Australian Securities and Investments Commission

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Australian Securities and Investments Commission—Report for 2018-19

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Annual Report 2018 -19 asic.gov.au

ISSN 1448-3416 (Print) ISSN 1448-370X (Online) October 2019

Australian Securities and Investments Commission

James R. F. SHIPTON Chair

Level 5, 100 Market Street GPO Box 9827 Sydney NSW 2000

Tel: +61 1300 935 075 Fax: +61 1300 729 000

asic.gov.au

1 October 2019

The Hon. Josh Frydenberg MP Treasurer Parliament House CANBERRA ACT 2600

Dear Treasurer

I am pleased to give you the annual report of the Australian Securities and Investments Commission for the year ended 30 June 2019.

The report has been prepared in accordance with section 136 of the Australian Securities and Investments Commission Act 2001 (ASIC Act), section 46 of the Public Governance, Performance and Accountability Act 2013, sections 17AA to 17AJ of the Public Governance, Performance and Accountability Rule 2013, and Resource Management Guide No. 135 Annual reports for non-corporate Commonwealth entities, published by the Department of Finance in May 2018.

I note that you are required under section 136 of the ASIC Act to cause the report to be tabled in each Chamber within 15 sitting days of receiving it.

Yours sincerely

James Shipton Chair

Contents

1 ASIC’s role 05

Chair’s report 06

1.1 ASIC’s role and responsibilities 11

1.2 ASIC’s structure and management 14

1.3 ASIC Commissioners 16

1.4 ASIC Executive Directors 18

1.5 Stakeholder teams 20

1.6 Regional Commissioners 23

1.7 Government priorities 24

1.8 Financial Services Royal Commission 28

1.9 OfficeofEnforcement 31

1.10 Enhanced approach to supervision 32

1.11 Financial summary and expenditure 35

2 ASIC’s annual performance statement 37

Chair’s statement 38

Our purpose 38

2.1 Performance objectives 38

2.2 Key results - investor, consumer and markets performance objectives 39

2.3 Analysis - implementing our investor, consumer and markets performance objectives 44

2.4 Registry services and outcomes 70

2.5 ASIC Service Charter results 75

2.6 Banking Act, Life Insurance Act, unclaimed money and special accounts 78

3 ASIC’s achievements bysector 79

Purpose and structure 80

3.1 Deposit-taking and credit 81

3.2 Insurance 87

3.3 Financial advice 91

3.4 Investment management, superannuation and related services 95

3.5 Market infrastructure 100

3.6 Market intermediaries 103

3.7 Corporate 106

3.8 Largefinancialinstitutions 112

ASIC Annual Report 2018-19 02

4 ASIC for all Australians 113

4.1 ASIC’s MoneySmart 114

4.2 Regional action 117

4.3 Our work with vulnerable consumers 122

4.4 Indigenous outreach 123

4.5 ASIC in the community 125

5 ASIC cooperation 127

5.1 Regional and international engagement 129

5.2 Innovation Hub 135

5.3 OfficeofSmallBusiness 137

5.4 OfficeoftheWhistleblower 138

5.5 Inter-agency collaboration on financialcrime 139

5.6 Misconduct reporting 141

5.7 Australian Financial Complaints Authority 143

6 ASIC’s people 145

6.1 Workforceplanning 146

6.2 Diversity and inclusion at ASIC 151

7 Financial Statements 159

8 Appendices 219

8.1 Appendices relating to how our people achieve our vision 220

8.2 Appendices relating to assessments 238

8.3 Appendices relating to statements required by law 252

8.4 Five-year summary of key stakeholder data 264

9 Glossary 267

10 Compliance index 273

Reporting requirements under the Public Governance, Performance and Accountability Act 2013 274

Additional compliance reporting requirements 283

11 General index 285

Contact details inside back cover

ASIC Annual Report 2018-19 04

1ASIC’s roleChair’s report 061.1 ASIC’s role and responsibilities 111.2 ASIC’s structure and management 141.3 ASIC Commissioners 161.4 ASIC Executive Directors 181.5 Stakeholder teams 201.6 Regional Commissioners 231.7 Government priorities 241.8 Financial Services Royal Commission 281.9 OfficeofEnforcement 311.10 Enhanced approach to supervision 321.11 Financial summary and expenditure 35ASIC’s role 05

Chair’s report

On behalf of my fellow Commissioners, I am pleased to present this report outlining ASIC’s work and achievements in 2018-19.

I take this opportunity to thank outgoing Deputy Chair Peter Kell for his valued contribution to ASIC’s work over many years, and to welcome Deputy Chairs Daniel Crennan QC and Karen Chester and Commissioners Danielle Press and Sean Hughes.

It has been a momentous year for the Australianfinancialsystem.

The important work of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) highlighted the costs and consequences ofmisconductinthefinancialservices industry and of failing to abide by the standards of behaviour required by the law, the regulator and the community.

The Royal Commission also reinforced and informed the strategic program of change that ASIC began in February 2018 and is continuing to implement to bolster the impact and effectiveness of our activities.

Wewelcomedthepassagethrough Parliament of legislation that strengthened the penalties and regulatory tools available to ASIC, including a stronger penalty framework for corporate and financialsectormisconduct.Parliament also provided design and distribution obligationsforfinancialservicesfirmsand a product intervention power for ASIC.

ThesereformssignificantlyenhanceASIC’s regulatory and enforcement toolkit and will enable us to take more proactive action to improve standards and achieve fairer outcomes for consumers.

This year we also had the privilege of hosting the 44th International Organization of Securities Commissions (IOSCO) Annual Meeting, in Sydney - a major event in the international regulatory calendar and an important opportunity to share ideas and enhance cooperation between regulators from around the world.

WeheldtheIOSCOmeetingjointlywith our ASIC Annual Forum, with the theme ‘Other People’s Money’. The Forum exploredhowthefinancialservices industry can better focus on the end users-people-andhowfinancialmarket participants can better meet public expectations when dealing with other people’s money.

As the theme of our Annual Forum made clear,wearefocusedonhowthefinancial systemmustputpeopleandfairnessfirst. Wereiteratethatmoreneedstobedone to achieve this.

In 2018, we adopted a new, clear vision and mission to focus our activities.

ASIC Annual Report 2018-19 06

Our vision

Afair,strongandefficientfinancialsystem for all Australians.

Our regulatory mission

To realise our vision, we will use all our regulatory tools to:

âº change behaviours to drive good consumer and investor outcomes

âº act against misconduct to maintain trust and integrity in the financialsystem

âº promote strong and innovative developmentofthefinancialsystem

âº help Australians to be in control of their financiallives.

Our registry mission

To realise our vision, we will provide efficientandaccessiblebusinessregisters that make it easier to do business.

Our strategic changeprogram

As part of our change program, we have been:

âº significantlyincreasingandaccelerating court-based enforcement matters as part of our new enforcement strategy. Wearealsolookingtousethefull extent of our new penalties and powers through the operational discipline of ‘Whynotlitigate?’

âº embedding and expanding new supervisory approaches and promoting best practice and innovation in regulation - particularly through our Close and Continuous Monitoring

program (or CCM) and our corporate governance review that is aimed at improving governance practices at the board level

âº implementing new and existing reforms and working towards our new obligations and responsibilities in response to the Royal Commission. This includes an expanded role for ASIC to become the primary conduct regulator in superannuation.

In 2018-19, there has been:

âº a 20% increase in the number of ASIC enforcement investigations

âº a 51% increase in enforcement investigations involving Australia’s largestfinancialinstitutions (ortheirofficers,employeesor subsidiary companies)

âº a 216% increase in wealth management investigations.

In August 2018 and March 2019, the Government announced a total of $474 million in additional funding over four years to strengthen and expand ASIC’s remit, including our ability to address misconductinthefinancialservices sector. This funding will be crucial for ASIC as we put the Royal Commission recommendations into effect. It will also enable ASIC’s deployment of enhanced regulatory approaches, including our supervisory initiatives.

ASIC’s role 07

Outlook - our strategicpriorities

Wehaveidentifiedsevenprincipal strategic priorities for 2019-20.

Thestrategicprioritieswehaveidentified representthemostsignificantwaysin which we are addressing consumer harm, punishing wrongdoing, and encouraging better culture and behaviour - including a greater emphasis on fairness and professionalism - throughout the industry.

ASIC’s key priorities

High deterrence enforcement action

Wearefocusedonefficientandeffective enforcement action, particularly cases that have a high deterrence value and those responding to egregious misconduct (e.g. misconduct impacting vulnerable consumers).

Wewillbettercommunicateour enforcement priorities, outcomes and performance.

Prioritising the recommendations andreferrals from the Financial Services Royal Commission

Our regulatory work is being guided by the outcomes of the Royal Commission. In addition, we will support key law reforms to achieve the recommendations of the Royal Commission.

WewillprioritiseRoyalCommission referrals,andprogressthemefficiently and effectively.

Delivering as a conduct regulator for superannuation

In establishing ASIC as the primary regulator of conduct in superannuation, consistent with the Government’s response to the Royal Commission recommendations, we will improve outcomes in superannuation through:

âº taking decisive regulatory and enforcement action to deter misconduct, and supporting relevant legislative reforms

âº supervision and surveillance of superannuation trustees focusing on whether trustees act in the best interests of consumers and treat them fairly

âº implementation of the superannuation recommendations of the Financial Services Royal Commission and other reviews.

Addressing harms in insurance

Wewilltakeenforcementandother regulatory action against mis-selling, particularly to vulnerable consumers, and review product features and practices that raise concerns.

Wewillsupportandimplementinsurance law reforms. As these reforms are legislated, we will take regulatory action on unfair contract terms and problems in claims handling.

ASIC Annual Report 2018-19 08

Improving governance and accountability

Wewillconductenhancedandintensive supervisionofkeyfirms,includingvia our CCM program and our Corporate Governance Taskforce.

Wewillbeprioritisingenforcement cases that hold individuals to account for governance failures or breaches that result in harm.

Wearecommittedtosupporting and implementing the proposed conduct accountability regime, and new laws on phoenix activity to deter misconduct among company directors and practitioners.

Protecting vulnerable consumers

Considering the impact of harm to consumers, particularly those who are vulnerable, is central to how we prioritise our work.

Wewilltakeregulatoryactionagainst unfair treatment of consumers facing hardship as well as irresponsible actions byfinancialservicesproviders.

WeremaincommittedtoourIndigenous Outreach Program, which helps Indigenous Australians better manage theirfinancesandimprovesthequality offinancialservicesprovidedtothem.

Addressing poor financial advice outcomes

Wewillsupportmeasurestoimprove theprofessionalismoffinancialadvisers and target the potential misconduct and harms to consumers that may arise from the industry’s shift towards ‘general advice’ models.

Wearealsocloselymonitoringthe potential harms that may result from larger institutions’ departure from the sector.

Operational priorities

Wealsorecognisetheimportanceof strengthening our own capabilities so that we have the right people and the right tools to do our job. To this end, we are:

âº building up ASIC’s capability in behavioural sciences, data and technology

âº positioning ASIC as a strategic and agile regulator

âº developing and using new regulatory tools and remedies

âº scaling up ASIC to deliver these outcomes.

James Shipton Chair

ASIC’s role 09

Our achievements

Below is a snapshot of some of our key achievements this year.

For more information about our key results, see Table 2.2.1

Surveillance

Over 1,200 surveillances undertaken

Investigations

151 investigations commenced

103 investigations completed

Prosecutions

individuals charged in criminal proceedings

167 criminal charges laid

custodial sentences (10 people imprisoned)

16 non-custodial sentences

369 individuals charged in summary prosecutions for strict liability offences

798 criminal charges laid in summary prosecutions for strict liability offences

Civil penalties

$12.7m in civil penalties imposed by the courts

Bannings

182 people removed or restricted from providing financialservicesorcredit

peopledisqualifiedor removed from directing companies

actions taken against auditors and liquidators

Infringement notices, compensation and court enforceable undertakings

14 infringement notices issued

$0.73m infringement penalties paid

$22.8m compensation and remediation for investors and consumers

$18.1m communitybenefitfund payments

court enforceable undertakings

Engagement

Over 1,400 engagements with stakeholders

Industry reports

45 industry reports published

WereportmanyofthesefigureseverysixmonthsinourEnforcementUpdates(Report615andReport625). Those reports are based on information available at the time of reporting and in some cases the totals vary slightly fromthestatisticsreportedinthistable,whicharedefinitive.

ASIC Annual Report 2018-19 10

1.1 ASIC’s role and responsibilities

Our regulatory approach

ASIC is Australia’s corporate, markets, financialservicesandconsumer credit regulator.

Wehaveanumberofregulatorytools available to us to address the harms that threaten good investor and consumer outcomes. These tools include enforcement action, supervision and surveillance, engagement with industry and other stakeholders, guidance, education and policy advice.

For most of the issues in our remit, we use a number of these tools to achieve the best outcomes. This includes:

âº supervising entities on an ongoing basis

âº undertaking risk-based surveillances thattargetspecificincidents or transactions

âº undertaking thematic reviews that focus on issues across a particular sector

âº commissioning reports

âº enforcing the law.

Our threat, harm and behaviour framework identifiesregulatoryrisksinthemarket to inform the strategic priorities in our corporate plan. This helps us prioritise enforcement and other regulatory actions targeting particular harms to investors, consumers and markets.

Our Emerging Threats and Harms Committee is a key component of ASIC’s broader risk management framework. This Committee of Commissioners and senior ASIC leaders helps ASIC:

âº identify, monitor and advise on emerging risks, including product or sector risks relevant to our strategic priorities

âº review the perimeter of our regulatory responsibilities for regulatory gaps not subject to appropriate regulation

âº monitor key changes to the priority harms that can cause harm to investors, consumers and the markets and sectors we regulate.

Whenweidentifyapotentialbreachof the law or a risk or cause of harm, we will determine the most appropriate response. Broadly, we consider the following factors in deciding which regulatory tool or tools we will use:

âº thematter’sstrategicsignificance(the seriousness of the misconduct or harm, how widespread it is, the importance of deterrence, and our strategic priorities)

âº the likelihood of success of using one or more of the tools available to us

âº theissuesspecifictothecase (e.g. availability of evidence)

âº thebenefitsofpursuingmisconduct (e.g. the impact of remedies we may be able to obtain to deter misconduct and protect or compensate consumers, and other public interest factors)

âº the availability of resources.

ASIC’s role 11

Our legislative responsibilities

The Australian Securities and Investments Commission Act 2001 (ASIC Act) requires ASIC to strive to:

âº maintain, facilitate and improve the performanceofthefinancialsystem and entities within it in the interests of commercial certainty, reducing businesscosts,andtheefficiencyand development of the economy

âº promoteconfidentandinformed participation by investors and consumersinthefinancialsystem

âº administer the law effectively and with minimal procedural requirements

âº receive,processandstore-efficiently and quickly - the information we receive

âº make information about companies and other bodies available to the public as soon as practicable

âº take whatever action we can, and which is necessary, to enforce and give effect to the law.

Wemonitorandpromotemarketintegrity and consumer protection in relation totheAustralianfinancialsystemand payments system.

Weenforcethelawandregulate companies,financial marketsand financialservicesunderthefollowing key legislation:

âº ASIC Act

âº Business Names Registration Act 2011

âº Corporations Act 2001 (Corporations Act)

âº Insurance Contracts Act 1984

âº National Consumer Credit Protection Act 2009 (National Credit Act).

Wealsoadministerpartsofthe following legislation:

âº Banking Act 1959

âº Life Insurance Act 1995

âº Medical Indemnity (Prudential Supervision and Product Standards) Act 2003

âº Retirement Savings Accounts Act 1997

âº Superannuation (Resolution of Complaints) Act 1993

âº Superannuation Industry (Supervision) Act 1993 (SIS Act).

ASIC Annual Report 2018-19 12

Oversight

Responsible Ministers

At 30 June 2019, the Ministers responsible for ASIC were the:

âº Treasurer, the Hon. Josh Frydenberg MP

âº Assistant Treasurer and Minister for Housing, the Hon. Michael Sukkar MP

âº Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator the Hon. Jane Hume.

Parliamentary oversight

The Parliamentary Joint Committee on Corporations and Financial Services (PJC) provides parliamentary oversight of ASIC.WealsoappearbeforetheSenate Standing Committee on Economics, the House of Representatives Standing Committee on Economics, and other parliamentary committees and inquiries as required.

Correspondence with members of Parliament

ASIC receives correspondence from members of Parliament, both directly and indirectly through requests from Treasury.

Weaimtorespondto100%of correspondence within 28 days of receipt. In 2018-19, we responded to 265 letters and emails from members of Parliament.Werespondedto91%ofthis correspondence within 14 days and 100% within 28 days.

Financial and operational oversight

ASIC is a non-corporate Commonwealth entity under the Public Governance, Performance and Accountability Act 2013 (PGPA Act), which primarily governs our use and management of public resources.

The PGPA Act also requires ASIC to prepare a corporate plan covering our purpose, environment, performance, capability, and risk oversight and management for the budget forward estimates period. ASIC’s Corporate Plan 2018-19 to 2021-22 was published on 31 August 2018.

The Auditor-General audits our annual financialstatementsonbehalfof the Parliament.

ASIC’s role 13

1.2 ASIC’s structure and management

This year, the Government appointed two new Deputy Chairs and two additional Commissioners to ASIC.

The Commission made some important changes to ASIC’s structure, appointing a group of executive directors who sit between the Commission and senior executive leaders and have operational responsibility for the organisation.

This allows the Commission to better focus on strategic matters, engage with external stakeholders, and provide oversight and governance to teams.

For more information on the Commissioners, see Section1.3 and on Executive Directors, seeSection1.4

The Commission in June 2019: From left, Deputy Chair Daniel Crennan QC, Commissioner Danielle Press, Commissioner John Price, Deputy Chair Karen Chester, Chair James Shipton, Commissioner Cathie Armour and Commissioner Sean Hughes.

ASIC Annual Report 2018-19 14

ASIC organisational structure

Commission

James Shipton Chair

Cathie Armour Commissioner John Price Commissioner

Karen Chester Deputy Chair Daniel Crennan QC Deputy Chair

Sean Hughes Commissioner Danielle Press Commissioner

Supervisory Teams

Financial Services

Credit, Retail Banking & Payments

Insurers

Markets

Corporations

Financial Reporting & Audit

Insolvency Practitioners

Market Infrastructure

Market Supervision

Wealth Management

Financial Advisers

Investment Managers

Superannuation

Office of Enforcement

Financial Services Enforcement

Wealth Management Enforcement - Major Financial

Institutions

Wealth Management Enforcement

Markets Enforcement

Corporations & Corporate Governance

Enforcement WA&Criminal IntelligenceUnit

Markets Enforcement

Close & Continuous Monitoring

Close & Continuous Monitoring Team

Assessment & Intelligence

Licensing

Misconduct & Breach Reporting

OfficeofSmall Business

Officeofthe Whistleblower

Small Business, Compliance & Deterrence

Strategy

Financial Capability

International

Strategic Intelligence

Strategic Policy

Behavioural Research &PolicyUnit

Chief Legal Office

Administrative Law

Commission Counsel

Delegates Panel

Special Counsel

Operations

Corporate Services

Finance

Information Technology

Specialist Services/ ChiefDataOfficer

Commission Specialist Teams

Corporate Affairs

Internal Audit & Operational Risk

People & Development

Registry

Communication & Engagement

Governance & Strategy

Legal

Program Delivery

Service Delivery

Service Delivery Support

Registry Development

Workload,Insight & Reporting

ASIC’s role 15

1.3 ASIC Commissioners

James Shipton

Chair, BA, LLB (Hons)

James Shipton commenced as ASIC Chair on 1 February 2018.

Australian Criminal Intelligence Commission, Australian Government Financial Literacy Board, Consumer Advisory Panel, Council of Financial Regulators, Criminal Justice and Law Enforcement Forum, External Advisory Panel, International Organization of Securities Commissions, Serious Financial Crime Taskforce, Trans-Tasman Council on Banking Supervision

Karen Chester

BEc (Hons)

Karen Chester commenced as ASIC Deputy Chair on 29 January 2019.

Consumer Advisory Panel, External Advisory Panel

Daniel Crennan QC

BA, LLB (Hons)

Daniel Crennan commenced as ASIC Deputy Chair on 16 July 2018.

Consumer Advisory Panel, External Advisory Panel

Internal committees: Enforcement Committee

John Price

BA, LLB (Hons)

John Price commenced as an ASIC Commissioner on 21 March 2012.

ASIC Business Advisory Panel, Consumer Advisory Panel, Council of Financial Regulators, Digital Finance Advisory Panel, Director Advisory Panel, External Advisory Panel, Federal Regulatory Agency Group, Financial Reporting Council, Serious Financial Crime Taskforce, Small Business Commissioners Meetings, Trans-Tasman Council on Banking Supervision, Trans-Tasman Emerging Risk Committee

Internal committees: ASIC Diversity Council, Regulatory Policy Committee, Regulatory Transformation Committee

ASIC Annual Report 2018-19 16

Cathie Armour

BEc, LLB (Hons), LLM

Cathie Armour commenced as an ASIC Commissioner on 3 June 2013.

CFR Financial Markets Infrastructure Steering Committee, Consumer Advisory Panel, External Advisory Panel, Director Advisory Panel, Markets Advisory Panel

Internal committees: Audit Committee, Reconciliation Action Plan Steering Committee, Regulatory Issues Committee, Regulatory Transformation Committee

Danielle Press

BEc (Hons)

Danielle Press commenced as an ASIC Commissioner on 17 September 2018.

Consumer Advisory Panel, Director Advisory Panel, External Advisory Panel, Markets Advisory Panel

Sean Hughes

BA, LLB (Hons), LLM

Sean Hughes commenced as an ASIC Commissioner on 1 December 2018.

ASIC-APRA Committee, Consumer Advisory Panel, External Advisory Panel, Trans-Tasman Council on Banking Supervision, Trans- Tasman Emerging Risk Committee

Internal committees: Emerging Threats and Harms Committee, ASIC Annual Forum Project Board

Peter Kell

BA (Hons)

Peter Kell ceased his role as Deputy Chair on 6 December 2018.

Peter commenced as an ASIC Commissioner on 7 November 2011 and was appointed Deputy Chair on 6 May 2013.

ASIC’s role 17

1.4 ASIC Executive Directors

Executive Director Assessment and Intelligence

Warren Day BBus (Acc), LLB (Hons), MProfAcc, LLM, MBus (InfoTech)

Executive Director Markets Enforcement

Sharon Concisom LLB (Hons)

Executive Director Financial Services

Michael Saadat BEc, LLB (Hons), LLM, EMBA

Executive Director Strategy

Greg Kirk BA, LLB (Hons)

Executive Director Financial Services Enforcement

Tim Mullaly LLB, BBus

Executive Director Wealth Management

Joanna Bird BA, LLB (Hons), BCL (Hons)

Executive Director Markets

Greg Yanco BBus (Acc), FCPA, MSAFAA

General Counsel

Chris Savundra BCom, LLB (Hons), BCL (Distinction)

ASIC Annual Report 2018-19 18

Executive Director Registry

Rosanne Bell BCom

Chief Supervisory Officer Close and Continuous Monitoring

Oliver Harvey BA, LLB, MPhil

Executive Director Operations

Carlos Iglesias BEc (Acc)

Chief Supervisory Officer Close and Continuous Monitoring

Louise Macaulay BA (Hons), LLB, LLM

ASIC’s role 19

1.5 Stakeholder teams

ASIC’s stakeholder teams and who they regulate

Markets

Greg Yanco - Executive Director

Corporations

Claire LaBouchardiere and Rachel Howitt - Senior Executive Leaders

âº Unlistedpubliccompanies:23,360

âº Listed companies (excluding listed schemes): 2,085

Financial Reporting and Audit

Doug Niven - Senior Executive Leader

âº Registered company auditors: 3,962

âº Entitiesrequiredtoproducefinancial reports: 32,296

âº Registered SMSF auditors: 5,919

Insolvency Practitioners

Thea Eszenyi - Senior Executive Leader

âº Registered liquidators: 651

âº Companies entering external administration: 8,105

Market Infrastructure

Nathan Bourne - Senior Executive Leader

âº Licensed domestic and overseas financialmarkets:28

âº Exempt markets: 20

âº Licensed domestic and overseas clearing and settlement facilities: 7

âº Exempt clearing and settlement facilities: 1

âº Derivative trade repositories: 2

âº Credit rating agencies: 6

Market Supervision

Calissa Aldridge - Senior Executive Leader

âº Market participants: 97

âº Securities dealers: 989

âº Investment banks: 22

âº Retail OTC derivative providers: 66

âº Wholesaleelectricityproviders:48

ASIC Annual Report 2018-19 20

Wealth Management

Joanna Bird - Executive Director

Financial Advisers

Kate Metz - Senior Executive Leader

âº Financial advisers: 26,793

âº AFS licensees licensed to provide personal advice: 4,199

âº AFS licensees licensed to provide general advice only: 1,760

âº AFS licensees licensed to deal in financialproductsonly:178

Investment Managers

Rhys Bollen - Senior Executive Leader

âº Responsible entities: 437

âº Registered managed investment schemes: 3,712

âº Wholesaletrustees:1,644

âº MDA operators: 215

âº IDPS operators: 91

âº Custodial service providers: 1,090

âº Foreignfinancialservicesproviders:934

âº Total assets: $1.5 trillion

Superannuation

Jane Eccleston - Senior Executive Leader

âº Superannuation trustees: 114

âº Total assets under management: $1,834 million

Financial Services

Michael Saadat - Executive Director

Credit, Retail Banking and Payments

Tim Gough - Senior Executive Leader

âº Authorised deposit-taking institutions: 147

âº Australian credit licensees: 5,188

âº Credit representatives: 38,187

âº Non-cash payment facility providers: 610

âº Trustee companies: 11

Insurers

Emma Curtis - Senior Executive Leader

âº General insurers: 82

âº Life insurers: 29

âº Friendly societies: 12

Financial Capability

Laura Higgins - Senior Executive Leader

Assessment and Intelligence

Warren Day - Executive Director

ASIC’s role 21

Close and Continuous Monitoring

Louise Macaulay and Oliver Harvey - Chief Supervisory Officers

âº Entities subject to supervision: AMP, ANZ,CBA,NABandWestpac

Registry

Rosanne Bell - Executive Director

âº Total companies registered: 2.7 million

âº New companies registered: 223,661

âº Total business names registered: 2.3 million

âº New business names registered: 375,052

âº Number of searches of ASIC registers: 142.6 million

Office of Enforcement

FINANCIAL SERVICES ENFORCEMENT

Tim Mullaly - Executive Director

Financial Services Enforcement

Melissa Smith - Senior Executive Leader

Wealth Management Enforcement - Major Financial Institutions

David McGuinness - Senior Executive Leader

Wealth Management Enforcement

Marita Hogan - Senior Executive Leader

MARKETS ENFORCEMENT

Sharon Concisom - Executive Director

Corporations and Corporate Governance

George Stogdale - Senior Executive Leader

Enforcement Western Australia and Criminal Intelligence Unit

Natalie DÃ¼rr - Senior Executive Leader

Markets Enforcement

Sharon Concisom - Senior Executive Leader

ASIC Annual Report 2018-19 22

1.6 Regional Commissioners

ASIC’s Regional Commissioners are our local ambassadors, promoting ASIC initiatives and engaging with regional communities through regular liaison.

For more information on our regional action, see Section 4.2

Australian Capital Territory

Laura Higgins BEd, BA (Hons)

âº Commenced as Acting Regional Commissioner in May 2019.

Christian Mikula BA, LLB (Hons)

âº Regional Commissioner from February 2016 to May 2019.

New South Wales

Michael Saadat BEc, LLB (Hons), LLM, EMBA

âº Commenced as Regional Commissioner in July 2016.

Northern Territory

Duncan Poulson BA, LLB

âº Commenced as Regional Commissioner in February 2006.

