This is a service specifically targeted at the needs of busy non-executive directors (NEDs). We aim to give you a ‘heads up’ on the things that matter for NEDs in the week ahead – all in two minutes or less.
In this edition, we discuss two recent ASIC reports: the first highlights ASIC’s interventions in response to greenwashing and the second provides an insight into ASIC’s key matters during the last quarter, including a focus on preventing predatory lending. We also discuss ASIC’s updated insolvency guidance for directors and the landmark joint trans-Tasman investigation into the Latitude Group’s data breach. Additionally, we look at the Takeovers Panel’s decision to decline to make a declaration of unacceptable circumstances in relation to the affairs of AIMS Property Securities Fund.
In Over the Horizon, we examine various funding announcements in the 2023-24 Federal Budget that foreshadow increased regulatory scrutiny over ESG and corporate cyber governance.
GOVERNANCE & REGULATION
ASIC releases report on its recent greenwashing actions. On 10 May 2023, the Australian Securities and Investments Commission (ASIC) released Report 763: ASIC’s recent greenwashing interventions (Report) which details the 35 interventions the corporate regulator has made in response to its greenwashing surveillance activities from July 2022 to March 2023. ASIC’s surveillance in relation to greenwashing follows its Information Sheet 271 How to avoid greenwashing when offering or promoting sustainability-related products released in June 2022 (Information Sheet). Of the 35 interventions, 23 resulted in corrective disclosure outcomes, 11 resulted in issuing infringement notices, and in one case, the commencement of civil penalty proceedings. ASIC Deputy Chair, Karen Chester, stated that by “disclosing how and why we intervened, alongside the corrective outcomes of our actions, we hope to further inform the market on how to avoid greenwashing”. When preparing disclosures, Directors should carefully consider the suggestions in the Report and the Information Sheet to ensure compliance. See ASIC Report. See also ASIC media release.
ASIC states it will continue to “sharpen its focus” on credit providers and debt management firms. On 11 May 2023, ASIC released Report 764: Enforcement and regulatory update: January to March 2023 (Report) which provides an insight into ASIC’s work and key enforcement matters. The Report revealed that ASIC had secured over $30 million in civil penalties during the reporting period. ASIC Deputy Chair, Sarah Court, stated that ASIC’s response to predatory lending meant it would set its sights on credit providers and debt management firms looking to take advantage of vulnerable customers. Ms Court also emphasised that ASIC’s enforcement action is “not limited to court action” and “[ASIC] will continue to use [its] full suite of powers to protect consumers looking to access credit”. See ASIC Report. See also ASIC media release.
ASIC updates insolvency guidance for directors. ASIC has updated Information Sheet 42: Insolvency for directors (Information Sheet 42), which provides general information on insolvency for directors. The update has added information regarding small business restructuring and simplified liquidation (topics that were previously absent from Information Sheet 42), as well as various minor amendments to improve clarity. See Information Sheet 42. See also G+T Knowledge article.
Landmark joint Australian-New Zealand investigation into Latitude data breach. On 10 May 2023, the Office of the Australian Information Commissioner (OAIC) announced that it has partnered with the New Zealand Office of the Privacy Commissioner to conduct a joint investigation into the Latitude group of companies. This marks the first time the two privacy watchdogs have conducted a joint privacy investigation, which the OAIC stated “reflects the impact of the data breach on individuals in both countries”. Following recent legislative amendments, OAIC is empowered to impose penalties on companies of up to $50 million (up from $2.2 million prior to the amendments). This announcement highlights the possible multi-jurisdictional consequences of data breaches, particularly for larger companies. Directors are reminded to ensure that sensitive data is safeguarded through robust cybersecurity systems and information handling practices. See OAIC media release.
Takeovers Panel declines to make a declaration of unacceptable circumstances in relation to the affairs of AIMS Property Securities Fund. On 11 May 2023, the Panel announced it declined to make a declaration of unacceptable circumstances in relation to the affairs of AIMS Property Securities Fund (APW) in AIMS Property Securities Fund 03  ATP 5 (AIMS 03). The Panel had previously considered some of the circumstances relating to APW in AIMS Property Security Fund 01 & 02  ATP 15 (AIMS 01 & 02), declining to make a declaration of unacceptable circumstances. In AIMS 03, the Panel considered an application on the basis of an alleged association between a controlling unitholder of APW (who is also a director of its responsible entity) and his two siblings. Since AIMS 01 & 02, new circumstances had arisen which supported the existence of the alleged association, including that the siblings sold their APW units to their brother, however the Panel was not satisfied that the circumstances were unacceptable. Nevertheless, the Panel had other concerns which it referred to ASIC, including a potential contravention of s 606 of the Corporations Act 2001 (Cth). See AIMS Property Securities Fund 03  ATP 5.
OVER THE HORIZON
2023-24 Federal Budget foreshadows increased ESG and cyber governance scrutiny. Last week’s Federal Budget earmarked funding for various initiatives that will increase scrutiny of company practices in relation to ESG and cyber governance. Regarding the latter, funding has been allocated to the OAIC to establish a standalone Privacy Commissioner which will increase scrutiny and enforcement of corporate privacy obligations. The OAIC has also received additional funding for its investigations and enforcement activities. Additionally, $46.5 million has been allocated to establish the Coordinator for Cyber Security, with the stated aim of increasing the coordination, efficiency and efficacy of government responses to cyber threats. Turning to ESG initiatives, ASIC has received $4.3 million of dedicated funding in 2023-24 for investigations and enforcement activities regarding greenwashing and other sustainable finance misconduct. Funding has also been allocated to establishing the first Commonwealth Anti-Slavery Commissioner, which will increase scrutiny and enforcement of modern slavery obligations. Finally, $14.3 million has been allocated over four years to reforming Australia’s anti-money laundering and counter-terrorism financing framework. These and other funding announcements reinforce the Albanese Government’s commitment to increasing corporate regulatory oversight and enforcement in various areas. See AICD article.