This is a service specifically targeted at the needs of busy non-executive Directors. 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 the results from the Director Sentiment Index for the second half of 2022, the punishment laid down to Austal Limited and its former CEO by the Federal Court and ASIC’s latest interim stop order for a fund’s alleged non-compliance with its target market determination. We also discuss the recent Federal Court decision in ASIC v Commonwealth Bank of Australia, which clarified the requirements for breaches of conflicted remuneration provisions and also the penalty delivered to timeshare company Ultiqa for investment advice which was not in the best interests to its consumers.

In Risk Radar, we consider the risk environment relating to cybersecurity and data control following the recent Medibank attack which has seen 200 gigabytes of health insurance data stolen.


AICD results indicate increased pessimism among directors. The Australian Institute of Company Directors (AICD) released the results of its Director Sentiment Index (DSI) for the second half of 2022, which evidenced a drop to negative 8.5%. Although current macroeconomic conditions and domestic market skill shortages are driving director confidence down, the survey of 1500 directors indicated that 42% believed that Australia’s economic health would continue to be strong in 12 months’ time. Access to skilled migrants is the number one concern for directors, with the expectation that labour demands will continue to increase. Similarly, cybersecurity remained on the minds of many, with 37% nominating the threat of cyber-related crime and data security as their number one concern. For the first time, the DSI asked directors to rate the performance of the Reserve Bank of Australia (RBA) and its decisions on monetary policy. While directors largely agree that the RBA is increasing rates at the right pace, they do believe it will precipitate business insolvencies and a housing debt crisis. See AICD Report.  

Austal and former CEO penalised for breach of continuous disclosure obligations. The Federal Court has ordered Austal Limited (Austal) to pay a penalty of $650,000 and former CEO, David Singleton to pay a penalty of $50,000 in respect of continuous disclosure breaches in the period between June and July 2016, whereby Austal failed to disclose a likely profit writeback of at least US$90 million for the financial year ended 2016. The undisclosed writeback ultimately meant that previous profit guidance from Austal was no longer reliable and ought to have been withdrawn. Over late June 2016, $23 million worth of shares were traded. ASIC Deputy Chair, Sarah Court, issued a reminder that ‘investors need to have timely access to accurate, relevant information to form their own judgement of risk and reward, and that is why the continuous disclosure regime is so important’. Austal and Mr Singleton have further been ordered to jointly contribute to ASIC’s $500,000 legal and investigations costs. See ASIC media release.

ASIC places interim stop order on ‘high-risk’ fund. Westlawn Financial Services Limited (Westlawn) has been blocked from offering or distributing the Westlawn Income Fund, which comprises a portfolio of secured and unsecured loans, credit, leases and other fixed-interest financial assets. ASIC’s concern is that the high-risk fund – which is being offered to retail investors – is non-compliant with its target market determination (TMD). Notably, the TMD investors are those with a moderate risk appetite, need for liquidity, capital investment for minimum two years and regular monthly income distributions. ASIC considered that the TMD did not meet the appropriateness requirements under the design and distribution obligations (DDO) in the Corporations Act 2001 (Cth) (Corporations Act). The action taken by ASIC is a reminder to financial product issuers that under DDO, they must define target markets for their products appropriately, having regard to the risks and features of their products. See ASIC media release.


Federal Court dismisses ASIC’s claim and clarifies requirement for breach of conflicted remuneration provisions. ASIC claimed that Colonial First State Investments Limited (Colonial), a wholly owned subsidiary of Commonwealth Bank of Australia (CBA), accepted monetary and/or non-monetary benefits under a distribution agreement, which could reasonably be expected to influence financial product advice provided by CBA to its retail clients in relation to Essential Super (Impugned Benefits). ASIC claimed CBA contravened the prohibition against a financial services licensee accepting conflicted remuneration pursuant to section 963E of the Corporations Act, as well as breaching the prohibition on product issuers or sellers giving conflicted remuneration pursuant to section 963K of the Corporations Act. CBA argued (and the Federal Court agreed) that the Impugned Benefits were simply standard intragroup accounting allocations, reflecting cost sharing between business units. Further, the accounting method did not amount to a benefit expected to influence financial advice conflicting the remuneration provisions. Justice Anderson stated that the conflicted remuneration provisions do not operate between business units in the same group of companies or within a consolidated group of companies, but are rather directed to benefits that exist between arms-length entities that are not part of a single consolidated group. See Australian Securities and Investments Commission v Commonwealth Bank of Australia [2022] FCA 1149.

Federal Court imposes $900,000 penalty on timeshare company Ultiqa. The Federal Court has ordered timeshare company Ultiqa Lifestyle Promotions Ltd (in liquidation) (Ultiqa) pay a $900,000 penalty following its May 2022 decision that established that Ultiqa financial advisers advised consumers to invest in the ‘Ultiqa Lifestyle Scheme’ despite this advice not being in consumers’ best interests and not being appropriate to their circumstances. This conduct contravened section 961L of the Corporations Act. However, in determining the penalty, Justice Downes determined that the multiple contraventions of section 961L are so ‘interrelated … that they should be viewed as a single course of conduct’ and ‘to otherwise do so would be to impose a penalty of oppressive severity’. See Australian Securities and Investments Commission v Ultiqa Lifestyle Promotions Limited (in liq) (No 2) [2022] FCA 1228.


Cybersecurity and data crime thrust back into forefront of corporate concern with recent Medibank attack. Last week, Medibank revealed it may have had as much as 200 gigabytes of health insurance data stolen in a cyber-attack, comprised of first names and surnames, addresses, dates of birth, Medicare numbers, policy numbers, phone numbers and claims data. In the wake of the Optus data breach, the recent Medibank hack is a timely reminder for all NEDs to review their cybersecurity policy and protection mechanisms. We recommend revisiting our G+T Article on ransomware legislation and Privacy law reforms.

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