Queensland

Amanda Zeller BCom, CPA

âº Commenced as Acting Regional Commissioner in May 2019.

John Weaver LLB, MSc (Fraud and Risk Management), FGIA

âº Regional Commissioner from June 2016 to May 2019.

South Australia

Melissa Smith LLB (Hons), BA (Juris), GDLP

âº Commenced as Regional Commissioner in June 2015.

Tasmania

Chris Green LLB, GDipBA (Exec)

âº Commenced as Regional Commissioner in November 2013.

Victoria

Warren Day BBus (Acc), LLB (Hons), MProfAcc, LLM, MBus (InfoTech)

âº Commenced as Regional Commissioner in October 2008.

Western Australia

Natalie DÃ¼rr LLB

âº Commenced as Regional Commissioner in July 2017.

ASIC’s role 23

1.7 Government priorities

Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry

ASIC welcomed the release of the finalreportoftheRoyalCommissionon 1 February 2019.

The Royal Commission examined whether there has been misconduct or conduct that falls below community expectations in the banking, superannuation and financialservicesindustry.ASICassisted the Royal Commission throughout the year by providing detailed intelligence across different market sectors, witness statements and submissions, and by appearing at public hearings.

For more information on the Royal Commission, see Section 1.8

Increased funding for ASIC

In August 2018 and then in March 2019, the Government announced over $470 million in additional funding to help strengthen and intensify ASIC’s approach to enforcement and expand its ability to addressmisconductinthefinancialsector.

The funding will support enhanced supervisionoflargerfinancialinstitutions, help ASIC implement its new role as the primary conduct regulator for superannuation, and support the administration of a conduct-focused accountability regime.

Product intervention powerand design and distribution obligations

On 5 April 2019, the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 came into force, providing ASIC with a product intervention power and imposing design and distribution obligations on industry.

The product intervention power will strengthen ASIC’s consumer protection toolkit by equipping us with the power to intervene where there is a risk ofsignificantconsumerdetriment. ASIC will consult on its approach to using this important new power in the second half of 2019.

The design and distribution obligations will bring accountability for issuers and distributors to design, market and distributefinancialandcreditproducts that meet consumer needs. Phased in over two years, the obligations will require issuers to identify in advance the consumers for whom their products are appropriate, and direct distribution to that target market.

Together,thesesignificantlegislative reforms will enable ASIC to take more effective action to improve standards and achieve fairer outcomes for consumers. ASIC will work with industry, including through guidance, as it puts in place processes and systems to meet its new obligations.

ASIC Annual Report 2018-19 24

Strengthening corporate and financial sectorpenalties

The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 came into force on 13 March 2019 and is an important step forward for ASIC’s enforcement regime. ASIC is now in a stronger position topursuesignificantcivilpenaltiesand criminal sanctions against those who breach the law.

This new law implements recommendations of the ASIC Enforcement Review Taskforce. It strengthens existing penalties and introduces new penalties for breaches ofcorporateandfinancialserviceslaws, including by:

âº increasing the maximum prison penalty to 15 years for the most serious offences, substantially increasing maximum prison penalties for a range ofothersignificantoffences,and doublingfinesformanyoffences

âº increasing the maximum civil penalty for individuals to $1.05 million or three timesthebenefitobtained,andfor companies to $10.5 million or three timesthebenefitobtainedor10%of annual turnover, capped at $525 million

âº extending civil penalties to a greater range of misconduct, including the failure of AFS licensees and credit licenseestoactefficiently,honestly and fairly

âº making disgorgement orders available as an additional remedy in civil penalty proceedings.

The legislation follows ASIC’s recommendations to Government to increase penalties and ensure that significantbreachesofthelaware appropriately punished.

Stronger protections for whistleblowers

The passage in March 2019 of the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 significantlyimprovedtheprotections available for whistleblowers who report misconduct. The reforms are intended to encourage people who have observed misconduct to come forward, to provide better protection for them, and to support increased reporting of corporate wrongdoing.

The reforms complement the measures ASIC has had in place since 2014 to improve our processes for assessing whistleblower reports and for communicating with whistleblowers during our inquiries.

ASIC’sOfficeoftheWhistleblower is overseeing the implementation of the reforms, which commence from 1 July 2019.

For more information on whistleblower protections, seeSection 5.4

ASIC’s role 25

Combating illegal phoenixactivity

In 2018-19, the Government progressedsignificantlawreformto help combat illegal phoenix activity. This activity involves creating a new company to continue the business of a company deliberately liquidated to avoid paying taxes, creditors and employee entitlements.

These reforms build on the work of the Phoenix Taskforce, of which ASIC is a member. ASIC assisted the Government in developing the reforms and made submissions to the consultation process.

In December 2018, the Government amended the Insolvency Practice Rules (Corporations) 2016 to restrict related party voting rights and limit the ability of phoenixoperatorstoundulyinfluencethe conduct of an external administration. In April 2019, the Government amended the Corporations Act to introduce new offence provisions for entering into a transaction to reduce the recovery of employee entitlements. The amendments also introduced provisions to assist in thedisqualificationofcompanydirectors of two or more companies that have relied on the Fair Entitlements Guarantee scheme and have also breached the Corporations Act.

In February 2019, the Government introduced into Parliament a package of reforms to further address illegal phoenix activity. These pending reforms include new phoenix offence provisions, measures to prevent the misuse of backdating director appointments and resignations, and voidable transaction provisions that allow the recovery ofcompanyassetsforthebenefit

of creditors. Reform to implement a DirectorIdentificationNumberisbeing pursued via the Government’s registry modernisation initiative.

For more information on our work oncombating illegal phoenix activity, see Sections 3.7 and 5.5

Modernising of businessregisters

Over the course of the year, we continued to work with Treasury and the Australian TaxationOffice(ATO)todevelopoptions for the modernisation of Australian business registers, including 31 in-scope ASIC registers and the Australian Business Register.Wewillcontinuethisworkto facilitate the Government’s 2018-19 budget announcement to modernise and consolidate ASIC’s registers with the Australian Business Registrar. In the meantime, we are continuing to support our existing systems, which are approaching the end of their useable life.

For more information on our registry, see Section 2.4

Competition

In October 2018, the Treasury Laws Amendment (Enhancing ASIC’s Capabilities) Act 2018 amended the ASIC Act to give ASIC an explicit mandate to consider the effects that the performance of our functions and the exercise of our powers will have on competition in the financialsystem.

ASIC Annual Report 2018-19 26

Wehaveissuedinternalguidanceonthe practical application of this mandate and are updating relevant regulatory guides, internal systems and manuals.

Other government inquiries

In 2018-19, ASIC made submissions to several parliamentary and government inquiries and was involved in numerous tabled reports.

The 2018-19 reports included:

âº Standing Committee on Economics, Review of the Australian Securities and Investments Commission Annual Report 2017, tabled 10 September 2018

âº Parliamentary Joint Committee on Corporations and Financial Services, Oversight of ASIC, the Takeovers Panel and the Corporations Legislation: Report No. 1 of the 45th Parliament, 13 February 2019

âº Parliamentary Joint Committee on Corporations and Financial Services, The operation and effectiveness of the Franchising Code of Conduct, 14 March 2019

âº Parliamentary Joint Committee on Corporations and Financial Services, Options for greater involvement by private sector life insurers in work rehabilitation, 24 October 2018

âº Senate Economics Legislation Committee, Banking System Reform (Separation of Banks) Bill 2019, 8 May 2019

âº Senate Economics Legislation Committee, Parliamentary Joint Committee on the Australia Fund Bill 2018, 3 April 2019

âº Senate Economics Legislation Committee, Lower Tax Bill 2018, 2 April 2019

âº Senate Economics Legislation Committee, Australian Business Securitisation Fund Bill 2019 [Provisions], 26 March 2019.

The 2018-19 submissions included:

âº Senate Economics Legislation Committee, Commonwealth Registers Bill 2019 and four related Bills [Provisions]

âº Senate Economics Legislation Committee, Treasury Laws Amendment (Consumer Data Right) Bill 2019 [Provisions], 21 March 2019

âº Senate Economics Legislation Committee, Progress report: Treasury Laws Amendment (Consumer Data Right) Bill 2019 [Provisions], 6 March 2019

âº Senate Economics References Committee, Credit and financial services targeted at Australians at risk of financial hardship , 22 February 2019

âº Senate Economics Legislation Committee, Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 [Provisions], 11 February 2019

âº Senate Economics Legislation Committee, Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 [Provisions], 11 February 2019

âº Senate Economics References Committee, Financial and tax practices of for-profit aged care providers , 27 November 2018

ASIC’s role 27

âº Senate Economics Legislation Committee, Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018; Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2018; Income Tax Rates Amendment (Sovereign Entities) Bill 2018, 9 November 2018

âº Senate Economics Legislation Committee, Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, 8 November 2018

âº Senate Economics Legislation Committee, Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 [Provisions], 13 August 2018.

1.8 Financial Services Royal Commission

On 30 November 2017, the Prime Minister and the Treasurer announced that the Government would establish a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

On 14 December 2017, the Governor-General appointed the Hon. Kenneth Hayne AC QC as Commissioner. The Commissioner provided the finalreportoftheRoyalCommission to Government on 1 February 2019. On 4 February 2019, the Treasurer released the Government’s response to the Royal Commission.

Ofthefinalreport’s76recommendations, 12 were directed at ASIC or required action by ASIC without the need for legislative change, while 34 recommendations relevant to ASIC will require legislative reform. Of these, 11 extend ASIC’s remit and powers and 23 impose new arrangements on ASIC’s regulated population.

WepublishedanupdateinFebruary2019 on our planned actions to implement the Royal Commission recommendations. Wecommittedtofullyimplementing the 12 recommendations directed at ASIC.Whererecommendationsrequire legislative reform, we are working with Treasury to provide policy and technicalinputonspecificmeasures and embedding new powers as reforms are implemented.

The Royal Commission recommendations reinforced and informed the program of changethatASICbeganin2018.Wehave also aligned our priorities to respond to the Royal Commission and to address the Government’s response to the Royal Commission.

ASIC Annual Report 2018-19 28

ASIC action

ASIC is committed to taking action in responsetotheRoyalCommission’sfinal report and the Government’s response. Our current and planned actions include:

âº working with Treasury’s Financial Services Reform Implementation Committee, established to coordinate the implementation of reforms arising from the Government’s response to the Royal Commission

âº continuing to strengthen our enforcement culture and approach, including by adopting an operational self-disciplineof‘Whynotlitigate?’ andcreatingaseparateOffice of Enforcement

âº strengthening our governance and culture to realign our enforcement and regulatory priorities

âº prioritising the referrals made to ASIC intheRoyalCommissionfinalreport and matters that were case studies before the Royal Commission, and working on a range of misconduct relatingtomajorfinancialinstitutions

âº preparing to become the primary conduct and disclosure regulator for superannuation

âº working with the Australian Prudential Regulation Authority (APRA) on the extended executive accountability regime for other prudentially regulated institutions and preparing for the implementation of a conduct accountability regime that will also apply to non-prudentially regulated entities.

Wearealsostrengtheningour cooperation with APRA, including by revising the existing APRA-ASIC MemorandumofUnderstanding, refreshing the APRA-ASIC governance structure through the establishment of the APRA-ASIC Committee in the second half of 2019, and further enhancing information-sharing arrangements between the two agencies. APRA and ASIC already engage frequently and effectively across a wide range of matters and at all levels of both agencies.

Summary of ASIC input to the Royal Commission

Over the course of the Royal Commission, ASIC responded to 144 requests for information (including 93 notices to produce, 41 requests for information, and 10 witness statements), reviewed over 160,000 documents, and produced more than 97,000 documents. Seven witnesses from ASIC appeared at the hearings.

Our work included document review and production, assisting the Royal Commission on potential law reform and policy issues, government liaison, preparation of submissions and responses to Royal Commission reports, and information management and litigation support.

ASIC’s role 29

Table 1.8.1 ASIC’s Royal Commission effort

Volume of work Resource effort

Average timeframe for our responses to information requests 5 days Dedicated team (funded) effort (hours)

25,216

Number of documents reviewed 160,559

Number of documents produced 97,321 Unfundedresourceeffort (hours) 29,016

Number of pages produced 562,529

TOTAL OF

144

INFORMATION REQUESTS

Notices to produce

41 Requests for information

10 Witness statements

There were 13 referrals made to ASIC, 11 of which were in the Royal Commission’s finalreport.Tworeferralsweremade by the Commissioner during the Royal Commission hearings. Conduct the subject of one matter referred to ASIC by the Royal Commission was before the courtsin2018-19(NAB/NULIS).ASIChas assessed and begun investigations into a further 32 case studies examined by the Royal Commission. One of these case studies was before the courts in 2018-19 (Dover/McMaster) and another was being considered by the Commonwealth Director of Public Prosecutions (CDPP) for potential criminal action.

Budget

ASIC was given a total of $10.628 million ($5.882 million in FY18 and $4.746 million in FY19) to cover the costs of its engagement with the Royal Commission.

The funding recognised ASIC’s critical role in assisting the Royal Commission, asweprovidedasignificantquantityof information relevant to the matters the Royal Commission examined. It also acknowledged that ASIC required external assistance to engage with the Royal Commission, so that we could remain focused on our ongoing work as a regulator.

ASIC Annual Report 2018-19 30

1.9 Office of Enforcement

This year, we made significant progress in changing ASIC’s approach to enforcement.

On 21 December 2018, Deputy Chair Daniel Crennan QC completed an Internal Enforcement Review of ASIC withMichaelWylesQC,ProfessorIan Ramsay, Australian Federal Police Deputy Commissioner Leanne Close, and Andrew Bailey and Andrew Di Pasquale of counsel. One of the key recommendations of that review was that ASIC establish a separate OfficeofEnforcement.Thereviewwas provided to ASIC’s Commissioners and to the Royal Commission.

WeresolvedtoestablishanOfficeof Enforcement in February 2019 and the Officebecameoperationalon1July 2019.TheprincipalpurposeoftheOffice is to strengthen ASIC’s enforcement effectiveness and our decision making and capabilities.

TheOfficeisresponsibleforcarrying out ASIC’s enforcement activities. It will operate under the following principles:

âº a single enforcement strategy for ASIC

âº strengthened governance structures across all of ASIC’s enforcement functions

âº collective prioritisation and accountability for delivery of the most strategically important enforcement matters across ASIC

âº flexibilityinresourceallocationacross specialist enforcement teams within theOffice

âº collective accountability for enforcement capability building, including for enforcement training and the use of technology and data across theOffice

âº ensuring that proper consideration is given to possible criminal and civil litigation outcomes by applying the‘Whynotlitigate?’operational self-discipline.

In 2019-20, a key priority for ASIC will be ensuring high deterrence enforcement action.ASICwillfocusonefficient and effective enforcement action and on targeting cases of egregious harm, especially those involving vulnerableconsumers.Wewillalso continue to prioritise referrals from the Royal Commission for investigation and litigation.

To optimise the deterrence impact of our enforcement work, we will improve our communication of our enforcement priorities, outcomes and performance.

ASIC’s role 31

Recent enforcement metrics

Since last year, we have also been significantlyincreasingandaccelerating our investigations, which should translate into more court-based outcomes as part of our new enforcement strategy. In 2018-19, there has been:

âº a 20% increase in the number of ASIC enforcement investigations

âº a 51% increase in enforcement investigations involving Australia’s largestfinancialinstitutions(ortheir officers,employeesorsubsidiary companies)

âº a 216% increase in wealth management investigations.

For more information, see Report615 ASIC enforcement update: July to December 2018 and Report 625 ASIC enforcement update: January to June 2019

1.10 Enhanced approach tosupervision

ASIC has enhanced key aspects of its supervisory approach, as part of its response to widespread conduct failures in the Australian financial services industry.

The aim of our enhanced supervisory approach is to promote permanent cultural and behavioural change in the monitored institutions and across the financialservicesmarket.

Our approach now encompasses the Close and Continuous Monitoring (CCM) program, continued supervision of providers and participants in various markets and a targeted review of corporate governance practices.

Close and Continuous Monitoring

The CCM program introduces a new supervisory model for Australia’s largest financialservicesinstitutions(AMP,ANZ, CBA,NABandWestpac)andfeatures a regular onsite ASIC presence in these institutionstoreviewspecificpractices.

The CCM program also emphasises C-suite engagement, designed to encourage a shift in leadership mindset, non-financial riskmanagement, day-to-day behaviours and decision making.Wearecurrentlyfocusingour

ASIC Annual Report 2018-19 32

targeted reviews on breach reporting and internal dispute resolution within the supervised institutions.

Once a review is complete, ASIC writes to the CEO and chair of the board of each institution with observations resulting from the onsite surveillance. ASIC will ensure that the institutions’ response to these observations is appropriate and timely. Wewillalsotakeacomparativelookacross the groups, once a review on a topic is complete. A public statement will be made at the completion of thematic reviews.

This approach is one part of ASIC’s responsetothedeficienciesin theinstitutions’identificationand managementofnon-financialrisk.Italso aligns our regulatory approach more closely with international peer agencies

suchastheUnitedKingdom’sFinancial Conduct Authority (FCA), the Securities and Futures Commission of Hong Kong, andtheUSFederalReserve.

Ongoing onsite supervision of providers and participants in variousmarkets

Wearealsocontinuingouronsite supervision of equities and futures markets infrastructure providers and participants and extending this supervision to infrastructure providers andparticipantsinthefixedincome, currencies and commodities markets. Onsite supervision was also used recently to support our work on supervising allocations for capital raising.

Close and Continuous Monitoring program

TheCCMprogramreviewsspecificpracticesofthesupervisedinstitutionsto identifydeficienciesatanearlystageandtoensurethattheyarepromptlyand directlyidentifiedandelevatedtokeydecisionmakersinthosegroups.The program is initially focusing on:

âº howinstitutionsdetectandrespondtoreportablebreachesoffinancialservices laws, and how they remediate those breaches in a timely manner âº how the institutions resolve disputes (i.e. customer complaints management), including assessing processes, practices, information technology systems,

communications and reporting.

Since the program started in October 2018, we have:

âº conducted 300+ onsite interviews of banking staff at all levels âº had ASIC employees onsite in one or more institutions for most business days since late October 2018 âº reviewed thousands of documents, including information provided to the boards.

ASICplanstoexpandtheprogramtoadditionallargeandcomplexfinancial services entities and to increase the depth of coverage of the entities that are currently part of the program.

ASIC’s role 33

Corporate governance review

Alongside our onsite supervision and the CCM program, we conduct targeted and thematic reviews of corporate governance practices of a broad range of financialservicesorganisations(including the monitored institutions) and other ASX 100 entities.

Focus areas this year were governance processes and practices in director andofficeroversightofnon-financial risk, and the granting and vesting of variable remuneration to key management personnel.

Corporate Governance Taskforce

ASIC’s Corporate Governance Taskforce was established to conduct a targeted and thematic review of corporate governance practices across large listed entities in Australia. The aim is to improve market integrity and investor and consumer outcomes by improving governance practices. Our work is focused on detecting cultural, organisational and risk management failings, gaining a deeper

understanding of the practices of the entities we regulate, and adapting our regulatoryresponseswheretherearesignificantchangesinthemarkettoimprove the governance practices of those entities.

This year, we analysed the governance practices of seven of Australia’s largest ASX-listedfinancialinstitutionstounderstandhowdirectorsandofficersoversee (and,inthecaseofofficers,manage)non-financialrisk.Wealsoreviewed discretionary decision making in variable remuneration outcomes for key

management personnel for these entities, as well as 14 other ASX 100 entities.

During these reviews, we issued 31 information requests, reviewed over 43,000 documents, and completed 97 interviews. ASIC also engaged an expert in organisational and behavioural analysis, who completed 35 interviews with directors andofficers,observedboard,riskcommitteeandremunerationcommittee

meetings of six entities, and conducted 20 surveys with over 180 responses from board members and executives.

Corporate governance-related outcomes

As part of our corporate governance work, we use our suite of regulatory tools to modify behaviour and improve corporate conduct. This conduct includes treating investors and consumers fairly, being accountable to investors through accurate, timely and clear disclosure, and adopting sound corporate governance practices.

ASIC Annual Report 2018-19 34

1.11 Financial summary and expenditure

1 Revenue generated and retained by ASIC, including court costs recovered, royalties and other sundry income.

Outcomes

Parliament funds ASIC to achieve the outcomeofimprovedconfidencein Australia’sfinancialmarketsthrough promoting informed investors and financialconsumers,facilitatingfairand efficientmarkets,anddeliveringefficient registry systems.

Revenue for the Commonwealth

In 2018-19, ASIC raised $1,273 million for the Commonwealth in fees, charges and supervisory cost recovery levies, an increase of 5% from the 2017-18 year.

Revenue, appropriations and expenditure

In 2018-19, ASIC received approximately $374 million in appropriation revenue from the Government, including $36 million for the Enforcement Special Account (ESA), representing a $26 million or 8% increase compared with 2017-18. The $26 million increase in appropriation revenue relates mainly to additional funding provided to ASIC in 2018-19 for new budget measures.

The increase in total expenses is consistent with the increase in appropriation revenue and represents a general increase in staff and supplier expenditure.

ASIC received approximately $11 million of own-source revenue,1 which is $30 million lower than the previous year. This reduction in own-source revenuerelatesmainlytosignificant court costs recoveries during 2017-18 relating to ESA matters. The increase inthe2018-19deficitresultismainly attributable to the year-on-year change in own-source revenue.

ASIC’s role 35

Table 1.11.1 Revenue, appropriations and expenses

2018-19 $’000 2017-18 $’000

Change $’000 Change %

Revenues from Government (incl. ESA) 374,313 348,041 26,272 8%

Own-source revenue (incl. other adjustments) 11,443 40,875 (29,432) (72%)

Total revenue 385,756 388,916 (3,160) (1%)

Total expenses (incl. depreciation and amortisation, net of gains) 431,133 399,816 31,317 8%

Surplus/(Deficit) (45,377) (10,900) (34,477) 316%

Table 1.11.2 ASIC’s use of taxpayers’ money for the outcomes approvedby Parliament

2018-19 2017-18

Operating expenses (incl. depreciation and amortisation, net of gains)

Total (net of gains) $431m $400m

Annual change on previous year +8% +2%

Fees and charges (including industry funding) raised for the Commonwealth

Total $1,273m $1,216m

Annual change on previous year +5% +32%

ASIC Annual Report 2018-19 36

2ASIC’s annual performance statementChair’s statement 38Our purpose 382.1 Performance objectives 382.2 Key results - investor, consumer and markets performance objectives 392.3 Analysis - implementing our investor, consumer and markets performance objectives 442.4 Registry services and outcomes 702.5 ASIC Service Charter results 752.6 Banking Act, Life Insurance Act, unclaimed money and special accounts 78ASIC’s annual performance statement 37

Chair’s statement

I, James Shipton, as the accountable authority of ASIC, present the 2018-19 annual performance statement of ASIC, as required under paragraph 39(1)(a) of the PGPA Act. In my opinion, the annual performance statement is based on properly maintained records, accuratelyreflectstheperformanceoftheentity,andcomplieswithsubsection39(2)ofthe PGPA Act.

Our purpose

Ourvision-afair,strongandefficientfinancialsystemforallAustralians-reflectsour purposeasAustralia’sconductregulatorforcorporations,markets,financialservicesand consumer credit and highlights the important role we play on behalf of all Australians.

2.1 Performance objectives

ASIC’s performance reporting in 2018-19 was guided by ASIC’s Corporate Plan 2018-19 to 2021-22 (at pages 36-39) and our Portfolio Budget Statement (at pages 143-144), which set out our objectives and

targets related to investor and consumer trustandconfidence,andfairand efficientmarkets.

In particular, we aim to achieve our key performance outcome, as stated in the 2018-19 Portfolio Budget Statement (atpage149),of‘improvedconfidence inAustralia’sfinancialmarketsthrough promoting informed investors and financialconsumers,facilitatingfairand efficientmarketsanddeliveringefficient registry systems’.

Our regulatory mission is to:

âº change behaviours to drive good consumer and investor outcomes

âº act against misconduct to maintain trust and integrity in the financialsystem

âº promote strong and innovative developmentofthefinancialsystem

âº help Australians to be in control of their financiallives.

Wedothisbypursuingenforcement outcomes, conducting surveillances, engaging with consumers and industry stakeholders and providing guidance, policyadviceandfinancialcapability education. These regulatory tools are used to achieve our vision of ensuring a fair,strongandefficientfinancialsystem for all Australians.

For more information on how we achieve this key performance outcome, see Sections 2.2 and 2.3 and Chapter 3

ASIC Annual Report 2018-19 38

2.2 Key results - investor, consumer and markets performance objectives

The number of surveillances and enforcement actions we undertake, the valueofthefinesimposedorthenumberofpeopleconvicted,andthe length of their sentences as a result of these actions vary from year to year.

This variation depends on factors such as the severity of breaches of the law and the complexity of the investigations we undertake.

1 These are new supervision activities, conducted by the CCM program team, which commenced in October 2018.

This year, we have enhanced our approach to supervision and surveillance to focus on onsite supervisory exercises through our CCM program. The objective of our enhanced approach is to proactively identify strategic activities in parts of Australia’smostsignificantfinancial

institutions, assess their effectiveness, andescalatedeficienciestotheboards and CEOs. This shift in focus has

impacted on the number of traditional surveillances undertaken.

For more information on the work of the CCM program, see Section1.10

Some of our results this year have also been impacted by our necessary focus on assisting and responding to the Royal Commission.

For more information on ASIC’s input to the Royal Commission, seeSection1.8

Table 2.2.1 Key results

Outcome

Total

2018-19

Total

2017-18

Close and Continuous Monitoring program - supervisoryexercises1

CCM program supervisory exercises commenced 6 -

Findings letters issued 4 -

Number of days onsite 124 -

Number of representatives met during CCM program supervisory exercises 462 -

ASIC’s annual performance statement 39

Outcome

Total

2018-19

Total

2017-18

Surveillance

Surveillances completed2

Over 1,200 3 Over 1,500 4

Instances of potentially misleading or deceptive promotional material withdrawn or amended 37 51

Enforcement5

Investigations6

Investigations commenced 151 126

Investigations completed 103 124

Criminal actions

Criminal litigation completed 33 16

Criminal litigation completed successfully (as a percentage) 89% 100%

New criminal litigation commenced 14 30

Number of people convicted 27 22

Custodial sentences (including fully suspended) 14 13

Non-custodial sentences/Fines 16 13

Totaldollarvalueoffines $266,050 $15,100

Average time to complete an investigation in months 23 24

Average time to a criminal court decision in months 29 30

Average total time to complete an investigation and reach a court decision in months 52 54

2 ASICismovingtoanewregulatoryworkflowplatform.Asaresult,weareadjustinghowmattersare characterised and changing our recording systems. In 2018-19, these changes are in progress and information is sourced from old and new platforms using different characteristics. These results are necessarily approximate.

3 This includes over 110 surveillances involving an onsite presence. 4 Lastyear,weincorrectlyreportedthisas‘Over1,200’,asover300financialreportingsurveillanceswereomitted in error. In 2017-18, we completed over 1,500 surveillances. 5 For more information on the types of civil penalties, people or companies removed, restricted or banned from

providingcreditservices,andthetypesandvalueofthefinesforinfringementnotices,seeSection2.3. 6 Investigationsforthesepurposesmeetthedefinitioninsection13oftheASICAct.

