year and have been tracking ASIC’s enforcement action, especially concerning crypto-assets and greenwashing.

This article takes a quick look at ASIC’s recent update on these issues.

As always, please reach out if there is any aspect of this update we can discuss further with you.

Digital rights and assets

The first half of 2024 was a busy period for ASIC seeking orders against crypto-asset businesses. These matters included proceedings against:

• BPS Financial Pty Ltd.
• Block Earner (which ASIC is appealing).
• Finder.
• NGS Crypto Pty Ltd, NGS Digital Pty Ltd and NGS Group Ltd and their directors.

A common feature of these proceedings is they all dealt with complex or novel legal issues of whether various parts of the Corporations Act applied to businesses offering crypto and digital asset products.

Until the Government’s proposed reform of the regulatory framework for digital asset platforms progresses, businesses in this sector will continue to grapple with difficult questions of how new products are regulated by existing financial services regulations.

ASIC’s Information Sheet 225 provides some clarity for how the regulator views some crypto-asset products. However, as businesses innovate and offer consumers new products, compliance becomes more challenging – and the risk of regulatory action increases.

Greenwashing

Our recent update on greenwashing deals with ASIC’s enforcement activities in this space, including ASIC’s proceedings against:

• Mercer Superannuation.
• Vanguard Investments Australia.
• Active Super.

ASIC’s update affirms that greenwashing remains a serious focus over the medium term and we can expect more enforcement action over the rest of 2024. In the near term, we expect that judgment will be handed down over ASIC’s successful greenwashing action against Vanguard. This will provide an important data point for businesses to understand how the Federal Court will assess penalties for greenwashing and will serve as an interesting comparator to the penalty ordered in the Mercer case.

Investment scams

In uncommonly good news on the topic of scams, ASIC reports that Australian investment scam losses are falling from their peak of $3.15 billion in 2022. However, yearly losses to investment scams still exceed $1 billion – representing a huge ongoing risk to Australian consumers.

A strategy ASIC trialled from 2023 to early 2024 was known as “fusion cell”. The strategy was a public/private partnership co-led by ASIC and the National Anti-Scam Centre (NASC) between various businesses operating in sectors targeted by financial services scams. The participants to fusion cell included banks, telcos, crypto exchanges, law enforcement agencies, regulators, the ATO and financial services providers.

The fusion cell report was published in May 2024 and set out the procedures deployed to interrupt investment scams – and to make certain technologies (such as telco infrastructure) more difficult for scammers to access.

The relative success of fusion cell likely indicates ASIC will continue to approach financial services scams in a similar way moving forward. Businesses operating in telco, banking and financial services sectors should be aware of ASIC’s willingness to partner with the private sector to combat investment scams, and may wish to proactively engage with the regulator and NASC to contribute to scam prevention.