ASIC Annual Report 2018-19 40

Outcome

Total

2018-19

Total

2017-18

Civil actions

Civil litigation completed 75 111

Civil litigation completed successfully (as a percentage) 96% 99%

New civil litigation commenced 55 77

Total dollar value of civil penalties $12.7m $42.2m

Average time to complete an investigation in months 20 24

Average time to a civil court decision in months 19 8

Average total time to complete an investigation and reach a court decision in months 39 32

Administrative actions

Administrative actions completed 84 91

New administrative actions commenced 61 56

Peopledisqualifiedorremovedfromdirectingcompanies 62 50

Action taken against auditors and liquidators 55 62

People/Companies removed, restricted or banned from providingfinancialservices 85 92

People/Companies removed, restricted or banned from providing credit services 97 41

Average time to complete an investigation in months 26 21

Average time to an administrative decision in months 4 5

Average total time to complete an investigation and reach a court decision in months 31 25

Court enforceable undertakings

Court enforceable undertakings accepted 10 27

ASIC’s annual performance statement 41

Outcome

Total

2018-19

Total

2017-18

Infringement notices7

Total number of infringement notices issued 14 55

Total dollar value of infringement notices $731,700 $2.02m

Summary prosecutions

Summary prosecutions for strict liability offences 369 398

Totalvalueoffinesandcosts $1.6m $1.5m

Agreed compensation

Compensation or remediation $22.8m $351.6m

Communitybenefitpayments $18.1m $48.1m

Stakeholder engagement

Meetings with industry groups and other stakeholders Over 1,400 Over 2,100

Consultation papers published 13 11

Industry reports published 45 45

Guidance

New or revised regulatory guides published 23 36

New or revised information sheets 27 32

Legislative instruments made, amended and repealed 53 93

Relief applications

Relief applications received 1,455 1,872

Relief applications approved 963 1,061

Relief applications refused or withdrawn 297 457

Relief applications in progress 195 354

7 These notices were issued for infringements related to the market integrity rules, ASIC derivative transaction rules, continuous disclosure rules, the ASIC Act, the National Credit Act and Australian Consumer Law. Compliance with infringement notices is not an admission of guilt or liability and these entities are not taken to have contravened the law.

ASIC Annual Report 2018-19 42

Outcome

Total

2018-19

Total

2017-18

Education

UsersvisitingASIC’sMoneySmartwebsite 8.4m 7.4m

Average number of users to the MoneySmart website per month 832,000 716,000

Number of users who have used a MoneySmart online tool 2.7m 2.3m

Average number of users utilising a MoneySmart tool per month 266,000 217,000

ASIC’s annual performance statement 43

2.3 Analysis - implementing our investor, consumer and markets performance objectives

In 2018-19, we employed the full range of regulatory tools available to us to deliver outcomes under the Portfolio Budget Statement and to fulfil our objectives of promoting investor and consumer trust and confidence and ensuring fair and

efficient markets.

The regulatory tools we used to identify and respond to threats and harms to consumers were enforcement, supervision and surveillance, licensing, engagement, guidance, education and policy advice.

This year, our work aligned with the focus areas outlined in our Corporate Plan 2018-22: Focus 2018-19, namely:

âº potential harms from technology

âº poor culture and professionalism

âº culture, governance and incentives that can harm markets

âº practicesthattargetfinancially vulnerable consumers

âº misalignment of retail product design and distribution with consumer needs

âº increased global uncertainty.

Potential harms from technology

ASIC’s focus on innovation and new developments includes monitoring potential threats or harms from technology, driven by the growing digital environment and structural changes in financialservicesandmarkets.

Ongoing areas of focus in our markets work include high-frequency or algorithmic trading.

Wealsomonitorandassessthe cyber resilience of our regulated population by analysing cyber resilience self-assessments in order to understand trends and themes across the sector andatanindividualentitylevel.We conduct ‘deep dives’ on entities or groups of entities to assess whether

the self-assessments we are given can beeffectivelyevidenced.Weprovide feedback to entities on how they compare to their peers and we compare the relative performance of different sectors.

Wealsoencourageearlyengagement with innovative or transformational technologies via our Innovation Hub, the key point of engagement for innovative start-ups wanting to engage with ASIC.

Through our Innovation Hub, we observe trends, facilitate the development of compliant systems, and give practical support to start-ups and scale-ups astheynavigateAustralia’sfinancial regulatorysystem.Wemaintainongoing engagement with the regulatory

ASIC Annual Report 2018-19 44

technology (regtech) community via guidance from the Innovation Hub’s work and our quarterly Regtech Liaison Forums.

Poor culture, professionalism and governance

This year, ASIC continued its important work redressing instances of poor culture, professionalism and governance inthecorporate,financialservicesand credit sectors.

WeestablishedtheCorporate Governance Taskforce (CGTF), which conducts targeted and thematic reviews of corporate governance practices across

large listed entities in Australia. The CGTF is designed to better detect cultural, organisational and/or risk management failings, to gain a deeper understanding of the practice of entities we regulate, and to adapt our regulatory responses where therearesignificantchangesinthemarket.

For more information on the CGTF, see Section 1.10

Wecontinuedourworkonsupervising the remediation of customers who have been charged fees for no service. ASIC undertook large-scale supervisory work, which includes overseeing both the compensation programs of six majorfinancialinstitutionsandtheir reviews to determine where there were other systemic fees-for-no-service failures. This work has resulted in significantcompensationpaid,ortobe

paid, to affected customers, with the banks collectively provisioning around $1.7 billion for remediation for consumers.

For more information on our work on fees for no service, see Section 3.3

Practices that target financially vulnerable consumers

ASIC creates and distributes tailored resources, tools and information that supportfinanciallyvulnerableconsumers in making informed decisions.

Weusesocialmediatoengage,educate and enable Australians to improve their financiallives.Thisformspartofourharm reduction approach.

This year, we conducted a campaign forInternationalWomen’sDay.We encouraged women to engage with their superannuation, because on average women retire with much lower

superannuation balances than men. Social media posts targeting women reached over 156,000 people.

Wealsocontinuetoeducatebookup providers and consumers about fair and legal ways in which book up can be provided to enable remote and regional Indigenous communities to purchase goods and services.

For more information on our work forvulnerable consumers, see Sections4.1, 4.3 and 4.4

Misalignment of retail product design and distribution with consumer needs

In April 2019, the Corporations Act was amended to give ASIC a product intervention power and the ability to enforce design and

distribution obligations.

The product intervention power, available for ASIC to use immediately, strengthens our consumer protection toolkit by equipping us with the power to intervene

ASIC’s annual performance statement 45

wherethereisariskofsignificant consumer detriment. This allows us to take a range of temporary actions, including banning a product or product feature,

imposing sale restrictions, and amending product information or choice architecture.

The design and distribution obligations, which commence in April 2021, will requirefirmstohaveappropriateproduct governance processes and controls in

place to ensure that consumers receive products that are consistent with their objectives,financialsituationandneeds.

In June 2019, we released for consultation a draft regulatory guide on the product intervention power. Consultation Paper 313 Product intervention power sets out

the scope of the power, when and how we expect to use the power, and how a product intervention order is made. In July 2019, we released Consultation Paper 316 Using the product intervention power: Short term credit,onthefirstproposed

use of our new product intervention power in the short-term credit sector.

Increased global uncertainty

ASIC has worked to manage increasing global uncertainty by testing cross-border business compliance and providing guidance on international regulations and policies.

The Asia Region Funds Passport commenced on 1 February 2019 and is designed to provide investors with access to funds from participating economies throughout the Asia region. Japan,

Thailand, New Zealand and Australia are able to receive and process registration applications from local prospective Passport funds, as well as entry applications from foreign Passport funds.

For more information on the Asia Region Funds Passport, see Section5.1

Wereleasedasuiteofsevennewand updated regulatory guides to provide comprehensive guidance to the funds management industry on the changes arising from introduction of the Asia Region Funds Passport. This guidance aims to promote industry-wide consistency and to help industry access

the Asia Region Funds Passport.

In July 2019, we released Consultation Paper 315 Foreign financial services providers: Further consultation, outlining our proposal to provide Australian financialservices(AFS)licensingreliefto foreign providers of funds management financialservices.Thisispartofthe

broader framework we will adopt for regulation of foreign entities providing financialservicestoclientsinAustralia.

For more information on ASIC guidance released this year, see further below in this Section 2.3

ASIC Annual Report 2018-19 46

Enforcement

Weusearangeofregulatory and enforcement sanctions and remedies to bring wrongdoers to account and ensure appropriate punishment and public denunciation for misconduct. In doing

so, we also seek to deter poor behaviour and encourage greater willingness by entities and individuals to act in accordance with the law.

This year, we increased and accelerated our court-based enforcement matters as part of our new enforcement strategy, and in response to recommendations of the Royal Commission.

Weadopteda‘Whynotlitigate?’ operational self-discipline and began theprocessofestablishinganOffice of Enforcement.

For more information on the Office of Enforcement, see Section 1.9

The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 came into force in March 2019. This new law improves ASIC’s enforcement toolkit, strengthens

existing penalties, and introduces new penalties for breaches of corporate and financialserviceslaws.Individualsnow face up to 15 years imprisonment and companiescanreceivemaximumfinesof up to $525 million.

For more information on these reforms, see Section 1.7

Enforcement action continues to be one of the key regulatory tools available to us tohelpachieveafair,strongandefficient financialsystemforallAustralians.Weuse a range of regulatory and enforcement

sanctions and remedies, including punitive, protective, preservative, corrective or compensatory action. Wealsoresolvemattersthroughcourt enforceable undertakings or by issuing infringement notices.

For more information on our regulatory tools, see Section 1.9

Some examples of enforcement action and key outcomes delivered in 2018-19 include the following.

Punitive actions

In 2018-19, we completed 75 civil court cases, covering issues such as engaging in unlicensed credit activity, misleading and deceptive conduct, failure to act with due care and diligence, market integrity rules, market manipulation, and unsolicited offers. Of these cases, 96% were successful. The total value of penalties for these civil court cases was $12.7 million.

ASIC’s annual performance statement 47

Westpac ordered to pay $3.3 million after Federal Court found it traded to affect the BBSW and engaged in unconscionable conduct

InNovember2018,theFederalCourtorderedWestpactopay$3.3millionfor contravening the ASIC Act by its involvement in the setting of the bank bill swap rate(BBSW)in2010.Thiswasthemaximumpenaltyavailable.TheFederalCourt alsoorderedthatanindependentexpertreviewWestpac’ssystems,policiesand proceduresandreportitsfindingstoASICwithinninemonths.

Timeline of Federal Court proceedings against Westpac for its BBSW conduct

APRIL 2016

OCT- DEC

2017

MAY 2018

NOV 2018

ASIC commenced Federal Court proceedings against Westpac.

Trial held before Justice Beach to determine liability.

Westpac was found to have engaged in unconscionable conduct and to have contravened its AFS licensee obligations.

Justice Beach ordered Westpac to pay a $3.3million penalty and appoint an independent

expert to review Westpac’s current systems, policies and procedures.

Thecourtordersfollowedajudgmenton24May2018,whichfoundthatWestpac had, on four occasions between 6 April 2010 and 6 December 2010, traded with the dominantpurposeofinfluencingyieldsoftradedprimebankbillsandthesettingof theBBSWinawaythatwasfavourabletoitsratesetexposure.

ThecourtfoundthatWestpachadactedunconscionably,hadcontravenedits obligation as an AFS licensee under section 912A of the Corporations Act, and had inadequateproceduresandtraininginplace.WestpacwasorderedtopayASIC’s costs of, and incidental to, the penalty hearing.

Each of ANZ and NAB had earlier paid pecuniary penalties of $10 million for attempts to engage in unconscionable conduct in respect of the setting of the BBSWandhadenteredintocourtenforceableundertakings,whichprovided forthemtopay$20milliontobeappliedtothebenefitofthecommunity.CBA

had earlier paid a pecuniary penalty of $5 million and had entered into a court enforceable undertaking, which provided for it to pay $15 million to be applied to thebenefitofthecommunity.

ASIC Annual Report 2018-19 48

ASIC’s proceedings against APCHL and former directors

In December 2018, the High Court handed down judgment on appeals brought by us against the former directors of Australian Property Custodian Holdings Pty Ltd (APCHL).

APCHL was the responsible entity of a managed investment scheme which collapsed in 2010 owing investors approximately $550 million. Following reports and concerns about the collapse of APCHL and The Prime Retirement and Aged Care Property Trust, we began an investigation into the conduct of the responsible entity,

APCHL, and the management of the Prime Trust.

As a result of the High Court appeals, the Federal Court was required to redetermine penalties. This occurred at a hearing in August 2019 and the decision was reserved.

Thiscasehighlightsthatdirectorswhoareofficersofresponsibleentitieshavean obligation to scheme members to discharge their duties with care and diligence, to not improperly use their position, to comply with the law, and to act in the interests of scheme members.

State One Stockbroking fined for failure to comply with market integrity rules

In November 2018, the Federal Court ordered that State One Stockbroking pay penalties totalling $350,000 for breaches of ASIC’s market integrity rules.

The court found that State One had failed to maintain the necessary organisational and technical resources with respect to post-trade alert systems and had placed bids on behalf of a client that it ought reasonably have suspected had the intention of creating a false or misleading appearance with respect to the market for, or price of, those securities. State One also agreed to pay $150,000 to ASIC for its legal and

investigative costs of the matter.

ASIC Commissioner Cathie Armour said: ‘The market integrity rules are vital to ensuring that Australia’s financial markets are fair and efficient. Market participants are reminded of the importance of their role as gatekeepers to our markets. If they fail to meet their obligations, ASIC will take action.’

ASIC’s annual performance statement 49

AMP and Clayton Utz produce documents sought by ASIC

On7March2019,ClaytonUtzprovidedASICwithnotesfrominterviewsconducted withcurrentandformeremployeesandofficersofAMPwhowereinterviewedas part of a report to AMP in October 2017 regarding fees for no service. The Clayton UtzreportwasconsideredintheRoyalCommissioninApril2018.

ClaytonUtzproducedtheinterviewnotesbeforethecourthearingandagreedto pay ASIC’s costs of the proceedings.

ASIChadbegunFederalCourtproceedingsagainstAMPandClaytonUtzin December2018,seekinganordercompellingClaytonUtztoproducetheinterview notes. The notes had been withheld from ASIC by AMP, which claimed that they were subject to legal professional privilege. ASIC disputed this claim. The notes related to ASIC’s investigation into AMP for charging fees for no service and responded to a compulsory notice to produce issued under section 33 of the ASIC Act in October 2018.

ASIC Deputy Chair Daniel Crennan QC said: ‘ASIC is determined to take enforcement action against the major banks and financial service providers and to use all legal powers necessary to investigate the significant issue of fees for no service. Entities should take seriously their obligations under statutory notices issued by ASIC, including producing documents in accordance with the specified timeframe and not preventing the disclosure of documents to ASIC by making unsubstantiated legal professional privilege claims. These interruptions delay and frustrate ASIC’s investigations.’

ASIC Annual Report 2018-19 50

Federal Court delivers judgment against Vocation Limited and its officers

In May 2019, the Federal Court delivered its judgment in relation to ASIC’s civil penaltyproceedingsagainstVocationLimited(inliquidation)anditsofficersMark Hutchinson (former CEO), John Dawkins (former Chairman), and Manvinder GrÃ©wal (former CFO).

The proceedings related to:

âº statements made to ASX about funding contracts with the Victorian Department ofEducationandEarlyChildhoodDevelopment(DEECD)andtoUBSAG Australia(UBS)aboutafullyunderwrittenplacementtoinstitutionaland sophisticated investors

âº a review by DEECD into two of Vocation’s main registered training organisations.

The court found that:

âº Vocation engaged in conduct that was misleading and deceptive in relation tostatementstoASXandUBS,ina25August2014ASXannouncementandin a due diligence questionnaire (DDQ), and failed to disclose to the market the actions taken by the former DEECD in July and August 2014 when it suspended all payments to Vocation

âº Mr Hutchinson and Mr Dawkins contravened the Corporations Act by causing or permitting Vocation’s contravention of section 674(2) of the Corporations Act

âº Mr Hutchinson contravened the Corporations Act by causing or permitting Vocation’s misleading and deceptive statements in the 25 August announcement and the DDQ

âº Mr GrÃ©wal contravened the Corporations Act by causing or permitting Vocation’s misleading and deceptive statements in the DDQ.

ASIC Commissioner Cathie Armour said: ‘ASIC regards statements that mislead or withhold material information as risking serious damage to the integrity and operation of the Australian market. As such, timely and accurate market disclosures will continue to be a key focus of ASIC’s market supervision and enforcement.’

ASIC’s annual performance statement 51

Federal Court finds that Whitebox Trading Pty Ltd and its sole director did not engage in market manipulation

On7June2019,theFederalCourtfoundthatWhiteboxTradingPtyLtdanditssole director and principal, Johannes Boshoff, did not engage in market manipulation in contravention of sections 1041A and 1041B of the Corporations Act in connection with orders they placed on ASX Limited for securities in the S&P ASX 200 Index on 18 October 2012 and on four earlier dates in 2012. The court also found that MrBoshoffdidnotfailinthedischargeofhisdutiesasadirectorofWhitebox.

Criminal convictions

In 2018-19, as a result of our investigations, 27 people were convicted of financialcrime,with14peoplereceivingsentencesofimprisonment.This year, 10 of the people sentenced to imprisonment were required to serve timeincustody,comparedtofiveinthe2017-18financialyear.

Douglas and Maureen Johnston sentenced to imprisonment for defrauding investors

In May 2019, Douglas Johnston was sentenced to six years imprisonment for defrauding investors of approximately $815,000. Mr Johnston acted with his wife, Maureen Johnston, to secure funds from investors, effectively lying about how the money would be used.

MrsJohnstonwassentencedtofive years and six months imprisonment in December 2018, after pleading guilty tothreecountsofobtainingafinancial advantage by deception, totalling $1,027,000.

Our investigation found that between 2010 and 2013, Mr and Mrs Johnston used funds investors had deposited into a bank account of Small Business Management

Pty Ltd to withdraw cash, repay their debts, transfer into an account in the name of Mrs Johnston, and pay new investor deposits in a Ponzi-style operation.

Computer hacker imprisoned for unauthorised access and insider trading

In June 2019, an IT consultant was sentenced to three years imprisonment, after pleading guilty to a total of 11 charges for insider trading, unauthorised access to data with the intention to commit a serious offence, and the alteration of electronic devices required

by ASIC. The court ordered that after serving 18 months, he be released on his own recognisance to be of good

behaviour for 18 months.

ASIC Annual Report 2018-19 52

Between 2012 and 2016, the consultant hackedintothenetworkofafinancial publisher with the intention of using this information to engage in insider trading. He used this inside information on 70 occasions to buy shares in 52 different companiesandprofitedfromthesellingof shares soon after the reports with the buy recommendations were published.

He was also charged with producing altered devices and deleting data relating to ASIC’s investigation, following a compulsory notice to produce under

the ASIC Act.

Former financial adviser Gabriel Nakhl imprisoned for dishonest conduct

On 15 March 2019, Gabriel Nakhl, a formerfinancialadviser,wassentenced to 10 years imprisonment with a non- parole period of six years. In June 2018, Mr Nakhl pleaded guilty to eight counts of engaging in dishonest conduct with investor funds. The conduct affected 12 investors between 2009 and 2011

while Mr Nakhl was a representative of Australian Financial Services Limited (in liquidation) and between 2011 and 2013

when he acted as the sole director of SydFA Pty Ltd (deregistered).

The court found that Mr Nakhl had effectively lied about investing funds in a range of products and had instead usedthesefundsforhisownbenefit,

losing approximately $5.1 million. ASIC had obtained orders in 2013 to freeze Mr Nakhl’s assets, permanently prevent himfromprovidingfinancialservices,and preclude him from managing a company for a period of 15 years.

Former liquidator David Leigh imprisoned for fraud

In May 2019, former liquidator David Leigh was sentenced to seven years imprisonment after pleading guilty to three counts of fraud. ASIC’s investigation revealed that as co-liquidator of Neolido Holdings Pty Ltd, Mr Leigh had dishonestly used $800,000 in funds from the Neolido external administration bank account for his own purposes.

Mr Leigh’s conviction followed a disciplinary committee decision in February 2019 to cancel his registration as a liquidator and prohibit other liquidators from allowing him to work on their behalf for a period of eight years.

Former Perth insurance broker imprisoned for dishonest conduct

In April 2019, a Perth insurance broker was sentenced to two years and nine months imprisonment, with a non-parole period of 18 months.

The senior insurance broker, who also acted as a director of Phoenix Insurance Brokers Pty Ltd (Phoenix), pleaded guilty to seven counts of dishonest conduct after diverting $199,391.32 in client refunds to

personal accounts held in his name. These 51 refunds were owed to 35 clients from Phoenix for cancellations and adjustments of their insurance policies.

As a result of his conviction, he is automaticallydisqualifiedfrommanaging companiesforfiveyears.

ASIC’s annual performance statement 53

Four and a half years imprisonment for dishonest conduct

In 2012, ASIC commenced investigations into the conduct of John Falconer, Farouk Fagredin and Andrew Sigalla of TZ Ltd, a Sydney-based company listed on ASX. In September 2017, John Falconer, TZLtd’sformerdirectorandchieffinancial

officer,wasextraditedfromThailandto face charges.

Mr Falconer pleaded guilty to:

âº fivecountsofdishonestconductas a director, relating to illegitimate payments totalling $6.25 million from the company’s accounts between

December 2006 and September 2008

âº one count of authorising or permitting the lodgement of false or misleading informationtoASXinfinancialreports, which failed to disclose the true nature of certain payments within the report.

In November 2018, the Supreme Court sentenced Mr Falconer to four and a half years imprisonment, with a minimum of three years to serve. During ASIC’s investigation, we issued over 200 notices to produce documents, obtained statements from 52 different witnesses, undertook detailed forensic accounting analysistodeterminetheflowoffunds, and liaised with the Hong Kong Securities and Futures Commission and the International Criminal Police Organization.

High Court finds no unconscionable conduct in APY Lands book up case

In June 2019, the High Court of Australia dismissed ASIC’s appeal against Mr Lindsay Kobelt, former owner and operator of Nobby’s Mintabie General Store in the remote South Australian Anangu Pitjantjatjara Yankunytjatjara (APY) Lands.

Mr Kobelt provided a system of book up to his customers, most of whom were Aboriginal residents of the APY Lands, allowing them to purchase goods and second-hand motor vehicles on credit. In return, Mr Kobelt required his customers to provide him with their debit cards, PINs and details of their income, which

he used to withdraw all, or nearly all, of each customer’s money from their bank account on or around the day they were paid.

The trial judge held that Mr Kobelt engaged in unlicensed credit activity and acted unconscionably.TheFullFederalCourtupheldthefindinginrelationtounlicensed credit activity but found that Mr Kobelt had not engaged in unconscionable conduct. A majority of the High Court upheld the Full Federal Court decision.

ASIC will continue to work collaboratively on book up law reform and to educate book up providers and consumers on fair and legal ways in which book up can be provided.

ASIC Annual Report 2018-19 54

Protective actions

Webanned,removedorrestricted85 people or companies from providing financialservices.

Webanned,removedorrestricted97 people or companies from providing credit services, for failing to comply with their responsible lending obligations or for engaging in unlicensed credit activity.

Wetookactionagainstself-managed superannuation fund (SMSF) auditors who were in breach of their SIS Act requirements, including failing to comply with auditing and independence standards, or who were otherwise considerednotfitandproperpersons. Wederegistered8auditors,suspended the registration of 2, and imposed additional conditions on 25 others. Wecancelledtheregistrationof19 auditors at their request, following compliance concerns raised with them

by the ATO or ASIC.

Queensland SMSF adviser banned for four years

InJuly2018,ASICbannedQueenslandfinancialadviserJamesCribbfromproviding financialservicesforfouryearsandsuspendedhisAFSlicence,heldbyModeAFSL Pty Ltd, for 10 weeks.

ASIC found that Mr Cribb failed to act in his clients’ best interests when providing advice on SMSFs. ASIC found that Mr Cribb had prioritised his own interests over thoseofhisclientsbyprovidingadvicethatwaslikelytobenefitotherentities related to him, including an SMSF administration business of which he was sole directorandashareholder.MrCribb’sadvicefailureswereidentifiedinASIC’s

recent review of SMSF advice.

ASIC’s annual performance statement 55

Perth adviser permanently banned by ASIC

In June 2019, we permanently banned Phillip Emidio Bruni after our review found that he had been dishonest and engaged in misleading or deceptive conduct. Mr Bruni had failed to give advice documents at all or within time, act in the best interests of his clients, give appropriate advice, or give priority to his clients’ interests. Our review revealed inconsistencies in the dates that documents were created, a forged signature on an authority to proceed, and an attempt to manufacture evidence to avoid scrutiny by ASIC.

ASIC Commissioner Danielle Press said: ‘ASIC’s decision reflects our expectation that financial advisers uphold the attributes of honesty and professionalism in their work. ASIC expects advisers to adhere to the law at all times and meet their obligations of providing appropriate advice that is in the best interests of their clients.’

OneCash Ltd directors disqualified

InNovember2018,wedisqualifiedthreeQueenslanddirectorsfrommanaging corporations, following liquidator reports that creditors were owed more than $60million.DamianDoddsandStephenAndersonweredisqualifiedfortwo yearsandsixmonths,andMarieDoddswasdisqualifiedfor18months.Each

has been charged by the Queensland Police Service with criminal offences. The disqualificationsfollowedtheappointmentofliquidatorstoOneCashLtd,RPMZone Pty Ltd, DSM Connect Pty Ltd and All Breads Australia Pty Ltd.

ASIC Annual Report 2018-19 56

Table 2.3.1 Corporate governance-related outcomes1

Misconduct type Criminal Civil Administrative Court enforceable undertaking Negotiated outcome Total (misconduct)

Action against auditors 0 0 14 0 0 14

Action against liquidators 1 2 1 1 0 5

Action against directors 3 0 3 0 0 6

Misconduct related to insolvency 0 0 2 0 0 2

Other corporate governance misconduct 0 17 0 0 0 17

Total (remedy) 4 19 20 1 0 44

1 Wehad9criminaland9civilcorporategovernance-relatedmattersunderwaywhereafinalresultwaspending asat1July2019,asthecourtortribunalhadnotdecidedthepenaltyorfinalorder,ormadeadecisionon conviction or sentence, or decided if a breach was committed.

Corrective actions

Wetookactionwherecreditlicensees, superannuation trustees or responsible entities made misleading statements to consumers or investors. There were 37 instances of potentially misleading or deceptive promotional material withdrawn or amended in 2018-19.

Compensatory actions

Our actions in 2018-19 contributed to $22.8 million of compensation and remediation paid, or ordered to be paid, to consumers. Taking enforcement action to ensure that consumers are appropriately compensated is a key ASIC priority.

Court enforceable undertakings

In 2018-19, ASIC accepted 10 court enforceable undertakings. After accepting a court enforceable undertaking, we work with entities and independent experts to

improve culture and compliance practices in order to facilitate long-term behavioural change. On multiple occasions, we took civil proceedings as well as accepting court enforceable undertakings. For more examples of court enforceable undertakings accepted this year, see ASIC’s compliance reports available on

the enforceable undertakings register on our website.

ASIC’s annual performance statement 57

Goldman Sachs court enforceable undertakings related to bookbuild

In July 2018, we accepted a court enforceable undertaking from Goldman Sachs Australia Pty Ltd (GS Australia) to improve controls relating to bookbuild messaging in certain equity capital market transactions managed by GS Australia.

ASIC Commissioner Cathie Armour said: ‘This court enforceable undertaking reinforces our focus on intermediary conduct and standards in capital raising transactions. Investors need to have confidence that they are being provided with accurate information in the course of a bookbuild or underwriting process.’

ASIC has also accepted court enforceable undertakings from individuals

Wealsoacceptedcourtenforceableundertakingsfromindividuals,including Wollongong-basedfinancialadviserJamesPhillipAllen,afteritwasfoundthathe failed to act in the best interests of his clients. In September 2018, Mr Allen agreed thatifhewishestore-enterthefinancialservicesindustryafterthethree-year exclusion period he has agreed to, he will need to complete a degree or equivalent qualification,passanexam,andundertakeasupervisedyearofworkandtraining.

ASIC Annual Report 2018-19 58

Infringement notices

In 2018-19, we issued 12 infringement notices and received a total of $311,700 in payments pursuant to these infringement notices.Weissuedinfringement notices against:

âº Australian Corporate Bond Company Pty Ltd ($25,200)

âº Metricon Homes Pty Ltd ($50,400)

âº Byte Power Group Limited ($33,000)

âº Gold Mountain Limited ($33,000)

âº HostPlus Pty Ltd ($12,600)

âº Local Appliance Rentals ($157,500).

Wealsoenteredintoacourtenforceable undertaking with Local Appliance Rentals requiring remediation of clients, improvements to compliance systems, and the payment of a $100,000 community benefit payment.

The Markets Disciplinary Panel issued two infringement notices, specifying a total of $420,000 in penalties for alleged breaches of the market integrity rules.1

For more information on the Markets Disciplinary Panel, see Section 8.1

Delivering timely enforcement action

Each year, we report on the average time taken to complete our investigations and achieve a criminal, civil or administrative decision.Wedosoinsupportofour commitment to transparency and our aim

to deliver timely enforcement action.

For more information on the timeliness of our enforcement actions, see Table 2.2.1

The time taken to achieve enforcement outcomesisinfluencedbyavarietyof factors. This should be kept in mind when comparing outcomes produced each year. For example, the average time taken to receive a court decision for civil matters increased in 2018-19, from 8 to 19 months, due to the closure of a number of long-running matters. The average for criminal decisions decreased by two months.

Weareexploringwaystoimprove theefficiencyandtimelinessofour enforcement processes, such as by using e-surveillance, e-investigation and e-discovery to expedite investigation and discovery.

1 Compliance with infringement notices is not an admission of guilt or liability, and these entities are not taken to have contravened the law.

ASIC’s annual performance statement 59

Supervision and surveillance

In 2018-19, in addition to the supervisory exercises undertaken in our CCM program, we completed:

âº over 300 surveillances in the deposit-takingandcredit,financial advice, investment management and superannuation sectors to ensure that financialservicesproviderscomplied

with their conduct obligations

âº over 900 surveillances in the corporations, market infrastructure and market intermediaries sectors.

Throughoursurveillance,weidentified and addressed 613 cases of failures, or potential failures, to comply with regulatory obligations.

Sector and issue-based surveillance

Wepublishedseveralreportsinresponse tofindingsofoursector-basedor issue-based surveillances. For example:

âº Report 586 Review of reverse mortgage lending in Australia outlines our findingsonthelendingpractices and consumer outcomes in the

reverse mortgage market and the effectiveness of enhanced responsible lending obligations.

âº Report 587 The sale of direct life insurance and Report 588 Consumers’ experiences with the sale of direct life insurancecontainthefindingsof

our review of the sale of direct life insurance products, including term life, accidental death, trauma, total and permanent disability, and income

protection insurance. The review explored how the design and sale

of such products contribute to poor consumer outcomes and outlined ASIC’s expectations of industry.

âº Report 591 Insurance in superannuation, our review of the insurance arrangements of 47 superannuation trustees, focuses on insurance claims and complaints handling, disclosures,

insurer rebates paid to trustees, and members being defaulted into demographic categories that resulted

in higher premiums.

âº Report 594 Review of selected financial services groups’ compliance with the breach reporting obligation examines the breach reporting processes of12financialservicesgroupsand identifiesseriousdelaysinthetime

taken to identify, report and correct significantbreachesofthelawacross the industry. ASIC will continue its surveillance and enforcement work to improve compliance in this sector.

âº Report 605 Allocations in equity raising transactions outlines the potential impactofconflictsofinterestin allocation decisions and highlights areas of improvement for licensees and issuers when raising equity on our

listed markets.

Financial reporting and audit

Oursurveillanceoffinancialreportsin 2018-19 led to material changes to 3% of the 294 reports of listed entities and other public interest entities reviewed. As a result of our surveillances, 8 entities

recognised changes to reported net assetsandprofitstotalling$232.5million.

In2018-19,wealsoreviewed65auditfiles oflistedentitiesandthefinancialreport audits of other public interest entities. In January 2019, we issued Report 607 Audit

ASIC Annual Report 2018-19 60

inspection program 2017-18, which covers our future focus areas for auditors and the 98auditfileswereviewedinthe18months to 30 June 2018.

For more information on our audit firm inspections, see Section 3.7

Wewilltakemattersinvolvingauditor conduct to the Companies Auditors Disciplinary Board. In 2018-19, as a result of our investigations, one registered company auditor was deregistered.

Auditor’s registration cancelled

In December 2018, the Companies Auditors Disciplinary Board (CADB) cancelled theregistrationofReginaldWilliams,aQueensland-basedregisteredauditor, following an application by ASIC.

ASICcontendedthatMrWilliamsfailedtocarryoutorperformadequatelyand properlythedutiesofanauditorinrelationtohisauditofthefinancialreportofLM Managed Performance Fund for the year ended 30 June 2012.

On5December2018,MrWilliamsappliedtotheAdministrativeAppeals Tribunal (AAT) for a review of the CADB decision, a stay of the operation and implementation of the CADB decision pending AAT review, an order forconfidentialityagainstdisclosureofhisnameduringtheAATreview,and

suppression of publication of any evidence.

On19March2019,theAATrefusedMrWilliams’sapplicationsforastay, confidentiality,andsuppressionofevidence,withhisapplicationforreview by the AAT of the CADB decision proceeding.

Licensing

ASIC assesses applications for AFS licences and credit licences.Wealsomaintain a number of professional registers for

registered companies, SMSFs, auditors and liquidators.

For information on our licensing ofmarket operators and benchmark administrators, see Section 3.5.

Our licensing and registration function governsentryintothefinancial system.We use a risk-based approach to assessment, devoting most resources to complex and

high-risk applications to ensure that only suitable persons and organisations are licensed or registered.

In 2018-19, we assessed over 2,080 applications for AFS licences and credit licences.Weapprovedover800AFS licences, 4 limited AFS licences and 356 creditlicences.Wealsocancelledor suspended358financialserviceslicences and 552 credit licences.

ASIC’s annual performance statement 61

During the year, 326 AFS licence and credit licence applications were withdrawn. Applications were often withdrawn after we informed applicants that they

were unlikely to meet the statutory requirementstoobtainalicence.We also did not accept 201 applications duetomaterialdeficienciesinthe

information provided.

Weassessedover659applications for registration as auditors (including company auditors and SMSF auditors). Of these, we approved 148, we refused 1duetomaterialdeficiencies,and58

werewithdrawn.Wealsocancelledor suspended 568 registrations.

For more information on licensing and professional registration, see Table 8.2.7

Former manager convicted of making false or misleading statements to ASIC in a licence application

WhenASICassessesalicenceapplication,weconsideranapplicant’sabilityto providelicensedservicesefficiently,honestlyandfairly,andincompliancewith theapplicant’sfinancialservicesobligations.Weassessthisbylookingatwhothe applicanthasnominatedtoactasa‘responsiblemanager’ofitsfinancialservices

business. For an application to succeed, we require nominated responsible managers to be competent and of good fame and character.

In this case, the nominated responsible manager stated that he had not previously been bankrupt, when he had in fact been declared bankrupt in 2008.

WhereaproposedresponsiblemanagermakesfalsestatementstoASIC,this raises serious concerns about their honesty and character. The submission of falselicensinginformationtoASICalsosignificantlyunderminestheintegrityof itslicensingassessmentprocesses.WereferredthemattertotheCDPP,who prosecuted the responsible manager. On 19 November 2018, he pleaded guilty to three charges of knowingly making false or misleading statements in documents submitted in support of an AFS licence application or involving his nomination as a responsiblemanager.HewasconvictedbytheMagistratesCourtandfined$3,000.

ASIC Annual Report 2018-19 62

ASIC’s decision to refuse to grant an AFS licence

InJanuary2019,theAATaffirmedASIC’sdecisiontorefuseanAFSlicencebecause the applicant’s nominated responsible manager failed to show an adequate understanding of the general obligations that apply to a licensee and failed to disclose matters that the AAT considered materially relevant, including past breaches of other laws.

The case highlights the importance of providing full and frank disclosure to ASIC in a licence application, and the weight placed on an applicant’s past conduct in financialservicesorunderotherlegislationindeterminingalicenceapplication. A failure to disclose relevant information runs the risk of an application being

refused. If ASIC discovers the false disclosure after a licence has been granted, we may cancel it or seek other remedies.

ThisfollowsanearlierAATdecisionon21December2018,affirmingASIC’sdecision to refuse an application where an applicant failed to provide all relevant information to enable ASIC to determine whether to grant a licence.

ASIC imposes additional licence conditions on AMP Financial Planning

In April 2019, ASIC granted AMP Financial Planning Pty Ltd (AMPFP) a licence variation to provide managed discretionary account (MDA) services. This followed our surveillance of AMPFP’s MDA services and advice business.

MDAs create additional risks for retail clients because when a client enters into a contract with an MDA provider, they give the provider authority to make investment decisions on their behalf on an ongoing basis without seeking the client’s prior approval.

In granting the variation, we included additional conditions as a result of observations made during our surveillance. The conditions were put in place to ensure that AMPFP adequately monitors and supervises the MDA services provided by its advisers, and that its advisers are adequately trained and meet its best interests obligations. The conditions also seek to ensure that when providing MDA services,AMPFPhasthenecessaryhuman,financialandtechnologicalresources, as well as risk management and internal dispute resolution systems, and that it

maintains adequate records.

ASIC’s annual performance statement 63

Six-year ban and AFS licence cancellation for OTC market contravention

In November 2018, ASIC banned Stavro D’Amore, former director of Berndale CapitalSecuritiesPtyLtd(Berndale),fromprovidingfinancialservicesforsixyears. The order was made after ASIC found that Mr D’Amore:

âº wasinvolvedincontraventionsoffinancialserviceslawsbyBerndale

âº islikelytocontraveneafinancialserviceslaw

âº isnotadequatelytrained,orisnotcompetent,toprovidefinancialservices.

ASIC cancelled the AFS licence of Berndale on the same day.

Berndale is also a retail over-the-counter (OTC) derivatives provider and our investigations found systemic failures in complying with reporting requirements. ASICalsofoundthatBerndalefailedtohaveadequatefinancialandhuman resourcesanddidnotprovidefinancialservicesefficiently,honestlyandfairly.

Berndale is appealing the licence cancellation.

On 5 December 2018, ASIC obtained freezing orders from the Federal Court against Berndale, its associated entities and Mr D’Amore, preventing them from selling or otherwise dealing with their property (including cash held with Australian banks) without ASIC’s consent. The orders remain in place.

ASIC Annual Report 2018-19 64

Engagement

Engaging with stakeholders, including industry, consumer groups and other regulators, helps us identify and resolve regulatory

issues in the market.

Wehaveanextensiveprogramof stakeholder engagement at operational and Commission levels.

At the Commission level, we have a stakeholder engagement plan to ensure that we use Commission senior engagement to achieve our vision. This Commission-level engagement with

stakeholders helps us understand market trends and emerging issues.

At the operational level, we hold frequent meetings with numerous stakeholder sectors and representatives.

In 2018-19, we held over 1,400 meetings with external stakeholders, including government agencies, industry bodies, consumer and small businessrepresentatives,financial services entities, companies, auditors, liquidators, market operators, market intermediaries, corporate advisers and compliance professionals.

Wealsoengagewithstakeholdersby releasing consultation papers seeking public comment on matters ASIC is considering. In 2018-19, we released 13 consultation papers on topics including credit licensing reform, market integrity rules, and responsible lending conduct.

Guidance

Wepublishguidance documents to respond and adapt to structural changesandcomplexityinthefinancial

services industry and to enhance industry participants’ understanding of their legal obligations and how we administer the law.

In 2018-19, we published 23 regulatory guides and 27 information sheets on topics such as funds management, oversight of compliance schemes for financialadvisers,andcrypto-assets.

Wealsoreleased45reportscovering issues such as credit card lending, buy now pay later arrangements, and insurance in superannuation.

For more information on these reports, see Chapter 3

ASIC’s annual performance statement 65

ASIC publications 2018-19

Examples of publications released this year to provide guidance to our stakeholders include:

âº RG 269 Approval and oversight of compliance schemes for financial advisers

âº CP 309 Update to RG 209: Credit licensing: Responsible lending conduct

âº CP 312 Stub equity in control transactions

âº CP 314 Market integrity rules for technological and operational resilience

âº INFO 232 Fees for no service: Remediation

âº INFO 238 Whistleblower rights and protections

âº INFO 235 Reporting obligations of Indigenous corporations

âº REP 580 Credit card lending in Australia

âº REP 584 Improved protections for deposit accounts with third-party access

âº REP 586 Review of reverse mortgage lending in Australia

âº REP 587 The sale of direct life insurance

âº REP 591 Insurance in superannuation

âº REP 593 Climate risk disclosure by Australia’s listed companies

âº REP 597 High-frequency trading in Australian equities and the Australian-US dollar cross rate

âº REP 600 Review of buy now pay later arrangements

âº REP 601 Market assessment report: Yieldbroker Pty Ltd

âº REP 605 Allocations in equity raising transactions

âº REP 614 Financial advice: Mind the gap

âº REP 615 ASIC enforcement update: July to December 2018

âº REP 625 ASIC enforcement update: January to June 2019.

Wealsoupdatedandreissuedsomeofourpublications,including:

âº RG 192 Licensing: Wholesale equity schemes

âº RG 132 Funds management: Compliance and oversight

âº INFO 157 Foreign financial services providers - practical guidance

âº INFO 225 Initial coin offerings and crypto-assets.

For a complete list of the publications issued this year, see our website.

ASIC Annual Report 2018-19 66

Consultation on ASIC’s responsible lending guidance

In February 2019, we released Consultation Paper 309 Update to RG 209: Credit licensing: Responsible lending conduct, seeking feedback on proposals to update our guidance on responsible lending, including in new areas such as written assessments, loan fraud and record keeping.

Theupdatedguidancewillreflectrecentregulatoryandenforcementaction,the results of ASIC thematic reviews, and initiatives such as comprehensive credit reporting, open banking and changes in technology such as data aggregation.

The consultation closed in May 2019.

ASIC will hold public hearings during August 2019 to test stakeholder views, hear about changes in and options around good market practices, and provide a transparent way to air views raised in written submissions.

Education

ASIC is the lead agency forfinancialcapabilityin Australia. This year, we launched the 2018 National Financial

Capability Strategy to support Australians in better managing their money on a day-to-day basis, making informed financialdecisions,andplanningfor

the future.

Wefocusedonimprovingthefinancial capability of young people. For example, our MoneySmart Teaching program supportsteachersindeliveringfinancial education through online professional

learning and resources aligned to the Australian Curriculum. These professional development courses help teachers improvetheirownfinancialwellbeing andtheirconfidenceinteachingchildren

how to manage money. The courses are free, accredited, online and tested with teachersthroughaTeacherWorking Group to ensure that they are relevant and practical.

ASIC’s annual performance statement 67

Teachers’ engagement with MoneySmart tools

‘This course has been personally most beneficial. If I’d known this info in my younger years, I would have been more in control of my financial situation. I’m going to recommend it to my nearest and dearest and work colleagues.’

Teacher who completed ‘Teach MoneySmart: Be MoneySmart’

‘I have been stimulated by the range of integrated units and resources in the program and feel inspired to teach MoneySmart which engages students and teaches financial literacy using authentic contexts and provides skills and strategies which are relevant for everyday life.’

Primary teacher, ACT

‘Financial literacy relates to mathematical thinking. Be a critical thinker when spending, budgeting and saving money. I would highly recommend the unit plans to my colleagues as a strong starting point to teach students financial literacy. From this training, I will be more aware of my spending, especially with invisible money.’

Secondaryteacher,NSW

‘I am a secondary teacher in Horsham. We love your website and the tools available. We use your calculators and activities to teach our kids about financial literacy.’

MoneySmart consumer

MoneySmart grants for school principals

ASIC is working with school leaders in a joint initiative with the Australian Primary Principals Association. Through the MoneySmart Grants for Principals, 10 primaryschoolsstartedfinancialliteracy projects with a focus on creating authentic learning opportunities to teach students how to manage money. These schools are drawing on existing MoneySmart Teaching resources and participating in a range of activities, including community gardens,

market days, a cafÃ©, product development, afinancialliteracyclassroomanda multimedia project.

‘The resources are great prompts for teachers - practical and creative. The activities are useful but not onerous. I congratulate all those

wonderful teachers taking the time and effort to teach this vital set of skills and awareness. Mental health, physical health, financial health - they are all interconnected to personal wellbeing and the overall health of our society.’

Malcolm Elliot, President of the Australian Primary Principals Association.

ASIC Annual Report 2018-19 68

Student loans and managing financial firsts

ASIC has worked collaboratively with the Department of Education and Training to ensure that tertiary students understand the nature of their student

loans. The MoneySmart website hosts a video outlining how a HELP loan is repaid and reminding students of their responsibilities in repaying the loan. On

the back of this work, in March 2019 ASIC invited universities to join the MoneySmart university project to ensure

that their students have information to makeandnavigatefinancialdecisions, including managing spending and debt, superannuation, and considering arangeoffinancialfirstsoftenfacedby

tertiary students.

Our education initiatives include:

âº ASIC’s MoneySmart website and MoneySmart Teaching and Universitiesprograms

âº FinancialWellbeingNetworkevents to share information and research with organisations representing business, not-for-profitcommunitygroups, education, academia and government

âº ASIC’s Indigenous Outreach Program (IOP), which supports the needs of Indigenous consumers and investors.

For more information on the IOP, seeSection 4.4

Policy advice

ASIC takes an active role in policy advice and implementation to improve theperformanceofthefinancialsystem. In 2018-19, we engaged in ongoing discussions with Treasury and provided advice and input into key law reforms

proposed by the Government.

For more information on government policy, see Section 1.7

Areas where ASIC provided input included:

âº law reform to strengthen existing penalties and introduce new ones for breachesofcorporateandfinancial services laws, in order to ensure that significantbreachesofthelaware appropriately punished

âº the new design and distribution obligations, which strengthen ASIC’s ability to prohibit retail products that do not align with consumer needs

âº the new product intervention power, which equips ASIC with the power to intervene in a timely manner whenthereisariskofsignificant consumer detriment

âº reforms to superannuation legislation, banning funds from inducing employers to encourage employees to join certain funds, and extending civil

penalties to trustees for breaches of their best interests duty

âº law reform to combat illegal phoenix activity

âº new whistleblower legislation to improve the protections available for whistleblowers.

ASIC’s annual performance statement 69

WealsoactivelyparticipatedinCouncil of Financial Regulators (CFR) working groups to discuss the systemic risks facingtheAustralianfinancialsystem and regulatory developments. This year, thisincludeddiscussionsonfinancing conditions and the housing market, ASIC’s newpowers,andpost-tradefinancial

market infrastructure.

Wecontinuedtoengagewithandprovide policy advice to international regulators.

For more information on our engagement with international regulators, see Section 5.1

2.4 Registry services and outcomes

Torealiseourvisionofafair,strongandefficientfinancialsystemforall Australians,weaimtoprovideefficientandaccessiblebusinessregisters that make it easier to do business.

Performance objectives

ASIC’s performance reporting in 2018-19 was guided by ASIC’s Corporate Plan 2018-22: Focus 2018-19 (at page 39) and our Portfolio Budget Statement (at pages 145-156), which set out our objectives

andtargetsrelatedtoprovidingefficient registry services, including the registers of companies and business names, as well as a range of professional registers.

ASIC’s registers

ASIC’sregistersaretheofficialsource of information for companies, business namesandfinancialprofessionals registered to operate in Australia. They are a critical part of Australia’s economic

infrastructure. The information contained in the registers enables businesses and consumers to make informed decisions.

The cost of registration as an Australian company was $488, increasing to $495 from 1 July 2019.

In 2018-19, we introduced the Asia Region Funds Passports register, a multilaterally agreed framework to facilitate the cross-border marketing of passport funds across participating economies in the Asia region.

ASIC Annual Report 2018-19 70

Table 2.4.1 ASIC’s registers

Outcome 2018-19 2017-18

Total companies registered 2.7m 2.6m

New companies registered 223,661 244,510

Total business names registered 2.3m 2.25m

New business names registered 375,052 366,181

Calls and online inquiries responded to by our Customer Contact Centre 670,741 678,697

Registry lodgements 2.9m 3.0m

Percentage of registry lodgements online 93% 93%

Number of searches of ASIC registers 142.6m 122.5m

Company registration - more choice for those starting a new business

Company and business name registrations are important steps in starting a new business. This year, 223,661 companies and 375,052 business names were registered with ASIC.

In June 2018, we launched the new Business Registration Service, enabling direct onlinecompanyregistrationthroughagovernmentwebsiteforthefirsttime. Untilthisyear,onlinecompanyregistrationscouldonlybecompletedthrough commercial businesses and at an additional cost. The new service extends services already in place for direct business name registration.

Services to register both companies and business names with ASIC are now offered through the Business Registration Service at business.gov.au.

This makes it easier to start a business by providing a single online service for the registration of companies, business names, Australian Business Numbers and other tax registrations.

The new service has accounted for 8% of company registrations and 30% of business name registrations this year.

ASIC’s annual performance statement 71

Accessing registry information

This year, our registers experienced a record level of access with over 142.6 million searches of public information. Wealsopreparedforagovernmentreform

on 1 July 2019 that exempts journalists from paying certain registry search fees.

Wemademorefrequent(weeklyrather than monthly) updates to many of the datasets available on data.gov.au. More frequent updates have improved the currency of the data available on the companies and business names datasets. This data is available for anyone to view

and use to conduct research or develop new products and services.

There are 12 registry datasets available on data.gov.au. These datasets have been viewed over 73,000 times this year.

Analysis of key outcomes

Key outcomes achieved by ASIC’s registry in 2018-19 include the following.

Quality recertification: This year, ASIC’squalitycertification(forafurther three-year period) under ISO9001:2015 was conducted by Bureau Veritas, a global

leader in inspection, quality and testing services.Wehavemaintainedquality certification ininformationmanagement since 1994.

Moving more company invoices online: Wehaveexpandedservicestomovemore invoices from paper and mail-based to online, which is good for the environment and helps us align with the Government’s

strategy to make more services digital. Over 682,568 additional invoices were issued online this year.

International collaboration: Earlier this year, ASIC signed an agreement with the Registration Authority of the Abu Dhabi Global Market to facilitate the exchange ofinformationandexpertise.Underthe agreement, we will collaborate with the Registration Authority towards enhancing

performance by sharing best practice and views on industry trends.

Corporate Registers Forum: ASIC’s Executive Director Registry, Rosanne Bell, continued as President of the international Corporate Registers Forum (CRF). The CRF is an association of corporate registries from over 60 international jurisdictions. This year, our involvement with the CRF

included attending the annual forum in April 2019 to share ideas and best practice and to discuss emerging registry issues.

Promoting online safety:Weareworking to manage the effects of scams that pose asignificantthreattothepublic,the business community and ASIC. During 2018-19, ASIC answered 9,747 customer

inquiries about scams and received over 103,000 visits to our dedicated webpage. Our work to combat scams raises awareness about online safety by:

âº alerting customers when a new scam is detected

âº providing information on how to protect yourself from email scams

âº sharing updates through social media, our website and publications.

ASIC Annual Report 2018-19 72

Registry gatekeeper conduct

An ASIC Registered Agent may be authorised to act on behalf of companies transacting with ASIC registers. Registered Agents submitted over 57% of the total 2.2 million lodgements to ASIC’s companies registers this year.

In October 2018, ASIC introduced mandatory Terms and Conditions for Registered Agents, which set out:

âº eligibility criteria to be a Registered Agent

âº grounds on which ASIC may cancel a Registered Agent status

âº requirements for lodging documents and lodging online

âº expectations of Registered Agents lodging on behalf of a company.

Wehavealreadyseenadropof18%intheRegisteredAgentpopulationto 22,230 at 30 June. By removing inactive agents and those not meeting our expectations, we expect to see increased compliance with lodgement and annual review obligations.

Revised Information Broker Agreements

Information Broker Agreements govern the commercial arrangements through which Information Brokers access ASIC registrydata.Theagreementsdefineroles and responsibilities, govern the use of the data being accessed, and set the terms of use of ASIC online services facilitating data access.

Key changes introduced this year to strengthen our governance arrangements included:

âº revisions to the term of each agreement to increase the frequency of review

âº specificprovisionstoensurecontinued compliance with privacy legislation

âº provisions for service suspension and termination for failure to pay invoices within agreed terms

âº increased security requirements.

ASIC’s annual performance statement 73

Digital Service Provider Terms and Conditions

The Digital Service Provider Terms and Conditionsdefineeligibilitycriteriaand theobligationstobefulfilledbyASIC digitalserviceproviders.Weareupdating these terms and conditions, including to strengthen ASIC’s capacity to enforce compliance and address misbehaviour.

A draft of the new requirements has been circulated to all ASIC digital service providers for review and feedback. The terms and conditions are expected to be finalisedandintroducedinthesecond

half of 2019.

These measures strengthen the ASIC registry services delivery model by definingtheminimumstandards and expectations required of our

business partners.

By better communicating the requirements to be a registry business partner, strengthening our compliance work, and acting on behaviours that generate complaints, we hope to better

inform new and current business partners about their obligations and to further promote the integrity of our registers.

ASIC Annual Report 2018-19 74

2.5 ASIC Service Charter results

The ASIC Service Charter covers the most common interactions between ASIC and our stakeholders and sets performance targets for these. Table 2.5.1 sets out our performance against the key measures outlined in theServiceCharterforthe2018-19financialyear.

Table 2.5.1 ASIC Service Charter performance, 2018-19

Service Measure Target Result

When you contact us

General telephone queries Weaimtoanswertelephonequeries on the spot

80% 90.7%

General email queries Weaimtoreplytoemailqueries within three business days 90% 91.8%

When you access our registers

Searching company, business name or other data online

Weaimtoensurethatouronline search service is available between 8.30 am and 7.00 pm AEST Monday to Friday, excluding public holidays

99.5% 99.8%

Lodging company, business name or other data online

Weaimtoensurethatyoucan lodge registration forms and other information online between 8.30 am and 7.00 pm AEST Monday to Friday, excluding public holidays

99.5% 98.4%

When you do business with us

Registering a company or business name online

Weaimtoregisterthecompanyor business name within one business day of receiving a complete application

90% 99.2%

Registering a company via paper application

Weaimtoregisterthecompanywithin two business days of receiving a complete application

90% 98.9%

ASIC’s annual performance statement 75

Service Measure Target Result

Registering a business name via paper application

For paper applications lodged by mail, we aim to complete applications for business name registrations within seven business days

90% 100%

Updatingcompany, business name or other ASIC register information online

For applications lodged online, we aim to enter critical information and status changes to company or business name registers within one

business day

90% 99.9%

Updatingcompany, business name or other ASIC register information via paper application

For paper applications lodged by mail, we aim to enter critical information and status changes to company or businessnameregisterswithinfive

business days

90% 93.6%

Registering as an auditor Weaimtodecidewhethertoregister an auditor within 28 days of receiving

a complete application

80% 90%

Registering a managed investment scheme

By law, we must register a managed investment scheme within 14 days of receiving a complete application, except in certain circumstances

100% 100%

Applying for or varying an AFS licence

Weaimtodecidewhethertograntor vary an AFS licence within 150 days 70% Granted: 73% Varied: 80%

Weaimtodecidewhethertograntor vary an AFS licence within 240 days 90% Granted: 86%1 Varied: 90%

Applying for or varying a credit licence

Weaimtodecidewhethertograntor vary a credit licence within 150 days 70% Granted: 92% Varied: 96%

Weaimtodecidewhethertograntor vary a credit licence within 240 days 90% Granted: 96% Varied: 98%

ASIC Annual Report 2018-19 76

Service Measure Target Result

Applying for relief 2 Weaimtogiveanin-principle decision within 28 days of receiving all necessary information and fees for applications for relief from the Corporations Act that do not raise

new issues

70% 66%

Weaimtogiveanin-principle decision within 90 days of receiving all necessary information and fees for applications for relief from the Corporations Act that do not raise

new issues

90% 80%

Complaints about misconduct by a company or individual

If someone reports alleged misconduct by a company or an individual, ASIC aims to respond within 28 days of receiving all relevant information

70% 73%

When you have complaints about us

AboutASICofficers, services or actions Weaimtoacknowledgereceiptof complaints within three working

daysofreceipt.Weaimtoresolvea complaint within 28 days

70% Resolved

within 28 days: 96%

1 Wereceived30%moreAFSlicencecancellationapplicationsthisyear.

2 This year, immediately before the introduction of fees for service, a lodging party lodged a suite of 228 applications associated with a demerger. The delays associated with this transaction materially impacted our efficiency indicators.

ASIC’s annual performance statement 77

2.6 Banking Act, Life Insurance Act, unclaimed money and specialaccounts

ASIC reunites people with their unclaimed money, as we are responsible for the administration of unclaimed money from banking and deposit-taking institutions and life insurance institutions (page 153 of ASIC’s Portfolio Budget Statement 2018-19).

Wefulfilthisresponsibilitybymaintaining a register of unclaimed money from banks, credit unions, building societies, life insurance companies and friendly

societies, as well as shares that have not been collected from companies. The public can search our register and makeclaims.Weprocessclaimswithin

28 days of receiving all necessary claim documentation.

In 2018-19, ASIC received $76.9 million in unclaimed money. This was less than the $89.6 million we received in 2017-18.

Wepaidoutatotalof$56.6million in claims in 2018-19, compared with $68.3 million the previous year.

Wepaidclaimantsinterest($2.7million of the $56.6 million) on unclaimed money from periods from 1 July 2013 onwards, at a rate of 2.5% for 2013-14, 2.93% for 2014-15, 1.33% for 2015-16, 1.31% for 2016-17, 2.13% for 2017-18 and 1.9% for 2018-19.

Table 2.6.1 Amount paid to owners of unclaimed money

Claims by type

2018-19 ($)

2017-18 ($)1 Principal Interest Total

Company 32,867,204 1,182,529 34,049,733 36,348,640

Banking 15,160,493 1,376,185 16,536,678 28,108,937

Life insurance 3,912,765 167,808 4,080,573 3,609,086

Deregistered company trust money 1,927,504 n/a 1,927,504 244,983

Total 53,867,966 2,726,522 56,594,488 68,311,645

1 Includes principal and interest.

ASIC Annual Report 2018-19 78

3ASIC’s achievements bysectorPurpose and structure 803.1 Deposit-taking and credit 813.2 Insurance 873.3 Financial advice 913.4 Investment management, superannuation and related services 953.5 Market infrastructure 1003.6 Market intermediaries 1033.7 Corporate 1063.8 Largefinancialinstitutions 112ASIC’s achievements bysector 79

Purpose and structure

This section of the report discusses activities and outcomes achieved for each industry funding sector this financial year, to help stakeholders better understand the regulatory effort we expended in their subsector.

Industry funding

ASIC industry funding means that those who create the need for regulation bear thecostsofthatregulation.Underthe model, entities pay a share of the costs to regulate their subsector through industry levies, which are based on a range of business activity metrics. The model provides a reasonable indication to industry year on year about the levies to be paid. Any changes to the model over time will have an impact on the costs of regulation recovered from each sector.

Wepublishedourindicativeindustry levies for 2018-19 as part of our Cost Recovery Implementation Statement (CRIS) in June 2019. The CRIS explains how the costs of ASIC’s regulatory activities will be recovered from each sector. The CRIS is available on our website.

Publication of this information helps industry better plan for the actual levy for 2018-19, which is billed in January 2020 after ASIC’s regulatory costs are published and business activity metrics for each subsector are provided by regulated entities.

Underindustryfunding,thereareseven sectors (deposit-taking and credit; insurance;financialadvice;investment management, superannuation and related services; market infrastructure and intermediaries; corporate; and large financialinstitutions)and52subsectors.

For ASIC achievements by regulatory tool, see Chapter 2.

ASIC Annual Report 2018-19 80

3.1 Deposit-taking and credit

The deposit-taking and credit sector comprises credit licensees (credit providers and credit intermediaries), deposit product providers, payment product providers, and margin lenders.

ASIC’s work in this sector during 2018-19 focused on responsible lending and ensuring that consumers are sold products that are appropriate for their needs.

Credit providers

Credit card project

In July 2018, we released Report 580 Credit card lending in Australia, which reported that more than one in six consumers were struggling with credit card debt.

Our review analysed over 21 million credit card accounts from 12 credit providers between 2012 and 2017.

Wefoundthat:

âº in June 2017, there were almost 550,000 people in arrears, an additional 930,000 people with persistent debt, and a further 435,000 people repeatedly repaying only small amounts

âº consumers could have saved $621 million during the 12 months to June 2017 if they had carried their balance on a card with a lower interest rate

âº over 30% of consumers who transferred their balance to a new credit card increased their debt by 10% or more during the promotional period and 63% of consumers did not cancel a card after a balance transfer

âº four credit providers continued to apply old repayment allocation rules for some or all credit card contracts enteredbeforeJuly2012.Weestimate that almost 525,000 consumers were charged more interest as a result.

During our review, the Government passed legislative reforms which included:

âº tightening the responsible lending requirements for credit cards, by introducing a requirement that a credit card contract be assessed as unsuitable if the consumer was unable to repay the credit limit within a period prescribed by ASIC. In September 2018, following our review, we prescribed a three-year period

âº strengthening the existing prohibition on unsolicited credit limit increase offers

âº changes to interest calculations, particularly when applying interest charges retrospectively

âº the right to request credit limit reduction and card cancellation online.

In addition to implementing the responsible lending reforms, we required industry to improve issues with conduct andoutcomesthatweidentifiedinour review. In December 2018, we reported

ASIC’s achievements by sector 81

on changes being made by providers to help consumers with credit card debt. This included requiring providers to:

âº trial proactive steps to help consumers with potentially problematic credit card debt or who are failing to repay balance transfers

âº restrict the amount by which consumers may exceed their credit limit to 10% of the limit

âº allocate repayments for all credit cards in the more favourable way required for cards entered into after July 2012.

Wewillmonitorcompliancewiththenew requirements and commence a follow-up review in 2020-21.

Unfair contract terms protections for small business borrowers

In September 2018, we announced that, following ASIC’s review, Prospa Advance Pty Ltd (Prospa) changed loan terms in its standard form small business loan contract to address terms being unfair to small business borrowers.

The changes included addressing problematic terms of the kind outlined in ASIC Report 565 Unfair contract terms and small business loans, and changes to other terms that could have operated unfairly for borrowers and guarantors. For example, Prospa amended its early repayment clause so that:

âº borrowers may repay their loan early without requiring Prospa’s consent

âº if borrowers repay their loan early, Prospa will provide a discount on the remaining interest payable (previously, Prospa had an absolute discretion to provide a discount if borrowers repaid early).

Prospa agreed that all customers who entered into or renewed contracts from 12November2016wouldhavethebenefitofthesechanges.

ASIC Annual Report 2018-19 82

Reverse mortgage providers

In August 2018, we published Report 586 Review of reverse mortgage lending in Australia, as part of ASIC’s work for olderAustralians.Ourreportidentifies that although there is an important role for such products, there is a risk that some borrowers may not recognise the longer-term impact on their future financial needs.

Importantly, we also found that the enhanced consumer protections introduced for reverse mortgages in 2012 have reduced risks to consumers. These protections include a ‘no negative equity guarantee’ that protects borrowers from owing more than the market value of their property, a presumption of unsuitability for high loan-to-value ratios, and additional obligations to inquire about the needs and objectives of potential borrowers.

Weanalyseddataon17,000reverse mortgages,111loanfiles,lenderpolicies andprocedures,andcomplaints.Wealso commissioned in-depth consumer research interviews with 30 randomly selected borrowers and consulted over 30 industry and consumer stakeholders.

Our review found that lenders needed to make more detailed inquiries about consumers’ requirements and objectives, including how a loan would affect theirfuturefinancialneeds,tenancy protectionandpensionincome.We identifiedpotentiallyunfaircontract terms, such as unilateral variation clauses and non-monetary default clauses, which entitled a lender to take action disproportionate to the related breach. Lenders have now acted to remove these types of clauses from their loan contracts.

Wealsoformedaworkinggroupinvolving lenders and industry participants to improve lending practices, and we are trialling a comprehension testing regime to monitor consumer outcomes in this industry.

Small and medium amount credit providers

Wecontinuedtoactagainst non-compliance with responsible lending obligations under consumer credit laws. This year, we focused on offers of high-cost credit and the consumer leasingindustry.Wealsoexamined emerging products that give consumers additional payment options but are not regulated credit and may potentially cause consumer harm.

ASIC’s achievements by sector 83

Local Appliance Rentals Pty Ltd

InNovember2018,afterASICidentifiedconcernsaboutcompliancewith responsible lending obligations and supervision of franchisees, Local Appliance Rentalspaidinfringementnoticestotalling$157,500.Wealsoobtainedacourt enforceable undertaking from Local Appliance Rentals to remediate consumers for past practices, appoint an independent compliance consultant, and pay a communitybenefitpaymentof$100,000.

Local Appliance Retails leased household goods, including to low-income consumers, recipients of payments from Centrelink, and people in regional and remote Australia. The remediation included refunds of excess payments and excessive late fees.

Buy now pay later arrangements

This year, we continued to examine emerging products that give consumers additional payment options but can potentially cause consumer harm.

In November 2018, we released Report 600 Review of buy now pay later arrangements,ASIC’sfirstreviewofthis rapidly growing industry.

Buy now pay later arrangements allow consumers to buy and receive goods and services immediately but pay for their purchase over time.

Buy now pay later

REVENUE OF

PROVIDERS

$32 million Q2 2016

$78 million Q2 2018

TRANSACTIONS

June 2016 80,000

June 2018 1.9 million

CONSUMERS

400,000 FY16

2 million FY18

MERCHANTS In just two years...

50x more merchants with Zip Pay

45x more merchants with Afterpay

ASIC Annual Report 2018-19 84

Weidentifiedsignsthatsomeconsumers, including many young people, are already struggling with too much debt from these arrangements.Wealsofoundthatsome buy now pay later arrangements resulted inthepriceofgoodsbeinginflatedand somehadinfluencedconsumerstospend more overall.

Only one of the six providers in our review examined the income and existing debts held by consumers before providing its services. After feedback from ASIC, all six providers changed some of their practices to help consumers stay in control and make informed decisions about their purchases and payments.

The buy now pay later industry will be an area of ongoing focus for ASIC, while we monitor whether additional protections are required.

Previously, ASIC’s jurisdiction to regulate conduct and address risks to consumers who use these kinds of products was limited. This was one of the reasons we supported the extension of ASIC’s proposed product intervention power to all credit facilities regulated under the ASIC Act. These new powers came into effect in April 2019.

Credit intermediaries

Ban on flex commissions in car finance market

Ourbanonflexcommissionsinthecarfinancemarketcameintoforceon 1November2018.Flexcommissionswerepaidbylenderstocarfinancebrokers, allowing the car dealer to set the interest rate on the car loan. Dealers would earn a larger commission on loans with higher interest rates, leading to vulnerable

consumerspayingexcessiveinterestratesontheirloans.Wearemonitoringlenders’ compliance with the ban, which we expect will result in consumers being charged lower interest rates and will end exploitative pricing practices.

ASIC’s achievements by sector 85

Deposit product providers

Review of deposit accounts with third-party access

In August 2018, we announced that followingareviewbyASIC,fivebanks would improve compliance measures and controls for deposit accounts that can be operated by a third party, such as a financialadviser.Ourreport,Report584 Improved protections for deposit accounts with third-party access,identifiedthat banks needed to do more to manage the risks to customers arising from third parties having access to money in the accounts.

The banks involved agreed to improve their practices, including by:

âº ensuring that account application forms and communications are clearer

âº improving the monitoring of advisers’ use of the accounts and their transaction requests

âº analysing any fraud that occurs on the accounts and remediating customers who have lost funds due to unauthorised transactions.

Approval of Banking Code

InJune2019,ASICapprovedthefirst stage of changes to the Australian Banking Association’s (ABA’s) new Banking Code of Practice. The changes include:

âº new provisions to ensure that a bank will not charge fees for services to deceased customers, where services are no longer being provided to that customer’s estate

âº changes to the commitments around the provision of valuations to small business customers

âº changestoreflectASIC’s implementation of law reforms to credit card responsible lending.

The new Code commenced on 1 July 2019.

All ABA member banks will be required to subscribe to the Code as a condition of their ABA membership. The protections in the Code will form part of the banks’ contractual relationships with their banking customers.

ASIC will decide on further changes to the Code in 2019 after consultation with key stakeholders. These further changes are designed to address recommendations of the Royal Commission and relate to the accessibility of banking products and services for vulnerable consumers, the charging of default interest on agricultural loans in the event of natural disasters, and various small business protections.

Payment product providers

Review of the ePayments Code

In March 2019, we published Consultation Paper 310 Review of the ePayments Code: Scope of the review, seeking feedback on the topics we propose to include in our review of the ePayments Code.Weareundertakingthereview to ensure that the Code continues to be effective and relevant to consumers and Codesubscribers.Inlightofsignificant continuingdevelopmentsinfinancial technology and innovation, a key focus of consultation has been consideration of options to future-proof the Code.

ASIC Annual Report 2018-19 86

3.2 Insurance

The insurance sector comprises life and general insurance and includes insurance product providers (including friendly societies), insurance product distributors, and risk management product providers.

This year, ASIC continued to focus on the sale of inappropriate products andthewayproductsaresold.Weundertooktargetedreviews,building on previous work to raise industry standards, and introduced new levels of transparency to enable consumers to make more informed decisions.

Insurance product providers

Life insurance claims data

Inaworld-firstinitiativeinMarch2019, APRA and ASIC published life insurance data and an online tool that allows consumers to compare life insurers’ performance in handling claims and disputes. The latest data was released in June 2019, covering the 12 months to December 2018.

The launch of the online life insurance tool with Sean Hughes and Geoff Summerhayes from APRA.

Consumers may now review an individual life insurer’s claims and disputes outcomes and compare them against other insurers and the industry average. The full set of published data may be accessed on APRA’s website and the life insurance claims comparison tool is available on ASIC’s MoneySmart website. As a result, consumers may compare each insurer’s:

âº claims-acceptance rates

âº average claim time

âº number of claims-related disputes

âº policy cancellation rates.

This level of transparency and accountability plays a critical role in increasing demand-side pressure and improvingtrustinfinancialservices.

ASIC’s achievements by sector 87

Insurance product distributors

Consumer credit insurance

This year, our work to address the inappropriate sale of consumer credit insurance (CCI) focused on ensuring that consumers who have been harmed are remediated, CCI products offer consumers better value, and sales practices comply with our requirements.

In2018-19,ASICidentifiedarangeofconsumerharms,including:

âº an average claims ratio of 19 cents in the dollar for CCI sold with personal loans and home loans, and 11 cents in the dollar for CCI sold with credit cards

âº consumers being sold CCI despite being ineligible to claim against one or more types of cover

âº the use of pressure selling techniques or other unfair sales practices

âº consumers receiving inappropriate personal advice under a general advice model for the purchase of unsuitable policies

âº consumers being charged incorrect premiums for their CCI policy.

Wehaveaddressedtheproblemsweidentifiedby:

âº commencingenforcementinvestigationsintothesalespracticesofseveralfirms

âº requiring lenders and insurers to undertake large-scale remediation programs for consumers who have suffered harm. ASIC estimates that lenders and insurers will collectively pay in excess of $100 million to over 300,000 consumers

âº consulting on banning the unsolicited outbound telephone sales of CCI, due to the consumer harms we have seen as a result of this practice

âº requiring lenders and insurers to comply with new and strengthened minimum standards when offering CCI products

âº expecting all lenders to incorporate a four-day deferred sales model for all CCI products sold across all channels (not just lenders that subscribe to the Banking Code of Practice).

Wepublishedareportonthefindingsofourworkon11July2019.

ASIC Annual Report 2018-19 88

Sale of direct life insurance

In August 2018, ASIC published Report 587 The sale of direct life insurance and Report 588 Consumers’ experiences with the sale of direct life insurance, after reviewing various products, including term life, accidental death, trauma, total and permanent disability, and income protection insurance. Direct life insurance sales are often made by telemarketing, online or face to face, including through bank branches. The review explored whether and how the design and sale of these products contribute to poor consumer outcomes.

Our review found:

âº high cancellation rates and poor claims outcomes: a sign that people are being sold products they do not want or cannot afford, or that are not right for them

âº threeinfiveofallpoliciessoldwere cancelled within three years

âº of the claims we looked at:

- 58% of claims were accepted

- 15% of claims were rejected

- 27% of claims were withdrawn

âº some products offered little value to customers - for example, accidental death insurance had a claims ratio of 16.1%, meaning that for every dollar paid in premiums only 16 cents was paid in claims.

Our report made clear our expectations, namely that:

âº the outbound selling of life and funeral insurance will be restricted

âº firmsstopsellingproductsthatdonot meet the needs of consumers

âº firmsrespondandraisestandards through their code of practice.

Wewillinterveneandtakeenforcement action if industry does not stop selling poor value products.

Sale of add-on products throughcar yards

Thisyear,wefinalisedfurtherrefund programs from Aioi Nissay Dowa Insurance Company Australia (ADICA), Eric Insurance, Virginia Surety Company, Sovereign Insurance Australia, LFI Group and NM Insurance for insurance products sold by motor vehicle dealers, including guaranteed asset protection (GAP) insurance, consumer credit insurance, extended warranty, and tyre and rim insurance. This brings the total customer refunds to over $130 million.

These insurance providers refunded sales of insurance offering low or no value to consumers - for example, because they were ineligible to claim at the time the policy was sold to them, or because unnecessary life insurance was sold to young people with no dependants.

ASIC’s achievements by sector 89

Our engagement with industry contributedtosignificantchangesinthe add-on market, including:

âº a reduction in commissions paid to dealers, from a maximum of 75% of the premium to around 20%

âº an increase in claims paid compared to premiums paid - for example, the average loss ratio for both GAP and CCI across the three main insurers has doubled since 2016-17

âº improvements to product design

âº the introduction of knock out questions by car dealers to check that the customer is eligible under the policy before it can be sold to them

âº some insurers ceasing to sell some add-on products, and four insurance providers exiting the market completely.

Insurance claim investigations

In 2018, at a workshop hosted by ASIC, regulators and industry stakeholders analysed and discussed proposed mandatory minimum standards for claim investigations for inclusion in the General Insurance Code of Practice, with the aim of addressing consumer harms from investigation practices.

This year, ASIC gathered data on the number of comprehensive motor vehicle claims investigated over a one-year period, and the outcome of the claims. Wefoundthat:

âº over 71% of claims investigated are found to be valid and are paid out

âº only 4% of investigated claims are declined due to fraud, revealing a very high ‘false positive’ rate for suspected fraudulent claims

âº 15% of investigated claims are withdrawn.

Weproposedasetofmandatoryminimum standardstoaddressidentifiedconsumer harms related to the investigation process. The minimum standards seek to ensure that insurers maintain active, timely and visible oversight of claim investigations, claims are assessed in a reasonable time, and consumers have the support they need.

In July 2019, we published Report 621 Roadblocks and roundabouts: A review of car insurance claim investigations, a report onthefindingsofourworkoninsurance claim investigations.

ASIC Annual Report 2018-19 90

3.3 Financial advice

Thefinancialadvicesectorincludes AFS licensees and their representatives who provide personal advice or general advice toretailand/or wholesale clients.

In 2018-19, ASIC’s work in this sector focused on remediating consumers who were charged fees for no service, licensee oversight, understanding consumerawarenessaroundgeneralfinancialadvice,andbanningadvisers engaging in misconduct.

Financial advisers

Charging clients without providing advice

In 2018-19, we continued to supervise the remediation of customers of ANZ, AMP, CBA,MacquarieBank,NABandWestpac who were charged annual fees for services, including an annual advice review, which were not provided (fees for no service).

Thisworkresultedinsignificant compensation being paid, or to be paid, to affected customers. As at 30 June 2019, the banks have collectively provisioned around $1.7 billion for fees-for-no-service remediation.

In August 2018, we released Information Sheet 232 Fees for no service: Remediation to assist licensees in remediating clients. Our media release of 11 March 2019, 19-051MR ASIC provides update on further reviews into fees-for-no-service failures, publicly disclosed the status of the banks’ further reviews in relation to fees for no service and further set out ASIC’s expectations of remediation programs.

Mind the Gap (Report 614)

In March 2019, ASIC published Report 614 Financial advice: Mind the gap, which analysed consumer awareness and understanding of the differences between personalorgeneralfinancialadvice.

ASIC’s research revealed that many consumers confuse general and personal advice, exposing them to greater risk ofmakingpoorfinancialdecisions.For example, despite receiving a general advice warning, many Australians receiving general advice may incorrectly think that:

âº their personal circumstances have been taken into account, and/or

âº the adviser has an obligation to act in their best interests when providing the advice.

ASIC’s achievements by sector 91

Factors that can influence how consumers perceive advice

Consumers are more likely to perceive advice that ...

... as general advice ... as personal advice

is from customer service staff

is from mass media (e.g. TV, radio)

has no fees

is a sales or

marketing recommendation

is about ‘less personal’ topics (e.g. term deposits)

is from more qualified staff

is from a face-to-face appointment

has upfront fees

requires the consumer to provide personal information

is about ‘more personal’ topics (e.g. superannuation)

ASIC is commissioning further research that will seek to identify a more appropriate label for general advice, or different labels for general advice provided in different circumstances, and will consumer test different versions of the general advice warning.

ASIC Annual Report 2018-19 92

Solar Financial Advisory Pty Ltd AFS licence cancellation

In November 2018, ASIC cancelled the AFS licence of Sydney-based Solar Financial Advisory Pty Ltd (Solar), following a surveillance relating to concerns about licensee oversight. ASIC found that Solar had failed to:

âº manageconflictsofinterest.ASolarrepresentativehadrecommendedthat clients establish SMSFs to invest in a private development company owned and administered by the representative and the representative’s associated companies. It was found that Solar had failed to:

- undertake adequate background checks on its representatives to identify and testpotentialconflictsofinterest

- update and test personnel information on an ongoing basis

- trainitsrepresentativesonconflictsofinterest

- haveadequatearrangementstomanageconflictsofinterest

âº ensurethatitsrepresentativescompliedwithfinancialserviceslaws,byfailingto provide appropriate oversight

âº properly monitor and supervise its representatives

âº maintainadequatehumanandfinancialresources

âº adequately manage its internal dispute resolution process, by failing to acknowledge and/or record complaints and properly communicate with complainants.

The cancellation of Solar’s AFS licence forms part of ASIC’s ongoing efforts to improvestandardsacrossthefinancialservicesindustry.

ASIC’s achievements by sector 93

Adviser bannings

ASIC takes administrative action, such as banning individual advisers, to protect investors and consumers and to deter misconduct.

This year, the Financial Advisers team banned 11 advisers from providing financialservices.

Bans imposed in 2018-19 include:

âº Peter Anthony Chigwidden: Mr Chigwidden was banned from providing financialservicesforfiveyears.ASICfoundthathehadconsistentlyfailed to address the stated needs and objectives of his clients and as a result did notprovideadvicethatwasintheirbestinterests.Whenadvisingclientson

product switching, he failed to adequately consider the cost impact or other consequences of that advice, leaving clients poorly informed. Crucially, the switching advice failed to show that the recommended products better met the clients’ needs than their existing products.

âº Subeer Luthra:ASICpermanentlybannedMrLuthrafromprovidingfinancial services and engaging in credit activities as a result of his dishonest conduct. ASICwasnotifiedofMrLuthra’smisconductbyWestpac.MrLuthraadvised his clients to switch their superannuation to a product issued by BT (part of the WestpacGroup),andtoobtaincomprehensivepersonalinsurance,without

taking their needs and objectives into consideration. He also recommended BT insurance and superannuation products to all his clients without adequately investigatingtheirexistingfinancialproducts.TheadviceresultedinMrLuthra’s clients paying excessive premiums that eroded their superannuation contributions at a point in their lives when they did not have time to rebuild their assets for retirement. ASIC found that Mr Luthra is not of good fame or character toprovidefinancialservicesbecausehisconductwasdishonestanddeliberate, and motivated by personal enrichment. ASIC also determined that Mr Luthra is notafitandproperpersontoengageincreditactivities.

ASIC Annual Report 2018-19 94

3.4 Investment management, superannuation and relatedservices

The investment management, superannuation and related services sector includes superannuation trustees, responsible entities, wholesale trustees, operators of notified foreign passport funds , custodians, investor directed portfolio service (IDPS) operators, managed discretionary account (MDA) providers, traditional trustee company service providers, and crowd-sourced funding intermediaries.

In 2018-19, ASIC focused on the responsibilities of superannuation trustees to consumers in relation to insurance offered through superannuation and dispute resolution. These are both areas inwhichsignificantlegislativechange occurred during the year.

Our regulatory work and the Royal Commission highlighted the importance of trustees properly overseeing advice fee deductions from superannuation accounts. To help consumers understand product fees and costs, we consulted on changes to the fee and cost disclosure requirements applying to superannuation and managed investment products in Consultation Paper 308 Review of RG 97 Disclosing fees and costs in PDSs and periodic statements. This followed the release of Report 581 Review of ASIC Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements, an external review of these requirements involving extensive industry engagement.

Our work in the managed funds sector ranged from investigating illegal conduct and pursuing compensation for investors, to identifying compliance failures and monitoringtherectificationprocessor taking action to address non-compliance. Wealsoworkedwithindustrytofacilitate good business practices, issued revised guidance,releasedthefindingsofsector surveys to improve understanding of these sectors, and undertook thematic reviews about MDAs and IDPSs.

Superannuation trustees

ASIC is primarily responsible for ensuring that superannuation trustees meet certain obligations in their dealings with consumers, including disclosure and advice to members, and ensuring that members have access to complaints processes.

ASIC’s achievements by sector 95

Insurance in superannuation

Millions of Australians hold insurance through superannuation, yet this insurance is not always delivered in a way that meets consumer expectations. In September 2018, we released Report 591 Insurance in superannuation, our review of the insurance arrangementsof47superannuationtrustees.Thereportidentifiedimprovements

needed across the industry in relation to:

âº claims processes and complaints handling

âº disclosure

âº defaulting of consumers into smoker premium rates in the absence of information that the consumer is a smoker.

Wehavebeenmonitoring,throughpublicinformationandonsitevisitsto trustees, the industry’s progress in implementing the Insurance in Superannuation Voluntary Code of Practice. This Code aims to improve product design, consumer understanding, and complaints and claims processes for consumers. At the end of 2018-19, 62 trustees have publicly indicated that they are adopting the Code.

This year, we also focused on ensuring that automatic smoker defaults do not apply to any public offer superannuation funds. ASIC considers that the practice of automatically defaulting members as ‘smokers’ when setting premiums is unacceptable,becausehighpremiumscansignificantlyerodemembers’retirement benefits.Ourworkresultedintrusteeswhoweidentifiedasautomaticallydefaulting

new members as smokers ceasing this practice.

Dispute resolution arrangements for superannuation

Weidentifiedthroughourinsurancework long timeframes for the resolution by some trustees of complaints concerning insurance claims. This can impact consumers when attheirmostvulnerable.Weconsiderthat superannuation trustees’ approach to internal dispute resolution (IDR) provides a meaningful measure of the way trustees treat their members and whether they act in their members’ best interests.

Weinvestigatedtrusteeswithinsurance complaint response timeframes beyond 90 days, to identify the drivers of complaints and what improvements were being made

toIDRpractices.Wegavefeedbackto individual trustees and published our findingsinindustrypublications.InMay 2019, we released Consultation Paper 311 Internal dispute resolution: Update to RG 165, on IDR requirements. It proposes a shorter timeframe for dispute resolution (45 days) and improved practices to deal with complaints.

Wecontinuedtoengagewithtrustees about their failure to provide adequate written reasons in response to complaints aboutdeathbenefitpayments.Thisled to improvements in trustee processes, including updated template letters and additional employee training. As well as promoting trustee accountability and

ASIC Annual Report 2018-19 96

consumerconfidence, properwritten reasons can help a consumer decide whether to escalate their complaint to external dispute resolution.

Wealsotookstepstoensurethat trustees acted to help consumers access the appropriate external dispute resolution body.

From 1 November 2018, the Australian Financial Complaints Authority (AFCA) became the dispute resolution body responsible for resolving superannuation complaints. Before this, superannuation complaints were considered by the SuperannuationComplaintsTribunal.We followed up with individual trustees who were slow to join AFCA to ensure that they did so ahead of 1 November 2018.

Wealsocontacted46trustees,witha collective membership of over 6.6 million Australians, that had inadequate

disclosure on their websites about AFCA’s role in complaints management. These trustees subsequently updated their consumer-facing disclosure, so members had easy access to information about their right to contact AFCA. In thefirstsixmonthsofAFCA’soperation, superannuation complaints accounted for 9% of all complaints received by AFCA.

Responsible entities

ASIC is responsible for ensuring that responsible entities meet their obligations tomembers.Weundertakeproactive supervision and surveillances of responsible entitiesthathavebeenidentifiedthrough our threat, harm and behaviour framework as being most likely to cause harm or potential harm to consumers, investors, andfairandefficientmarkets.

Endeavour and Linchpin

ASIC obtained orders that Endeavour Securities (Australia) Limited (Endeavour) and Linchpin Capital Group Limited (Linchpin) be placed into liquidation and that receivers be appointed over the assets of a registered scheme operated by Endeavour and an unregistered scheme operated by Linchpin into which the

registered scheme was invested.

Endeavour and Linchpin are related entities. Linchpin on-lent the funds to directors, related entities and authorised representatives who recommended that clients invest in these schemes, generally on an unsecured basis. The court found that Endeavour:

âº did not act in the best interests of the members of the registered scheme

âº failedtoprovidefinancialservicesefficiently,honestlyandfairly

âº failed to exercise due care and skill as a responsible entity

âº engaged in related party transactions without member approval.

In total, the registered scheme received $17.3 million from 131 investors. There were 41 investors in the unregistered scheme, which had assets of $21.2 million.

ASIC’s achievements by sector 97

Australian Mutual Holdings Limited

Following an ASIC investigation, on 17 April 2019, ASIC’s Financial Services andCreditPanelbannedJeffreyWorboys and Matthew Barnett from providing financialservicesforsixyears.MrWorboys and Mr Barnett were joint executive officersanddirectorsofAustralianMutual Holdings Limited (AMHL).

ASICfoundthatMrWorboysand Mr Barnett did not exercise the degree of care and diligence required and failed to act in the best interests of the members of the Courtenay House Capital Investment Fund, which was operated by AMHL. This included a failure to ensure that the persons responsible for trading funds had therequisitequalificationsandexperience to manage a foreign exchange and derivatives fund.

Infringement notices related to exchange-traded bonds

Australian Corporate Bond Company Pty Ltd (ACBC) paid $25,200 in penalties after ASIC issued two infringement notices for alleged misleading statements made in the promotion of exchange-traded bonds on the ACBC website between May and December 2017.

WewereconcernedaboutACBC’s misrepresentation about term deposits and exchange-traded bonds carrying a similar risk while producing a higher return. For example, investments in a term deposit of up of $250,000 are protected by the Australian Government guarantee for authorised deposit-taking institutions, while investments in exchange-traded bonds are not.

Interim and final stop orders for schemes involving defective disclosure

This year, we also issued interim and finalstopordersinrespectofProduct Disclosure Statements relating to offers of interests in property development schemes, a mortgage scheme and an initial coin offering (ICO) where we found disclosuretobedefective.Wealso reviewed disclosure by exchange-traded funds to identify defective disclosure.

Cancelled licences

WecancelledtheAFSlicenceofCWS Mortgages Ltd for failing to comply with professional indemnity insurance requirements and of Vesta Living CommunitiesLtdforfailingtofulfilits organisationalcompetenceandfinancial resource requirements.

ASIC Annual Report 2018-19 98

Guidance

This year, to improve our understanding of the market, we commenced a pilot program to collect recurrent data for all registered managed investment schemes and reviewed our regulatory settings against IOSCO recommendations about liquidity in collective investment vehicles.

Wereleasedreportsinrelationtocrowd-sourcedfundingintermediaries (Report 616) and marketplace lending providers (Report 617). These reports provide a deeper understanding of new and existing business models, as well as insights into our monitoring of activity levels and assessment of risks in these sectors.

WealsorevisedInformationSheet157Foreign financial services providers - practical guidance.Thisinformationsheetprovidesguidanceforforeignfinancial services providers seeking to provide services in Australia.

In addition, we reissued class order relief for business matching services and out-of-use notices for warrants.

Wholesale trustees

Wecontinuetomonitorandconduct risk-based surveillance of compliance by wholesale trustees with their licence conditions and any conduct that may result in harms to investors. Our subsequent actions have included addressing misleading and deceptive statements about an ICO offering, requiring amendments to promotional materials in relation to statements about past performance, requiring additional measures to manage processes for certifying wholesale clients, and causing the voluntary cancellation of an AFS licence.

WealsoreissuedRegulatoryGuide192 Licensing: Wholesale equity schemes due to the sunsetting of the existing relief. The revised guidance relates to amendments to the existing relief to take into account astrengtheningoffinancialandcustody requirements in 2013.

Managed discretionary account providers and platforms

Webeganareviewofthemarketpractices of MDAs and platforms to identify issues affecting consumer outcomes in this growing sector of the market - for example,transparencyandconflicts of interest.

ASIC’s achievements by sector 99

3.5 Market infrastructure

The market infrastructure sector includes Australian market licensees, various types of market operators, benchmark administrators, clearing and settlement (CS) facility operators, Australian derivative trade repository operators, exempt market operators, and credit rating agencies.

ASIC’s work in this sector during 2018-19 continued to focus on improving the effectiveness of Australia’s capital markets. This included technology governance and operational risk management for market operators, supporting legitimate crypto-asset businesses to operate lawfully in Australiathroughdirectfeedbacktofirms,ongoingoversightofandpolicy development for clearing and settlement facility operators, implementation of the tiered market licensing regime, publication of the Yieldbroker (OTC trading platform) report, and implementation of an oversight model for benchmark administrators.

ASIC Annual Report 2018-19 100

Large securities exchange operators

Market integrity rules for technology and operational resilience

In September 2018, following an extensive review with the assistance of KPMG and the Reserve Bank of Australia (RBA), ASIC published Report 592 Review of ASX Group’s technology governance and operational risk management standards.

In June 2019, we released Consultation Paper 314 seeking feedback on proposed market integrity rules for securities and futures market operators, and market participants, to promote the resilience of their critical systems. Failures of critical systems can severely impact market integrity, and it is important that we update the rules to align with changes in the technology and processes that underpin financialmarkets,particularlyasthemultimarketenvironmentforAustralianlisted securities creates interdependencies between participants and operators, and the outsourcing and offshoring of critical systems is becoming more prevalent.

The proposed rules apply to both the securities and futures markets and address:

âº maintaining critical systems

âº change management in relation to critical systems

âº outsourcing

âº risk management, and data and cyber security

âº incident management and business continuity planning

âº governance and resourcing

âº fair access to markets and trading controls.

Supporting legitimate crypto-asset business in operating lawfully

To support legitimate crypto-asset business in operating lawfully in Australia, we updated Information Sheet 225 Initial coin offerings and crypto-assets. Crypto-assets such as cryptocurrency, or tokens, are created and dispersed using distributed ledger technology, sold through initial coin offerings (e.g. to raise capital to fund projects), and traded on crypto-asset trading platforms.

The technology surrounding crypto-assets can be complex and can fall under the jurisdiction of several regulatory agencies. Information Sheet 225 reinforces the obligation on crypto-asset businesses to avoid misleading and deceptive conduct whether or not the crypto-asset is or involvesafinancialproduct.Information Sheet 225 also provides high-level regulatory signposts as a starting point to help crypto-asset participants comply with the obligations administered by ASIC.

ASIC’s achievements by sector 101

ASIC has taken action to stop several proposed initial coin offerings or token-generation events (together, ICOs)targetingretailinvestors.Wehave stopped the issue of a Product Disclosure Statement for a crypto-asset managed investmentscheme,andonfiveother occasions since April 2018 have acted to prevent ICOs raising capital without the appropriate investor protections. These ICOs have been put on hold and some are considering how to restructure to comply with relevant legal requirements.

Clearing and settlement facility operators

Chicago Mercantile Exchange

On 26 February 2019, the overseas CS facility licence of the Chicago Mercantile Exchange (CME) was varied to authorise it to provide central counterparty services to the licensed exchange-traded derivatives market to be operated by FEX Global Ltd. CME’s authorisation facilitates greater competitionintheAustralianfinancial systembypermittingaUS-basedcentral counterparty (CCP) to provide CCP services to a licensed domestic market. CME is licensed as an overseas CS facility because of the regulatory equivalence of theUSandAustralianCSfacilityregimes.

Established specialised market operators

Yieldbroker assessment

In November 2018, we reported on our assessment of the Yieldbroker market. Werecommendedimprovementstothe market’sarrangementsforconflictsand governance, supervision and enforcement, and systems and controls. Yieldbroker addressed each of our recommendations, resultinginasignificantstrengthening of governance and compliance arrangements, including an upgrade ofitsconflictsarrangements.Among other improvements, it developed a remuneration policy, a compliance manual, and enhanced monitoring systems.

Exempt market operators

Implementation of the Market Licence Regime

In May 2018, we introduced a two-tiered market licence regime that allowed us to tailor our licences to assist the operation ofspecialisedandemergingfinancial markets.Weimplementedthisregime across the year, and most of the exempt professional market platforms in the commodities,FXandfixedincomesectors applied for licences. As of 30 June 2019, the Minister’s delegate had granted the firstlicencesfortheseplatforms,withmost of the outstanding applications being in the latest stages of processing.

ASIC Annual Report 2018-19 102

3.6 Market intermediaries

The market intermediaries sector includes market participants, securities dealers, corporate advisers, over-the-counter (OTC) traders, retail OTC derivatives issuers, and wholesale electricity dealers.

ASIC’s work in this sector during 2018-19 included enhancing our supervision model for the most complex and high-risk market intermediaries, which involves broader engagement across each entity and the development of tailored supervision plans.

Weembeddedouroversightofmarket intermediaries’fixedincome,currency and commodities businesses, including through a thematic review of foreign exchange practices, onsite reviews, and detailed surveillance of large transactions. Wealsoaddressedharmstoretail consumers in the retail OTC derivatives market through a range of licensing action, referrals to our Enforcement teams, and disrupting unlicensed conduct.

Enhanced market intermediary supervision

Wehaveenhancedoursupervisory approach for the largest and most complex market intermediaries in order to facilitate early detection of actual and potential harms and to foster constructive andtimelybehaviouralchange.We are doing this by, among other things, developing a deeper understanding of governance arrangements and internal controls that can help prevent poor conduct.

Weareincreasingourengagement through onsite reviews and meetings in order to identify areas of potential harm, to provide faster feedback on how to address the potential harms, and to act where appropriate. Our onsite reviews have covered themes such as culture and conduct, risk programs and training, corporate governance, compliance arrangements, pre- and post-trade controls, client money, and client disclosure arrangements.

For more information on corporate governance and Close and Continuous Monitoring, seeSection1.10

Oversight of fixed income, currency and commodity market intermediaries

This year, we continued to enhance our oversightoffixedincome,currencyand commoditymarkets.Weconducted several onsite and targeted surveillance reviews where we assessed wholesale foreign exchange market participants against their obligations under the Corporations Act, the FX Global Code and Report 525 Promoting better behaviour: Spot FX.Wealsofocusedon the use of ‘last look’ practices in Australia and the use of mark-ups in foreign exchange businesses.

ASIC’s achievements by sector 103

Wereviewedthefixedincomebusinesses ofseveralfirmsandbeganreviewsofthe managementofconflictsofinterestby commodity businesses and intermediaries. Wealsocompletedtargetedreviewsof significantfixedincometransactionsto identify breaches of the law or compliance failures by market intermediaries.

Allocations in equity raising transactions

In December 2018, ASIC published Report 605 Allocations in equity raising transactions, summarising our review of transactions and practices by large and mid-sized AFS licensees. The report underscores the potential impact of conflictsofinterestinallocationdecisions and highlights areas of improvement for licensees and issuers when raising equity on our listed markets.

Werecommendedthatlicensees:

âº engage with issuers at various stages during a transaction

âº ensure that messages to investors are not misleading and deceptive

âº review the adequacy of allocation policies and procedures

âº avoid allocations to connected persons

âº proactively identify and manage potentialconflictsofinterest.

The issuer’s objectives should be the primary driver of allocation recommendations. Licensees should ensure that their controls, including policies and procedures, training and monitoring, are appropriate and that they areprovidingfinancialservicesefficiently, honestly and fairly.

Issuers should also be engaged with their capital raising transactions, with a particular focus on raising funds on the best terms possible.

ASIC continues to periodically review transactions and we have found that our ongoing presence is changing behaviour in this sector.

High-frequency trading

ASIC’s latest review of high-frequency trading revealed that high-frequency traders are responsible for a quarter of equitymarketandAustralian-USdollar cross rate transactions.

In November 2018, we published Report 597 High-frequency trading in Australian equities and the Australian- US dollar cross rate, which analyses high-frequency traders and their impact onmeasuresofmarketquality.Wefound that high-frequency traders maintain a significantpresence,theydonotappear to degrade investor execution outcomes, and the costs imposed on investors for trading with high-frequency traders are smallandcontinuetodecline.Wealso found that intraday trading has decreased and that holding times are increasing.

ASIC Annual Report 2018-19 104

Retail OTC derivatives market

Retail OTC derivatives issuers in Australia offer various products, including margin foreign exchange, binary options and contractsfordifference.Wecontinueto respond to a high incidence of misconduct in the retail OTC derivatives sector, involving large client losses.

This year, we continued to closely monitor this market and progressed a number of enforcement and administrative actions where we found breaches of the law. In April 2019, we conducted an extensive information-gathering exercise of the licensed entities active in retail OTC derivatives, covering 18 areas. Information obtained will be used to help us address key themes and concerns in the sector.

WepubliclywarnedAustralianissuers that they may be dealing with offshore investors illegally and to cease any non-compliant activities, particularly given that many jurisdictions - such as China, Europe, Japan and North America - have restricted or prohibited the provision of certain OTC derivatives to retail investors. WealsoworkedtoensurethatretailOTC derivatives providers are complying with foreignlaws.Wehaveliaisedwithvarious foreign regulatory agencies on this issue.

Progress on benchmark reform

Financial markets around the world, including Australia, use LIBOR (London Interbank Offered Rate) as a benchmark rate underpinning trillions of dollars of financialcontracts.Preparationforthe upcoming end of LIBOR is a key challenge fortheglobalfinanceindustry.In2019, ASIC began a project with the support of APRA and the RBA to ensure that the end of LIBOR is understood and well

managed.Wehavewrittentosystemically importantfirmsintheindustryabouttheir preparedness, asking them to identify their exposures to LIBOR and how they will transition to alternative rates.

Strengtheninglocalfinancialbenchmarks and fall-back provisions is another key issueinbenchmarkreform.WhileASIC isconfidentthattheBBSWwillremaina significantbenchmark,weareoverseeing ongoingreformstotheBBSWcalculation methodology to minimise potential future disruption.

ASIC licensed the administrator of the BBSW(ASX)toensurereliability,market integrityandinvestorconfidence.The European Commission determined that the Australian regime for benchmark administrators is equivalent to that oftheEuropeanUnion.Thisdecision allows Australian licensed benchmark administratorstocomplywithEU regulations without the need to be dually licensed.

ASIC monitors the trades and orders thatcontributetotheBBSWrateset for misconduct and activity that may undermine the integrity of the process. Surveillance and reporting tools were enhanced during the period, which has improvedefficiency.

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3.7 Corporate

The corporate subsectors include corporations (listed corporations, unlisted public companies, large proprietary companies, and small proprietary companies1), auditors of disclosing entities, registered company auditors, and registered liquidators.

The Royal Commission and inquiries such as the APRA inquiry into CBA have highlightedthatpoorgovernancepracticescanleadtosignificantconsumer andinvestorlosses,aswellaslossofconfidenceinourmarkets.

ASIC’s work in this sector during 2018-19 focused on improving corporate governance practices and enhancing fairness and disclosure for retail investorsincorporatefinancetransactions.

Corporations

1 Small proprietary companies will be charged through an increase to the annual review fee for proprietary companies in the Corporations (Review Fees) Regulations 2003.

Climate risk disclosure

In September 2018, ASIC published Report 593 Climate risk disclosure by Australia’s listed companies, in response to the increasing foreseeability of climate change-related risks and the growing focus on the issue by investors. The report follows a surveillance project examining the climate risk disclosure practices of a sample of companies in the S&P ASX 300 and contains recommendations about consideration and disclosure of climate risk.

Our report recommends that directors and advisers adopt a probative and proactive approach to climate risk, comply with the law where it requires disclosure of material risk, and consider reporting under the framework developed by the Taskforce on Climate-Related Financial Disclosures. Weanticipatecontinuedworkinthisarea as disclosure practices develop over time.

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ASIC intervention in de-listing application

ASIC intervened in a de-listing application by Flinders Mines Limited (Flinders). Flinders is a public mining company listed on ASX. In December 2018, Flinders applied for de-listing, together with a share buy-back and rights issue. The proposed transactions would have had the effect of increasing its major

shareholder’s relevant interest in Flinders from 56% to a maximum of 65% and the resolutions could be passed by the shareholder.

ASIC received numerous reports of misconduct regarding Flinders and considered the concerns raised by minority shareholders. Following a Takeovers Panel declaration of unacceptable circumstances in proceedings in which ASIC was an active participant, Flinders withdrew its de-listing application and abandoned its other proposed corporate actions.

ASIC also worked with ASX in relation to its release of amended Guidance Note 33: Removal of entities from the ASX official list . The revised Guidance Note indicates that ASX will now usually require a listed entity to obtain the approval of its security holdersbeforeitsremovalfromtheofficiallistbywayofaspecialresolution(rather

than an ordinary resolution).

Withdrawal rights for retail shareholders

In June 2019, we intervened in a rights ‘low document’ entitlement offer by St Barbara Mines Limited (St Barbara), which resulted in the company allowing retail shareholders to withdraw their acceptances. A low document offer is a security offer generally undertaken by listed entities where the securities can be offered for sale or issue without a public document.

During the retail offer period, St Barbara announced a production downgrade that negatively impacted its share price. ASIC intervened as we believed that retail shareholders were not being given the chance to reconsider their investment decision, even though the new trading price was now below the entitlement offer

price. After our intervention, St Barbara announced that retail investors would be given an opportunity to withdraw their acceptances.

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Small business outcomes

ASIC focuses on helping small businesses understand and comply with their legal obligations under the Corporations Act and conducts surveillance, enforcement andpolicywork.Wherenecessary,we take administrative, civil or criminal action against companies, directors and other officeholderswhofailintheirduties.By doing so, ASIC helps to ensure that all marketparticipantscanbenefitfroma levelplayingfield.

This year, ASIC recorded 514 small business-related outcomes (see Table 3.7.1).

As at 1 July 2019, ASIC had 161 small business-related criminal matters underwaythathadnotachievedafinal result (see Table 3.7.2). They were not included in Table 3.7.1 because either:

âº the court or tribunal has determined liability but not decided the penalty or finalorder

âº a plea was entered but the court or tribunal has not yet made a decision on conviction or sentence

âº the court has not yet decided if a breach of law or an offence was committed.

For more on ASIC’s Office of Small Business, see Section 5.3

Table 3.7.1 Small business enforcement outcomes by misconduct and remedy type

Misconduct type Criminal Administrative Total (misconduct)

Action against persons or companies 364 132 496

Efficientregistrationandlicensing 18 0 18

Total (remedy) 382 132 514

Table 3.7.2 Small business criminal cases underway as at 1 July 2019

Misconduct type Criminal

Action against persons or companies 154

Misconduct related to registration and licensing 7

Total 161

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Auditors of disclosingentities

Financial reporting surveillance

In 2018-19, ASIC proactively reviewed 300financialreportsoflistedandother significantentities,withtheaimof improvingthequalityoffinancialreports and providing useful information for investors and other stakeholders.

Wecontinuetopubliclyhighlightfinancial reporting focus areas for directors, preparers and auditors in our surveillance offinancialreports.Ourreleasesallow stakeholders to address key reporting mattersbeforeissuingtheirfinancial reports and ensure that the market is properly informed on a consistent and comparable basis. Areas of focus include impairmentofnon-financialassets, recognition of revenue, and the adoption of new accounting standards on revenue andfinancial instruments.

Premier Investments writes down brand name assets

ASIC raised concerns about the value of the casual wear brand name assets in the financialreportofPremierInvestmentsLimited(Premier)fortheyearendedJuly 2017.Wequestionedthereasonablenessandsupportabilityoftheroyaltyrate assumptions and sales growth forecasts used in testing the assets for impairment.

As a result of ASIC’s work, Premier wrote down the value of the relevant assets by $30millioninitsfinancialreportforthefollowingyearendedJuly2018.

Audit inspection program

Auditors play a vital role in underpinning investortrustandconfidenceinthe qualityoffinancialreports.Toimprove and maintain audit quality, we reviewed approximately65financialreportsof listed entities during the year. In January 2019, we released Report 607 Audit inspection program report for 2017-18, reportingtheresultsofourauditfirm risk-based inspections for the 18 months to 30 June 2018.

This year, we emphasised the importance ofgoodleadershipinauditfirms, including their staff members embracing the need to improve audit quality and being accountable for their work in conducting quality audits.

ASIC’s reviews also ensured that audit firmscontinuetofocusonthesufficiency and appropriateness of the audit evidence they obtain, their professional scepticism, and their appropriate use of the work ofexpertsandotherauditors.Wealso continued to encourage auditors to focus ontheimpairmentofnon-financialassets, revenue recognition, and the impact of the new accounting standards.

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Registered liquidators

Liquidator of suspected phoenix company

Through the Assetless Administration Fund (AA Fund), ASIC combats the harms associated with illegal phoenix activity, such as losses for employees, businesses and consumers. The AA Fund supports registered liquidators in investigating and examining matters involving pre-insolvency advisers and illegal phoenixing. This may include funding a liquidator to conduct public examinations, where there is a reasonable basis to suspect that this may reveal evidence to support recovery action by the liquidator or possible prosecution by ASIC.

This year, a registered liquidator used theirownfirm’sresourcesandundertook sufficientinvestigationstofindthata liquidated company’s director had likely engaged in misconduct. To complete the investigation and conduct public examinations, the liquidator applied for funding from the AA Fund. The funding allowed the liquidator to gather enough evidence to launch recovery actions against the director and their spouse. ASIC is also funding the liquidator’s recovery action through the AA Fund. This case highlights the utility of the AA Fund when liquidators are appointed to companies otherwise devoid of assets - enabling liquidators to investigate, seek recovery for creditors, and combat illegal phoenix activity.

Former liquidator imprisoned

In February 2018, ASIC commenced an investigation into the conduct of a registered liquidator alleged to have stolen $800,000 from the bank account of an external administration that he jointly controlled.

Following our investigation, the liquidator was charged and on 3 May 2019 he pleaded guilty to three charges of fraud. He was sentenced to seven years imprisonment and will be eligible for parole after serving 22 months in custody.

ASIC also referred the alleged misconduct to the Liquidators Disciplinary Committee, which cancelled the liquidator’s registration. Other liquidators will be prohibited from allowing him to work on their behalf for eight years.

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Liquidators forced to repay remuneration

InJune2019,theFederalCourtfixedremunerationsoughtbyliquidatorsJohn Sheahan and Ian Lock for the voluntary administration and liquidation of the CedencoGroup.Remunerationwasfixedat$3.9millioncomparedtothe $5.8 million sought, a reduction of 33%. The liquidators were ordered to repay the difference plus interest at the court’s interest rates and were ordered to pay ASIC’s costs.

Earlier in February 2019, the court found that the remuneration reports provided to creditors fell ‘well short’ of the requirements, including in some cases not providing any remuneration reports. The court found that creditors had suffered substantial injustice as they were not able to properly consider the reasonableness of the remuneration.

The court found that external administrators should:

âº ensure that remuneration reports comply with the Act

âº ensure that time sheet narrations accurately record tasks undertaken

âº review work in progress

âº write off time where relevant

âº appropriately tailor templates or precedent documents.

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3.8 Large financial institutions

Entities subject to Close and ContinuousMonitoring

Wehaveenhancedkeyaspectsofour supervisory approach, as part of our response to widespread conduct failures intheAustralianfinancialservicesindustry.

Our approach now includes the CCM program, which introduces a new supervisory model for Australia’s largest financialservicesinstitutions(AMP,ANZ, CBA,NABandWestpac)andfeaturesa periodic onsite ASIC presence in these institutionstoreviewspecificpractices. Wearealsointheprocessofatargeted review of corporate governance practices of these institutions and a selection of other ASX 100 listed entities.

For more information on the CCM program and our review of corporate governance practices, seeSection1.10

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4ASIC for all Australians4.1 ASIC’s MoneySmart 1144.2 Regional action 1174.3 Our work with vulnerable consumers 1224.4 Indigenous outreach 1234.5 ASIC in the community 125 ASIC for all Australians 113

A key part of our mission is to help Australians be in control of their financial lives.

Weseekopportunitiestoimprovepeoples’knowledgeandhelp buildconfidencearoundfinancialmatters.Thisincludesworkingwith regional communities and our Indigenous population to ensure that thefinancialsystemservestheneedsofallAustralians.

4.1 ASIC’s MoneySmart

The MoneySmart program provides trusted tools and information to help Australians be in control of their financial lives. This year, extensive consumer consultation helped shape a fresh MoneySmart, to be released in 2019-20.

InAugust2018,ASICreleased‘Womentalkmoney’,aseriesofvideosdesignedto highlight some of the major challenges women face around money. The videos sought to inspire women to share their personal money stories and motivate them to actively engage withtheirfinancesandbuildconfidenceinmanagingtheirmoney.

‘MoneySmart’s Budget Planner tool opened my eyes that most of my money can be saved.’

MoneySmart Consumer

‘I’m really loving the infographics and just wanted to thank you for making statistics fun! It has helped put my goals in perspective.’

MoneySmart Consumer

Left:AuthorJaneCaro,whofeaturesinour‘Women talk money’ videos, with ASIC’s Laura Higgins.

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The Next Generation MoneySmart Program

The MoneySmart program, launched in 2011, reaches millions of Australians each year. In 2018-19, we invested in consumer research, testing, content planning and design to produce the next generation MoneySmart, to be released in 2019-20.

Through this project, which surveyed, interviewed and interacted with over 1,000 consumers, we aim to:

âº increase consumer engagement with MoneySmart

âº set up MoneySmart for measurable continuous improvement

âº enhance the user experience of MoneySmart.

2018 National Financial Capability Strategy

As the lead agency in Australia for financialcapability,ASIClaunchedthe latest National Financial Capability Strategy in August 2018.

The priorities outlined in the National Strategy inform the practices of the broaderfinancialcapabilitycommunity.

The Strategy supports them in encouraging long-term behavioural changebybuildingstrongfinancial capabilities in individuals, families and communities.

The new National Strategy was shaped by a consultation process that included over 145 submissions from stakeholders and built on the 2014-17 National Financial

Literacy Strategy.

Below: Members of the Australian Government Financial Literacy Board at the launch of the 2018 National Financial Capability Strategy.

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ASIC’s Financial Wellbeing Network

TheASIC-ledFinancialWellbeingNetworkhasover1,500membersfromvarious organisationsinthebusiness,not-for-profit,educationandgovernmentsectors thatworktoempowerAustralianstobeincontroloftheirfinanciallives.The network includes ASIC-coordinated events, newsletters, a research hub and service delivery expertise.

In 2018-19, we delivered the following events:

âº ‘WhyaHuman-CentredApproachMatters’,withPeterKell,ASICandRebecca Hendry, Meld Studios

âº ‘Financial Capability: An International Perspective’, with Nancy Castillo, Financial HealthNetworkUSAandSteveTrites,FinancialConsumerAgencyofCanada

âº ‘FinancialWellbeingin2019:APanelDiscussion’,withDeliaRickard,ACCC; PeterMcNamara,GSM;andRobynneQuiggin,UTS

âº ‘FinancialDecisionMaking:HowDoWeReallyBuildFinancialCapability?’,with Dr Emily Heath, EY and Andrew Dadswell, ASIC.

Over90%ofattendeesleftfeelingsatisfiedorverysatisfiedwithourevents,and over 80% of attendees report that they will take action as a result of attending.

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4.2 Regional action

In 2018-19, our Regional Commissioners and regional offices focused on addressing the diverse needs of our community and improving outcomes for consumers and businesses in each Australian state and territory.

Through our Regional Commissioners and regional liaison, we ensure that we maintain an active presence in each state and territory. The Regional Commissioners

report to the Commission three times a year on activities, services and liaison in their state or territory.

This year, our work in the regions included improvingfinancialcapabilityforspecific community sectors, engaging with local agencies and industry associations, and collaborating with other local government departments and agencies on policy issues.

Our performance against our Service Charter this year (see Section 2.5) shows ASIC has provided high levels of service Australia wide.

Australian Capital Territory

Our team in the ACT continues to build strong working relationships across Canberra at both the Commonwealth and state levels of the public service and with

peak bodies.

InAugust2018,theACTofficesupported the launch of the National Financial Capability Strategy. ASIC Chair James Shipton welcomed a number of Parliamentarians and key stakeholders to Parliament House. The event featured RBA

Governor Philip Lowe, who emphasised the importance of consumers actively engagingwiththeirfinances.

For more information on ASIC’s financial capability initiatives, see Sections 2.3 and 4.1

In March 2019, ahead of International Women’sDay,ASIChostedapanel discussion to encourage women to engage with their superannuation and

know their superannuation balance. The panel was moderated by Elysse Morgan, ABC journalist and host of The Business. Participants from over a

dozen public sector agencies attended the National Museum of Australia for a challenging panel discussion on women and money, highlighting ASIC priorities around superannuation and featuring a

number of personal stories emphasising that everyone needs to have money conversations.Womenaretakingcontrol oftheirfinancialfutures,andmore

women than men consolidated their superannuation funds last year.

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Above:ASICChairJamesShiptonspenttimewithafinancialcounsellorandlistenedtocallsonthe National Debt Helpline.

New South Wales

In May 2019, we hosted the IOSCO AnnualMeeting.TheNSWRegional Commissioner was Master of Ceremonies at the IOSCO Presidents Committee

meeting, which included the signing ceremony for new signatories to the IOSCO Multilateral Memorandum ofUnderstanding.

The IOSCO Annual Meeting was held together with the ASIC Annual Forum 2019, which attracted a diverse mix of international and local participants and a record attendance overall.

For more information on ASIC’s hosting of the IOSCO Annual Meeting, see Section 5.1

Consumer Action Law Centre, Victoria: Gerard Brody (CEO, Consumer Action Law Centre), Fiona Guthrie (Financial Counselling Australia), James Shipton, Laura Higgins and Michael Saadat.

WecontinuedtosupportASIC’s engagement with consumer groups andfinancialcounsellingorganisations, including taking part in Financial Counselling Australia’s ‘A day in the life’

project, which invites federal politicians and senior decision makers in government andindustrytospendtimewithafinancial counsellor in order to better understand

the work they do.

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Northern Territory

Our regional work included presenting atCharteredAccountantsANZ,Certified Practising Accountants (CPA) Australia and Institute of Public Accountants (IPA) events in Darwin and Alice Springs.

Commissioner Danielle Press spoke at a BusinessandProfessionalWomen’sevent.

WealsosupportedASIC’sengagement withconsumergroupsandfinancial counselling organisations, including hosting a roundtable discussion about the

work we do to support older Australians, and we engaged with members of newly arrived migrant communities at the Melaleuca Refugee Centre.

WespenttwoweeksinArnhemLand, gathering evidence for an investigation andhelpingpeoplewithfinancial consumermatters.Wealsodelivered governance training for Aboriginal directors living at the remote community of Pirlangimpi on the Tiwi Islands.

WecollaboratedwithLenoreDembski, theOfficeoftheRegistrarofIndigenous Corporations, the Australian Institute of Company Directors and Charles Darwin Universitytohosteventscelebratingthe contribution Indigenous women make as directors and business leaders. ASIC

produced a series of posters celebrating the achievements of Aboriginal and Torres Strait Islander women in business.

Supporting the Indigenous Business Sector - Darwin event with Tradara Briscoe, artist and designer, and Tanyah Nasir, trainer and consultant, who both run their own businesses.

WeworkedwithNTPolicetoremove four people with dishonesty-related criminal convictions from the corporate register, disqualifying them from holding directorships and managing corporations.

Queensland

This year, we took part in a range of stakeholder events and local outreach programs. Our work with small business included attending a regulatory rally in Townsville in October, to coincide with

SmallBusinessProfessionalsWeek,where we distributed information about our support services for small businesses.

In March, we attended the Australian Government Small Business Fair in Rockhampton and in May we participated in a cross-agency event in Beenleigh

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forQueenslandSmallBusinessWeek, promoting tools and resources available to help small businesses understand their obligations.

In October, we travelled to Palm Island with representatives of the Indigenous Consumer Action Network, to meet with locals and other agencies to deliver financialliteracyresourcesandgather intelligenceonlocalfinancialissues.The visit was part of the targeted outreach

program to support recipients of class action compensation payments made by the Queensland Government.

South Australia

This year, our regional work focused on providing support and advice to small business.Wejoinedwithotherfederal, state and local agencies to provide information on compliance, registration and licences, training, safety and business growth strategies.

ASIC took the MoneySmart message to the Riverland Field Days in Barmera, spoke to the local community about making goodfinancialdecisions,andpromoted our MoneySmart website, app and financialliteracyresources.

Wealsopresentedatprofessional events, including the Financial Planning Association annual general meeting, the SA/NT Australian Restructuring Insolvency and Turnaround Association conference,

the Law Society of South Australia and Chartered Accountants ANZ about regulatory issues relevant to their sector.

Below:ASICProjectOfficerMelissaGrossonsiteprovidinginformationandadviceforsmallbusiness.

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Tasmania

In September 2018, we hosted over 50 members of the Tasmanian business community at an ASIC stakeholder function attended by our Chair and three Commissioners.WeheldtwoRegional Liaison Committee meetings this year and discussed experiences that businesses have

had with the ASIC registry and matters highlighted by the Royal Commission.

In March, we participated in Small Business Fairs in Launceston and Hobart, where we answered questions from small business owners and consumers about our role in this sector and ASIC’s registry services.WealsoshowcasedourSmall Business Hub and the First Business App and distributed Small Business booklets and MoneySmart material.

Victoria

In October 2018, we held a MoneySmart stand at the Elmore Field Day in regional Victoria, with the support of the ASIC Chair and members of our Graduate Program. The three-day event attracted a strong attendance of 35,000 visitors from acrossVictoriaandNewSouthWales.We distributed around 1,500 MoneySmart

showbags and the ASIC Chair met with local small business representatives and the Rural Financial Counselling Service.

WemarkedtheoccasionofASIC’stenancy ofourTraralgonofficereaching25years. ASIC has occupied the entire building in the La Trobe Valley since June 1993.

Our Victorian Regional Commissioner, WarrenDay,spokeattheVictorian Independent Broad-based Anti-corruption Commission’s Protected

Disclosure Coordinator Forum in June about ASIC’s approach to whistleblowers, theexperienceofASIC’sOfficeofthe Whistlebloweroverthelastthreeyears, and the amendments to whistleblower

provisions in the Corporations Act coming into effect from 1 June 2019.

Our Regional Commissioner also recorded a small business podcast with Alexi Boyd for her radio show Small Biz Matters, discussing ASIC’s role in starting up and closing down

businesses, our work with small business, phoenix activity, and other cross-agency work. He is also a guest on ABC Gippsland once a month, speaking about consumer issues and ASIC’s MoneySmart program

with Jonathon Kendall.

Western Australia

This year, we continued our engagement with local industry by convening eight liaison meetings across the corporate finance,insolvency,accounting,credit and market participant sectors, providing

stakeholders with a forum to raise concerns or emerging issues in their sectors.

In August, we hosted the annual ASIC stakeholder function, where the Chair presented on ASIC’s current priorities. Commissioner Cathie Armour hosted a ‘WomenDirectors’eventandintroduced

ASIC’s Corporate Governance Taskforce to the local community.

Our Regional Commissioner gave presentations during the year to the business community on a variety of regulatory topics, including governance andriskmanagement,financial technology(fintech)andregulatory

technology (regtech), and ASIC’s approach to enforcement.

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4.3 Our work with vulnerable consumers

We create and distribute tailored resources, tools and information that support financially vulnerable consumers in making informed decisions. We also focus on promoting industry behaviour that leads to fairer outcomes for vulnerable consumers and take regulatory action to ensure that consumers facing hardship are treated fairly.

Our new product intervention power allows us to confront and respond tosignificantconsumerharmfrom financialandcreditproducts.We

issued Consultation Paper 313 Product intervention power on the scope of the power and how we expect to use it, and Consultation Paper 316 Using the product intervention power: Short term credit,onthefirstproposeduseofthe

power in the short-term credit sector. Thispaperdetailedsignificantconsumer detriment, including for some of our most vulnerable consumers.

Beyond our implementation of the new product governance regime, we are updating our responsible lending guidanceandactingtoaddressconflicts of interest that may cause consumer harm.

Weareexamininghowlendersengage withconsumersexperiencingfinancial hardship, undertaking reviews of product features or practices that raise concerns, and considering sales techniques that can disproportionately affect vulnerable consumers - for example, in the direct life and consumer credit insurance sector.

Our regulatory work is informed by the insights of our behavioural unit about what works for consumers, what drives behaviour,andhowtoinfluenceitfor the better.

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4.4 Indigenous outreach

Indigenous awareness andaction

ASIC’s Indigenous Outreach Program (IOP) provides specialist advice, insight and support to other ASIC teams to ensure that we effectively and appropriately address the needs of Indigenous consumers and investors.

IOP also engages with Indigenous communities and stakeholders working with Indigenous Australians to more effectively enable us to enhancethefinancialwellbeingof

Indigenous consumers.

Engagement with Indigenous consumers and advocates

In 2018-19, our work with Indigenous consumers included:

âº continuing to provide a direct point of contact through the IOP Helpline and IOP email

âº providing strategic outreach in remote regions, including Central Queensland, south-westWesternAustraliaand the Kimberley

âº attendingstateandnationalfinancial counsellors’ conferences

âº ongoing participation in Indigenous networks, including the National Indigenous Consumer Strategy, the North Queensland Indigenous ConsumerIssuesTaskforce,theWA Indigenous Consumer Assistance Forum and the Consumer Action Law Centre’s Indigenous network.

Weremainfocusedonhavinga visible presence in remote as well as urban communities to help us better understand key issues of concern for Indigenous consumers.

Wealsocontinuetosupportthe engagement of Indigenous consumers in thefinancialsystem.Ourcurrentareasof focus include:

âº working to ensure that the superannuation system better meets the needs of Indigenous consumers

âº potential law reform to remove the exemption of funeral expenses as a financialproduct(arecommendation of the Royal Commission)

âº continuing to work collaboratively on book up law reform and to educate book up providers and consumers on fair and legal ways in which book up can be provided.

Consumer education initiatives for Indigenous consumers

In response to issues raised through outreach activities, we engaged an Indigenous creative media company to create a series of animations highlighting topics such as dealing with family

pressures about money and seeking help to sort out money problems. These are available on the MoneySmart website and were created and distributed in collaboration with stakeholders in regional and remote areas of Australia.

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Central Australian Aboriginal Media Association

ASIC uses a range of media channels to reach Indigenous consumers. This year, the IOP participated in interviews forming a series of radio programs aimed at increasing knowledge around superannuation in remote Aboriginal communities.

The programs were coordinated by the Central Australian Aboriginal Media Association (CAAMA) and covered topics such as consolidating superannuation and insurance in superannuation. CAAMA promoted and distributed the programs through its radio network, which reaches remote communities across the Northern

TerritoryandcentralregionsofSouthAustraliaandWesternAustralia.Theradio programs will also be translated into Pitjantjatjara and Arrernte, two languages commonly spoken by CAAMA listeners.

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4.5 ASIC in the community

ASIC is a leader among government agencies in offering a national program that gives our people opportunities to make an impact on charities that are

important to them. This year, our people:

âº supported 44 different charities through workplace giving:

- around 10% of ASIC’s people made pre-tax contributions this year, donating over $106,000

âº volunteered, using the paid leave provided by ASIC, at:

- Smith Family iTrack - youth mentoring (national)

- Youth Law Australia (national)

- Foodbank Victoria (Melbourne)

- Exodus Loaves and Fishes (Sydney)

- MealsonWheels(Traralgon).

Wearealsorecognisedforintegratingour Graduate Program into our community work. Each year, our new graduates participate in a charity project to fundraise

for one of our charity partners. In 2018, our graduate cohort raised over $15,000 for Lifeline Australia.

Lifeline Chair John Brogden visited ASIC in November 2018 to congratulate our graduates in person for their efforts.

National speaker events

In July 2018, we hosted the Hon. Linda Burney MP, Member for Barton, as our keynotespeakerduringNAIDOCWeek.

TheNAIDOCWeekthemefor2018was Because of her, we can! As pillars of Indigenous society, Aboriginal and Torres Strait Islander women play active and significantrolesatthecommunity,local,

state and national levels.

Linda’sjourneyisaterrificexampleofthis. She spoke about what NAIDOC means to her, the importance of reciprocity in the culture of First Nations peoples, and the invaluable role that women play in society.

Below: ASIC Chair James Shipton, former Deputy Chair Peter Kell, Danille Abbott and Abbey Glynn, two of our Indigenous staff members, with the Hon. Linda Burney in Sydney.

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Another highlight of our National Speakers Program this year was the ASIC Anzac Day event, where we were honoured to welcome His Excellency General the Hon. Sir Peter CosgroveAKMC(Retd)andWingCommanderAliciaBroadheadtoourofficestospeak about leadership, dedication and the Anzac spirit.

HisExcellencyGeneraltheHon.SirPeterCosgroveAKMC(Retd)andWingCommanderAliciaBroadhead.

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5ASIC cooperation5.1 Regional and international engagement 1295.2 Innovation Hub 1355.3 OfficeofSmallBusiness 1375.4 OfficeoftheWhistleblower 1385.5 Inter-agency collaboration on financial crime 1395.6 Misconduct reporting 1415.7 Australian Financial Complaints Authority 143ASIC cooperation 127

ASIC cooperates with peer agencies, industry and the publictosupport the work we do in the financial sector for thebenefitof all Australians.

For example:

âº our work with our overseas counterparts ensures that we are on top of international developments andenablesustoinfluenceglobal

regulatory policy

âº our Innovation Hub helps innovative Australian businesses comply with regulatory requirements and provides a platform for international engagement onfintechandregtechideas

âº ourOfficeofSmallBusinessengages with and helps protect small business in Australia

âº ourOfficeoftheWhistleblower coordinates the recording and actioning of reports from whistleblowers

âº we participate in the Government’s Phoenix Taskforce, Serious Financial Crime Taskforce and Black Economy Taskforce to address misconduct,

including illegal phoenix activity

âº our analysis of reports of misconduct received from the public, and of breach notificationsfromindustry,iscriticalin informing our regulatory work.

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5.1 Regional and international engagement

ASIC engages closely with peer regulators and agencies overseas to develop international regulatory policy. This engagement ensures that ASIC can positively influence the operation and regulation of global financial markets.

In 2018-19, we advocated for:

âº global regulatory coordination and harmonisationinfintechandregtech

âº deeper regional integration through initiatives such as the Asia Region Funds Passport and stronger regional supervisory cooperation, especially in trans-Tasman issues through closer collaboration with New Zealand regulators

âº greater focus on fairness and addressing misconduct, whether legal or not, particularly in the retail sector.

ASIC is also involved in international policy in terms of trade and investment.

ASIC is a member of the IOSCO Board and is represented on its policy committees andtaskforces.Wealso:

âº chairtheMarketConductWorking Group of the International Association of Insurance Supervisors

âº serve on the board of the International Forum of Independent Audit Regulators and contribute to the International Accounting

Standards Board

âº contribute to consumer policy through membership of the International Financial Consumer Protection Organisation Governing Council and the Financial Consumer Protection Taskforce established

by the Organisation for Economic Cooperation and Development

âº participate in working groups establishedbytheWorldEconomic Forum on cyber risk and consumer data protection

âº contributetotheAsia-PacificEconomic Cooperation Financial Regulators Training Initiative by providing speakers at training seminars in the region.

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IOSCO Annual Meeting and ASIC Annual Forum 2019

In May 2019, ASIC hosted the 44th Annual Meeting of IOSCO in Sydney, bringing together 415 delegates from 151 member organisations in 98 jurisdictions.

The IOSCO Annual Meeting is a major event in the international regulatory calendar and an important opportunity to share ideas and enhance cooperation between regulators from around the world.

TheIOSCOBoardmeetingdiscussedissuessuchascrypto-assets,artificial intelligence and machine learning, market fragmentation in securities and derivatives markets, and retail distribution and digitalisation.

WeheldtheIOSCOmeetingalongsideourASICAnnualForum,withthetheme ‘OtherPeople’sMoney’.TheForumexploredhowthefinancialservicesindustrycan better focus on the end user and how market participants can ensure that they meet public expectations.

The event featured international speakers, including IOSCO Board Chair Ashley Alder,ChiefExecutiveoftheUKFCA Andrew Bailey, and Chair of the European

Securities and Markets Authority Steven Maijoor. Attendees heard from leading academics and industry participants on a range of topics, from how business can create shared value for stakeholders to waysinwhichfinancialservicescan effectively reach all parts of society,

including the vulnerable. ASIC’s Commission discussed how the new leadership team is embracing current challengesoffinancialregulationand focusing ASIC on the future.

James Shipton with the Forum organising team.

The Annual Dinner featured Professor Mihir A Desai from Harvard Business School and Harvard Law School, who dissected key learnings from his book The wisdom of finance: How the humanities can illuminate and improve finance .

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Asia Region Funds Passport

The Asia Region Funds Passport (ARFP) provides a multilateral framework to facilitate the cross-border marketing of managed funds across participating economies in the Asia region. It is intended to support the development of an Asia-wide funds management industry

through improved market access and regulatory harmonisation. Participating economies include Australia, Japan, the Republic of Korea, New Zealand and Thailand.

ASIC worked closely with Treasury to develop the ARFP legislation, which took effect in September 2018, and issued guidance to support the funds management industry in facilitating the ARFP. The ARFP commenced on 1 February 2019, with Australia as an

inaugural participant.

Promoting regional cooperation

Regional supervisory colleges

Supervisory colleges facilitate deeper dialogue and cooperation between regulators to enhance supervision of cross-borderfinancialentities,provide greater visibility of interdependencies, andhelpmanagefinancialand non-financial risks.

ASIC continues to participate in supervisory colleges, such as hosting the Asia-PacificRegionalSupervisoryCollege and other colleges, including some

pertaining to major credit rating agencies (Fitch, Moody’s and S&P).

IOSCO Asia-Pacific Regional Committee

This year, we focused on strengthening ourtieswithIOSCO’sAsia-Pacific Regional Committee (APRC). The APRC gives IOSCO members in our region the opportunitytospeakwithaunifiedvoice,

whichisimportantgiventhesignificant regulatory changes with extra-territorial effect emanating particularly from the EuropeanUnion.

Our work this year included encouraging APRC members to bring emerging concerns in their domestic jurisdictions to the regional level - for example, we

encouraged the sharing of examples of conduct that is harmful but not strictly illegal. As a result, the IOSCO Board has commissioned work on this topic in the coming year.

Delegation to China

In April 2019, we worked to strengthen ties and cooperation with our Chinese regulatory counterparts by sending an ASIC delegation to visit the China Securities Regulatory Commission,

the Chinese Banking and Insurance Regulatory Commission, the State Administration of Foreign Exchange and other regulators in China.

ASIC cooperation 131

International cooperation requests

This year, we made 331 international cooperation requests and received 514 requests in relation to activities such as supervision, surveillance, intelligence, enforcement, policy and benchmarking licensing, and capacity building.

This included 130 requests to ASIC for assistance in enforcement matters, including 30 requests seeking ASIC’s assistance to compel material from third parties under the Mutual Assistance in Business Regulation Act 1992.

International cooperation

In November 2018, ASIC cancelled the AFS licence of retail OTC derivative issuer AGM Markets Pty Ltd (AGM) and banned former director and Chief Executive OfficerofAGM,YossefAshkenazi,fromprovidingfinancialservicesforeightyears.

ASICfoundthatAGM’sfinancialservicesbusinessinvolvedcoreelementsof unconscionabilityandunmanagedconflictsofinterestandfollowedabusiness model that disregarded key conduct requirements. ASIC also launched related civil proceedings.

AGM’s conduct was connected to individuals and entities overseas, and significantinformationwasobtainedfromforeignjurisdictionsinthecourseof our investigation. ASIC made nine requests for assistance to foreign agencies in this matter, including pursuant to the IOSCO Multilateral Memorandum of Understanding.TheinternationalassistancereceivedbyASICplayedasignificant role in progressing this matter.

ASIC Annual Report 2018-19 132

Capacity building

Our capacity building initiatives are an important part of ASIC’s international regulatory strategy.Theyprovideauniqueperspectiveonhowfinancialmarketsarechangingin emerging economies and the regulatory challenges this poses, as well as allowing ASIC to share expertise with our regulatory peers.

Capacity building in Indonesia

ASIC assists the Indonesian Financial Services Authority, Otoritas Jasa Keuangan (OJK), in a wide range of capacity building initiatives. The objective is to strengthen OJK’s capacity to develop and implement global standards and practices, and to build a culture of responsive and skill-based surveillance and risk-focused supervision. This year, OJK staff interacted with ASIC through seminars, workshops and mutual visits.

ASIC also provided extensive assistance to OJK on emerging regulatory issues. WehosteddelegationsfromOJKfocusedonunderstandingASIC’sapproachesto investment advice, the regulation and supervision of investment banks and audit, and independent experts’ reports.

Wedeliveredworkshopsonenforcementapproachestofinancialreportingfraud and phoenix activity and participated in a workshop on Islamic capital markets. WealsocontributedtoaseminarinIndonesiaonfintechregulationinthecontext of anti-money laundering.

IOSCO Assessment Committee

ASIC is a member of IOSCO’s Assessment Committee, which is responsible for programs to review implementation of the IOSCO Principles and Objectives of Securities Regulation, the global standard for securities regulators.

During the period, ASIC participated in a program devised by IOSCO’s Assessment Committee to help IOSCO members complete self-assessments against the IOSCO principles. In December 2018, we reviewed and advised on the self-assessments prepared by participants. These self-assessments are key to jurisdictions critiquing their own regulation and its implementation and identifying any weaknesses.

ASIC cooperation 133

Financial Sector Assessment Program

In 2018-19, Australia underwent a Financial Sector Assessment Program (FSAP) review, conducted by the International Monetary Fund (IMF). The FSAP provides a comprehensive analysis of a country’s financialsector.

ASIC, working under the auspices of the CFR, contributed to Australia’s FSAP response. The cross-agency CFR working group comprised members from the Australian Treasury, APRA, the RBA and ASIC.

The FSAP included an assessment of Australia’s implementation of the Core Principles for Effective Banking Supervision, aspects of the Insurance Core Principles, and aspects of Australia’s financialmarketinfrastructure.

Brexit

This year, ASIC developed a work plan to identify and minimise potential Brexit-related impacts on Australian financialservices,marketsand participants.Weliaisedcloselywiththe UKFCAandtheBankofEngland.

In February 2019, we released guidance ‘Preparing for Brexit’ and, in April 2019, we released a joint statement with the FCA announcing our updated memorandum

ofunderstanding(MOU)onalternative investmentfundsandournewMOUon traderepositories.Wecontinuetomonitor Brexit-related developments.

ASIC Annual Report 2018-19 134

5.2 Innovation Hub

In 2018-19, the Innovation Hub provided informal assistance to over 190 businesses (fintech and regtech), helping them consider regulatory issues early and where relevant prepare licence or relief applications.

OfthenewfintechbusinessesthatengagedwiththeInnovationHubbeforesubmitting their licence application, we granted 25 new AFS licences or credit licences. These applicants received approval materially faster than those that had not sought assistance.

WE WORKED WITH A TOTAL OF

130 ENTITIES

9 Marketplace lending

35 Other (insurance, superannuation, managed investments)

Consumer credit

Markets (markets of financial products)

Digital advice

Crowd-sourced equity funding

Payments and remittance

20 Combined business models

ASIC cooperation 135

ASIC and regtech

In September 2018, ASIC received $6millioninfundingforfinancialyears 2018-19 and 2019-20 to undertake a range of initiatives to promote the use of regtech byfinancialfirmsthataimtodeliver

better consumer outcomes. ASIC will run four regtech initiatives in 2019, including demonstration events in August and September 2019.

These initiatives will focus on:

âº improving the compliance and quality offinancialpromotions

âº monitoringthequalityoffinancialadvice

âº using voice analytics and voice-to-text applications to help identify compliance issues in the sale of direct life insurance

âº developing a Licensing Technology-Assisted Guidance (TAG) Tool (potentially a chatbot), designed to provide guidance on ASIC’s

licensing framework.

Thisyear,ASICalsoranfivenatural language processing trials with regtech firmstoinvestigatehowthistechnology could be deployed to assist ASIC in its supervisory work. On balance, the results of the trials were positive, providing a better understanding of how this

technology may potentially maximise efficienciesinASIC’sregulatorywork.

International engagement on innovation

ASIC has been part of the Global Financial Innovation Network (GFIN) from its inception in 2018. The GFIN has grown to comprise 35 regulators and 7 observers across 21 jurisdictions. It is committed tosupportingfinancialinnovationin

the interests of consumers by creating a framework for cooperation between regulators to share experiences and approaches to innovation. As part of the GFIN cross-border pilot, ASIC will work withregtechfirmstoexploretheirtesting

plans across multiple jurisdictions.

ASIC was on the 2018-19 steering committee for the IOSCO Fintech Network, which is focused on information sharing across regulators. Weareamemberofthenetwork’s four workstreams (distributed ledger technology,artificialintelligenceand ethics, regtech, and innovation).

ASIC Annual Report 2018-19 136

5.3 Office of Small Business

ASIC’s Office of Small Business focuses and coordinates ASIC’sefforts and initiatives to assist, engage and help protect small businesses (those with fewer than 20 employees). In the 2018-19 financial year, small businesses represented 96% of all

companies and businesses registered with ASIC.

Assist: In May 2019, to better address the queries that small business owners have and to provide a clearer online user journey, we refreshed our resources for small businesses by simplifying and further developing them using web analytics.

Engagement

8,649 subscribers to InFocus newsletter

54,479 views of the Small Business Hub

Resources

14,504 downloads of the First Business app (as at 30 June 2019)

Engage: To increase awareness of ASIC’s role in small business and listen to the issues faced by Australian small businesses, ASIC teams presented at over 84 forums, exhibitions and

meetings across Australia. This included collaborating with the Department of Jobs and Small Business to attend small business fairs in 18 locations across Australia.

Protect: This year, we updated AFCA’s and ASIC’s registers to remove licensees who are not currently engaging in credit orprovidingfinancialservices,orwho

have not complied with the obligation to be a member of AFCA. This work proactively addressed a potential harm to small businesses that would not otherwise

have access to an external dispute resolution body.

For more information on ASIC’s registers, see Section 2.4

For more information on ASIC’s small business outcomes, see Section 3.7

ASIC cooperation 137

5.4 Office of the Whistleblower

ASIC’s Office of the Whistleblower is the central point in ASIC for recording and actioning the disclosures we receive from whistleblowers, ensuring that we communicate with them throughout our inquiries, and for engaging with stakeholders

on implementing Australia’s corporate sector whistleblower protection regime.

In early 2019, the Government passed legislation to strengthen and expand Australia’s corporate sector whistleblower protectionregime.Weconsultedwith financialservicesproviders,professional

services providers, and other regulators on implementation of the reforms.

Weassessallbreachesthatwhistleblowers disclose to us and inform them of their statutoryrightsandprotections.We recentlyupdatedourguidancetoreflect the new regime.

This year, we dealt with 278 disclosures by whistleblowers. Around 62% of these related to corporations and corporate governance, including internal company disputes.Wealsodealtwithmatters relatedtocreditandfinancialservicesand

the conduct of licensees (27%), markets (7%), and other issues (4%).

Following our preliminary inquiries, we referred approximately 7% of matters to our compliance, surveillance or investigation team.

Weassessedapproximately93%of disclosures as requiring no further actionbyASIC,oftenduetoinsufficient evidence. In some cases, we referred

the matter to another agency, law enforcement body, or third party (such as a liquidator) that was better placed to deal with the issue or was already taking action.

ASIC Annual Report 2018-19 138

5.5 Inter-agency collaboration on financial crime

Criminal Intelligence Unit

ASIC’sCriminalIntelligenceUnit collaborates with other Australian enforcement and regulatory agencies on serious and organised crime, including through the Phoenix Taskforce and the Serious Financial Crime Taskforce (SFCT). This year, we released 123 intelligence products to partner agencies andreceived172intelligencereports.We also provided to the Australian Criminal Intelligence Commission our analysis of the threats posed to the Australian

taxation system by illegal phoenix activity.

Serious Financial Crime Taskforce

The SFCT is a multi-agency initiative targeting offences related to serious fraud, money laundering, and defrauding the Commonwealth. In 2018-19, we contributed to its work in respect of crimes related to international tax evasion, illegal phoenix activity, and a new priority of cyber crime affecting the Australian taxation and superannuation systems.

From 2020 to 2023, we will have increased taskforce funding to support our role in enforcement activities and criminal intelligence analysis.

Phoenix Taskforce

ASIC continued its collaboration with the federal, state and territory agencies in the Phoenix Taskforce, which takes a whole-of-government approach to combating illegal phoenix activity.

Our work this year included presentations, panel discussions, and meetings with fellow regulators, insolvency practitioners, professional bodies, small business and industrygroups.Wealsosupported thesignificantlawreformthatthe Government has progressed to address illegal phoenix activity.

For more information on our enforcement action to combat illegal phoenix activity, see Sections1.7and3.7

ASIC cooperation 139

Former director imprisoned for 12 months for illegal phoenix activity

In November 2018, a former director of Metropolitan Design Pty Ltd (Metropolitan) was sentenced to 12 months imprisonment by the Magistrates Court in Queensland after pleading guilty to charges related to illegal phoenix activity. The former director was convicted of 13 breaches of directors’ duties under the Corporations Act.Hewasreleasedona$3,000two-yeargood-behaviourbondanddisqualified frommanagingcorporationsforfiveyearsfrom18November2018asaresultof

his conviction.

ASIC investigated the director’s conduct after receiving a liquidator’s report. In September 2015, Metropolitan was placed into liquidation, owing the ATO $235,626. Our investigations revealed that between 13 April and 22 September 2015, the director instructed debtors to redirect payments owed to Metropolitan to his personal sole-trader bank account, thus using his position dishonestly to gain an advantage for himself. His actions intentionally set out to deny the ATO

money owed to it - conduct constituting illegal phoenix activity. The matter was prosecuted by the CDPP.

ASIC Annual Report 2018-19 140

5.6 Misconduct reporting

Misconduct reports fromthe public

ASIC encourages members of the public to report concerns about corporate andfinancialservicestous.Weusethis information to direct our regulatory activities to identify and address harms to

investors and consumers. The intelligence we receive from the public is critical in supporting our work.

Our 27 information sheets, which explain our role in relation to the most frequently reported concerns, were read online by over 79,000 unique readers in 2018-19. Our 15 YouTube video clips were viewed over 13,600 times during the year.

In 2018-19, we dealt with 10,249 reports of alleged misconduct. This is 7% more than in2017-18,reflectingincreasedawareness flowingfromtheRoyalCommission.

Breach reports from licensees and auditors

ASIC uses breach reports from licensees and auditors to identify and respond to misconduct.

The Corporations Act requires AFS licensees to tell us in writing, within 10businessdays,aboutanysignificant breach (or likely breach) of their

obligations.Failuretoreportasignificant breach is an offence and may result in penalties.

Wealsoreceivebreachreportsfrom auditors who have reasonable grounds to suspect a breach of the Corporations Act by the company, managed investment

scheme, or AFS licensee that they are appointed to audit.

In 2018-19, we dealt with:

âº 705 auditor breach reports, 44% more than in 2017-18

âº 2,173 breach reports about managed investment schemes and AFS licensees, a 56% increase from 2017-18.

This increase is due to licensees reviewing their breach reporting practices in light of the Royal Commission and ASIC’s review. Weanticipatethatincreasesinthese reports will continue for some time.

ASIC cooperation 141

Report 594 Review of selected financial services groups’ compliance with the breach reporting obligation

Thisyear,ASICpublishedareviewofthebreachreportingpracticesof12financial servicesgroups:ANZ,CBA,NAB,Westpac,AMP,BankofQueensland,Bendigo Bank,CreditUnionAustralia,GreaterBank,HeritageBank,MacquarieandSuncorp.

The review considered the institutions’ compliance with reporting requirements under section 912D of the Corporations Act. The law requires all AFS licensees to reporttoASICa‘significantbreach’within10businessdaysofbecomingawareofit.

InReport594,releasedinSeptember2018,ASICidentifiedseriousand unacceptabledelaysinthetimetakentoidentify,reportandcorrectsignificant breachesofthelawamongAustralia’smostimportantfinancialinstitutions.Key findingsincludedthefollowing:

âº Financialinstitutionsweretakingtoolongtoidentifysignificantbreaches,with the major banks taking an average time of 1,726 days (over 4.5 years).

âº There were delays in remediation for consumer loss. It took an average of 226 daysfromtheendofafinancialinstitution’sinvestigationintothebreachtothe firstpaymenttoimpactedconsumers.(Thisisontopoftheaverageacrossall institutions of 1,517 days before the breach is discovered, as well as the time taken to start and complete an investigation.)

âº Thesignificantbreaches (withinthescopeofthereview)causedfinancial lossesto consumers of approximately $500 million, with millions of dollars of remediation yet to be provided.

âº The process from starting an investigation to lodging a breach report with ASIC also took too long, with major banks taking an average of 150 days.

Onceafinancialinstitutionhasinvestigatedanddeterminedthatabreachhas occurredandthatitissignificant,thelawrequiresthebreachbereportedto ASICwithin10businessdays.Oneinsevensignificantbreaches(110of715)were reported later than that 10-business-day requirement.

Inresponsetothereview’sfindings,ASICisensuringthatthereisastrongfocuson compliance with breach reporting requirements in its new CCM program approach to supervising major institutions. ASIC is also actively considering enforcement action for failures to report breaches on time.

ASIC Annual Report 2018-19 142

Statutory reports from liquidators, administratorsandreceivers

Wereceived8,106initialreportsfrom external administrators. Over 7,200 of these reported suspected offences by companyofficers,withtheremainder

lodged because the return to unsecured creditors may be less than 50 cents in the dollar. Of the 7,200 that reported misconduct, we requested supplementary reports from the external administrators in

1,008 cases. These supplementary reports typically set out the results of the external administrator’s inquiries and the evidence tosupporttheallegedoffences.We

referred 24% of supplementary reports assessed in 2018-19 for compliance, investigation or surveillance action, compared to 20% in 2017-18.

5.7 Australian Financial ComplaintsAuthority

The Australian Financial Complaints Authority (AFCA) commenced operations on 1 November 2018. AFCA deals with consumer, small business and primary producer complaints about banking, insurance, investments, financial advice, credit and superannuation.

AFCA replaced two ASIC-approved, industry-based schemes - the Credit and Investments Ombudsman and the Financial Ombudsman Service - as

well as the statutory Superannuation ComplaintsTribunal.Initsfirstsixmonths of operations, AFCA received over 35,000 complaints.

As an authorised external dispute resolution (EDR) scheme, AFCA is governed by an independent board responsible for ensuring the scheme’s ongoing compliance with the authorisation requirements, ministerial conditions and ASIC regulatory

requirements. The Corporations Act

gives ASIC a range of powers in relation to AFCA, including requiring that ASIC approve material changes to the scheme.

This year, we focused on ensuring a smooth transition to AFCA and that consumer access to EDR was maintained during the transition. ASIC worked with AFCA and other stakeholders on a range

of implementation issues and reforms to the dispute resolution framework. This included:

âº ASIC approval of the inaugural AFCA scheme Rules and the Independent Assessor Terms of Reference in September 2018, following AFCA’s

public consultation

ASIC cooperation 143

âº proactive measures, including licence cancellations, to protect consumers fromthefewfinancialfirmsthatwere not complying with their licence obligation to be a member of the AFCA scheme

âº ASIC approval of Rules changes to give effect to a further AFCA authorisation condition introduced by the Government, which required AFCA to extend its jurisdiction to allow the scheme to deal with certain

complaints about conduct dating back to 1 January 2008 - the approval followed AFCA’s public consultation on the proposed changes

âº receiving statutory reports from AFCA about systemic issues and serious contraventionsinvolvingfinancialfirms.

Additional reforms affecting AFCA include regulationsrequiringfinancialfirmsto take reasonable steps to cooperate with AFCA in resolving complaints and the Government’s announcement that it will establish an industry-funded, forward-looking compensation scheme of last resort.

In May 2019, ASIC also began public consultation on updated IDR standards andhowfinancialfirmshandleconsumer and small business complaints, including

the introduction of a mandatory IDR data collection and reporting framework. This work is informed by consumer research and intelligence from the IDR stream of ASIC’s CCM program.

For more information on the CCM program, see Section1.10

ASIC Annual Report 2018-19 144

6ASIC’s people6.1 Workforceplanning 1466.2 Diversity and inclusion at ASIC 151 ASIC’s people 145

6.1 Workforce planning

Working at ASIC

The 2019 Australian Public Service (APS) Employee Census was conducted in May and June 2019 with 72% of our people taking part. The results showed that our people are engaged and committed to the work we do. Of those who participated, 91% strongly believe in ASIC’s purpose and objectives and 86% consider themselves committed to ASIC’s goals.

ASIC’s commitment to creating a diverse workforce was also evident in the survey results, with 86% of us responding positively compared to the APS average of 78%. The Census includes scores on three key indices: Employee engagement, WellbeingandInnovation.ASICscored above the APS average across all three indices.

The ASIC Enterprise Agreement 2019-22wasapprovedbytheFairWork CommissioninMay2019.Thefirst2% per annum salary increase under the agreement also took effect in May.

For more information on employment data, see Appendix 8.1

Recruitment

Wearecommittedtoinvestinginour workforce and we continue to recruit people from a wide variety of disciplines, includinglaw,finance,economics, statistics and analytics, business and accounting, mathematics, arts and social science, and information technology and computer science.

Staff benefits

Wecontinuedtoprovideprofessional developmentandotherbenefitsforstaff in 2018-19, such as:

âº up to 15.4% superannuation contribution

âº annual performance bonus paid to ASIC 4 and executive level employees (for ASIC’s 2018-19 performance payments, see Table 8.1.8)

âº reward and recognition programs, including individual and team awards

âº payment of relevant professional association memberships

âº a study assistance program with employees supported in their studies across a range of disciplines, including IT and data analytics, leadership, appliedfinanceandlaw

âº flexibleworkingarrangements.

ASIC Annual Report 2018-19 146

2019 graduates with Commissioners Sean Hughes and Danielle Press.

Graduate Program

In 2019, ASIC received over 2,000 graduate applications and was recognised as a Top Graduate Employer by the Australian Association of Graduate Employers. ASIC was ranked #1 in the Australian Government category.

ASIC has a well-established national 18-month Graduate Program, providing on-the-job training, structured development opportunities, and rotation through different teams. During the

program,graduatesreceivesignificant professional development in both business and interpersonal skills.

Graduates progress through a multistaged recruitment process that enables us to select a diverse range of candidates. To further support ASIC’s strategic priorities, we have doubled our intake of graduates from mathematics, statistics and analytics disciplines. This year, we employed 24 graduates. Next year, we intend to further expand this valuable program and employ over 50 graduates.

Testimonials from recent ASIC graduates

Sabrina Mobbs - law graduate 2018

Through the Graduate Program, I rotated through four teams across ASIC which exposed me to incredibly varied work and allowed me to better understand and appreciate the broad mandate ASIC has. I completed rotations in Enforcement, Markets, Strategy and Corporations.

The work I did across these teams ranged from contributing to the case theory for a large investigation into directors’ duties and attending onsite at investment banks to reviewing disclosure documents for prospective capital raisings and writing briefs to the Commission.

ASIC’s people 147

Roger Samuel - arts and social sciences graduate 2018

I joined ASIC because I wanted to help ensure that all Australians cantrustourfinancialsystem,whichwerelyoneverydayto provide a roof over our head, to protect ourselves against life’s unknowns, and to save for the future. The ASIC Graduate Program was particularly appealing to me because I was able to rotate through four very different teams and see the regulatory system from the law reform process all the

way through to civil and criminal litigation.

I’ve thoroughly enjoyed the Graduate Program, in particular the supportive managers as they have always prioritised my learning to help me understand the purpose behind the work that we do.

ASIC’s 2018 graduates with John Brogden, Chair of Lifeline. Our graduates have raised more than $15,000 for Lifeline Australia, as part of their graduate fundraising project.

ASIC Annual Report 2018-19 148

Mentoring

Weprovideourpeoplewithopportunities to participate in a range of mentoring programs. In 2018-19, these included the following.

ASIC’s mentoring program: Developing our capability at all levels, in areas such as regulatory professionalism, learning agility, technological adeptness, communication skills, business skills and leadership skills. This year, 136 people (69 mentees and 67 mentors) participated in the program.

Women in Banking and Finance: Conducted externally, this mentoring program supports women preparing for senior leadership roles. This year, four ASIC leaders participated as mentees and four ASIC senior executives participated as mentors.

Women in Law Enforcement Strategy (WILES): A 10-month formal mentoring program to address the under-representation of women in law enforcement agencies, particularly at seniorlevels.Thisyear,fiveASICleaders participated in this program as mentees.

Learning

ASIC’s people participated in over 20,000 learning activities covering capabilities outlined in our organisational learning framework and our professional and technical learning frameworks.

Our professional and technical learning frameworks focus on building and maintaining capability in regulatory practice, enforcement, law, data analytics, accounting and auditing.

Wedevelopourteams’capabilities through both formal and on-the-job learning activities. Our Learning team, in partnership with our Professional and Technical Learning Networks, Communities of Practice and team Learning Champions, sponsor, guide, develop and deliver capability building activities.

Whilewecontinuetodevelopour future capabilities in data analytics, emerging technologies and stakeholder engagement, we are expanding our focus to include:

âº reviewing and refreshing our regulatory practice learning framework, and developing new learning activities and resources to support this

âº developing a suite of learning activities to support our Close and Continuous Monitoring and supervisory teams

âº piloting a capability assessment and planning tool online for implementation across ASIC in 2019-20

âº developing a new leadership capability framework to guide learning and talent activities to support ASIC’s management team.

ASIC’s people 149

TOTAL OF

355 LEARNING ACTIVITIES

24 Compliance

Business

Leadership

Behavioural

224 Professional and technical

Work health and safety

Weproactivelymaintainworkhealthand safety through our case management and responses to incidents that have the potential for injury. This approach has had excellent results, with ASIC being the only Commonwealth agency to receive a refund on its premium from Comcare.

Wearepromotingacultureofrisk awareness and welcome our teams’ engagement in conducting risk assessments and identifying potential areas of harm.

This year, we introduced a new mental health and wellbeing program, developed to help people leaders recognise and respond to signs of emotional distress.

Ourfluvaccinationprogramresultedin 53.6% participation and we continued to train and support our Health and Safety Representatives,FirstAidOfficersand HarassmentContactOfficers.

Workhasprogressedontherevised WorkHealthandSafetyManagement System, with new policies, procedures and guidelines developed, including on fatigue management and dealing with threats of self-harm and violence.

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6.2 Diversity and inclusion at ASIC

Werecognisethevalueofadiverse workforce and an inclusive culture, and we actively encourage diversity of thought to ensureafair,strongandefficientfinancial system for all Australians.

Our approach to diversity and inclusion is governed by the ASIC Diversity Council.

This year, ASIC’s diversity and inclusion strategies achieved:

âº our commitment to a 50/50 gender-balanced leadership team at the Senior Executive Service (SES) level, with women comprising 52% of senior executives

âº an increase in the workforce of those identifying as Indigenous (1.35%), up from 1.09% the previous year

âº an increase of 12% in the Australian WorkplaceEqualityIndex,which measures LGBTIQ+ workplace inclusion

âº 215attendeesacrossfour‘Womenin ASIC - Communities of Practice’ events.

For more information on the diversity of ASIC’s workforce, seeAppendix8.1

Women in ASIC

ASIC supports women in leadership and senior positions, as part of our inclusionanddiversitystrategy.Wemet our voluntary target of 50% women in senior positions in 2018-19, including our target for equal representation in Executive Level 1, Executive Level 2 and SES positions.

TheWomeninASICCommitteedelivers:

âº ‘Keeping You Connected’ events for ASIC employees on extended leave, includingparents.Weinvitepeople on extended leave to come into the officetosocialiseandkeepuptodate with developments

âº continued Communities of Practice quarterly events to discuss topics related to women in leadership and workforce participation. Highlights this year included journalist Virginia Trioli speaking about the changing nature of social media and the Hon. Justice Anne Ferguson, Chief Justice of the Supreme Court of Victoria, who spoke aboutbecomingthefirstsolicitortobe appointed Victoria’s Chief Justice

âº our popular annual ‘Bring Your DaughtertoWork’event.

Ayesha Budd participating in a ‘Bring Your Daughter toWork’event,whereweorganisedaminiexchange market to explain the concept of shares and how exchange markets work.

ASIC’s people 151

‘Balance for Better’ with Elizabeth Broderick AO

Australia’s longest serving Sex Discrimination Commissioner (2007-15), Elizabeth BroderickAO,joinedusforInternationalWomen’sDay.Thisyear’sthemewas ‘Balance for Better’. During a Q&A session with Commissioner Danielle Press, Elizabethspokeabouttacklingdiscrimination,flexibleworking,andkeeping

emotionally replenished.

ThiseventwashostedbyWomeninASICandconcludedwiththeannualWomen in Leadership award, which went to Diana Steicke from ASIC’s Assessment and Intelligenceteam.DianareceivedtheWomeninLeadershipawardforherworkon the development of ASIC’s Small Business Strategy. Diana has strengthened the cohesion and collaboration between ASIC teams that engage with small business.

Eleni Atsalakis, Joanna Greco, Elizabeth Broderick AO and Commissioners Danielle Press and Cathie ArmourcelebrateInternationalWomen’sDay.

ASIC Annual Report 2018-19 152

Equitable gender briefing

As a result of ASIC’s proactive effort to ensure that we brief female barristers equitably, the proportionoffemalebarristerswebriefhasincreasedsignificantlyinrecentyears.ASIC is on track to meet long-term targets set by the Law Council of Australia to ensure that at least 30% of all briefed or selected barristers are women and/or that women account for 30% of the value of all barristers’ brief fees paid.

ASIC briefings to barristers 2018-19, by gender

Targets set in Legal Services Directions 2017

18%

28%

56%

57%

Senior Barristers

82%

72%

44%

43%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Junior Barristers

Value of briefs

Number of briefs

Value of briefs

Number of briefs

Male Female

Thisyear,wesignificantlyexceeded the targets set by the Legal Services Directions 2017 for junior barristers and exceeded the target for the number of briefsforseniorfemalebarristers.While ASIC has not yet met the target for the value of briefs to senior female barristers, the steps ASIC has taken in recent years will assist in meeting this target in the future.

In addition to signing up to the Law CouncilofAustralia’sEquitableBriefing Policy, ASIC is a founding signatory to the Charter of Commitment to achievegenderequitablebriefing practices in commercial litigation. This charter is part of a joint initiative by the Commercial Bar Association of Victoria, members of the judiciary, and the Victorian Equal Opportunity and Human Rights Commission.

ASIC’s people 153

Rainbow Network

Our LGBTIQ+ Network continues to raise awareness about LGBTIQ+ issues in the workplace and provide support to ASIC employees. This year, ASIC participated intheannualAustralianWorkplace Equality Index, which measures LGBTIQ+ workplace inclusion, and received an increase of 12% in the index.

RossWetherbee,PresidentofWearitPurple, being presented with a cheque at our 2019 IDAHBIT celebration.

The Rainbow Network also marked International Day Against Homophobia, Biphobia, Interphobia and Transphobia (IDAHBIT). Commissioner Danielle Press andRossWetherbee,PresidentofWear it Purple, spoke at an event highlighting the importance of a workplace culture of celebrating difference, and showcasing themissionofWearitPurple,which fosters supportive, safe, empowering and inclusive environments for LGBTIQ+ young people.

Reconciliation Action Plan

ASIC is progressing towards the measurable targets included in its Stretch Reconciliation Action Plan (RAP) 2017-20, launched in April 2018. This ongoing work shows ASIC’s commitment to the journey of reconciliation.

The focus areas of our RAP include:

âº building real, respectful and long-lasting relationships with Indigenous employees and external stakeholders

âº ensuring a culturally sensitive and aware workplace

âº increasing and retaining Indigenous people at ASIC.

One of the new plaques installed in ASIC workplaces Australia-wide.

Examples of the RAP initiatives achieved include the Aboriginal and Torres Strait IslanderflagsbeingdisplayedinASIC reception areas, and ASIC installing plaques acknowledging the traditional owners and paying respect to their cultures and elders.

NationalReconciliationWeekcelebrations in 2019 were our biggest yet. ASIC’s Sydney employees participated in an Indigenous food knowledge event with external educators sharing knowledge on native meats, herbs and spices cultivated

ASIC Annual Report 2018-19 154

and used by Aboriginal and Torres Strait Islander peoples for thousands of years. This was followed by live performances in Sydney and Brisbane, which were video conferencedacrossallASICoffices, showcasing Indigenous culture through music and dance.

Wehavealsobeenfocusingonbuilding cultural awareness in the workplace, including having an Indigenous consultant provide face-to-face Indigenous cultural training in Sydney, Melbourne, Hobart, Canberra and Adelaide and successfully expanding the use of Indigenous catering for ASIC’s RAP events and other ASIC events.

Indigenous employment initiatives at ASIC

Aboriginal and Torres Strait Islander employment is a key objective of ASIC’s RAP.

Our employment initiatives include:

âº participation in the Indigenous Australian Government Development Program

âº participation in the Indigenous Apprenticeship Program

âº supporting two team members to take part in the Jawun secondment program.

This year, the Indigenous Staff Network Group, which includes people from a numberofASICoffices,haditsfirstoffsite in Sydney and participated in networking and professional development activities.

MembersofASIC’sIndigenousStaffNetworkGroupatthefirstoffsiteinSydney.

ASIC’s people 155

Multicultural access and equity

ASIC’s Multicultural Plan for 2018-19 focuses on the culturally and linguistically diverse communities that access ASIC services.

This year, the Multicultural Access and Equity Committee:

âº continued to monitor customer engagement with ASIC’s telephone interpreter service

âº offered ASIC employees the opportunity to register in the HR management system as an interpreter.

ASIC’s Developing Cultural Awareness training continues to have a high completion rate (97% of our people).

ASIC celebrates International Day of People with Disability with Annabelle Williams OAM

On 3 December 2018, ASIC celebrated International Day of People with Disability withguestspeakerAnnabelleWilliamsOAM.Annabelle,aformerParalympic swimmer for Australia and current Legal Counsel for the Australian Olympic Committee, provided her insights on the importance of inclusion and accessibility in the workplace and shared her personal and professional experience of living with a disability. Annabelle reminded us that diversity, in all its forms, is an opportunity.

AnnabelleWilliamsOAMspokeonempoweringpeoplewithdisabilitiesandensuringinclusiveness and equality.

ASIC Annual Report 2018-19 156

Accessibility

An accessible and inclusive workplace is a priority for ASIC. For example, ASIC’s websites are designed to be read by screen readers, transcripts and captions areavailableforallvideofiles,andatext equivalent is available for all images. The Digital Assistance team in ASIC’s Contact Centre supports customers requiring additional assistance with online transactions.

Weaimtoeliminatebarriersto accessibility, promote disability awareness initiatives across ASIC, and encourage training and career development opportunities for people with a disability.

This year, ASIC participated in the Australian Network on Disability’s Access and Inclusion Index for the firsttime,ranking11thofthe23 participating organisations.

Wearemakingprogressagainstour Accessibility Action Plan, including accessing the Government’s RecruitAbility program to recruit graduates in our 2019 intake and having employees complete our Disability Awareness e-learning module.

ASIC also supports the National Disability Strategy 2010-2020, which sets out a 10-year national policy framework to improve the lives of people with disability, promote participation, and create a more inclusive society. The second progress report can be found at www.dss.gov.au.

Rebecca Wong - law graduate 2019

Since joining ASIC as a law graduate six months ago, I have been amazed and humbled by the support I’ve received from people at all levels of the organisation. An activity-based work environment certainly presents challenges

when you’re blind and navigating ASIC’s internal data management systems with a screenreaderhasn’tbeeneasy.ASIC’sWork Health and Safety team has offered me invaluableassistanceinthisregard,sothedifficultiesIhaveencounteredhavebeen hindrancesratherthaninsurmountablebarriers.MycontactinWHShashelpedme organiseorientationaroundtheofficeandobtaintheassistivetechnologyIneed.

Above all, my colleagues in Financial Services Enforcement and the Chief Legal Officehavebeenpatient,open-mindedandflexible,ensuringIamabletothrive in and contribute to an organisation whose values and work I believe in. For me, inclusivity isn’t about doing everything right from the get-go; it’s about learning, improving, and being open to change.

ASIC’s people 157

ASIC Annual Report 2018-19 158

7Financial Statements

Financial Statements 159

Contents

Independent Auditor’s Report 161

Statement by the Accountable Authority and Chief Financial Officer 163

Statement of Comprehensive Income 164

Statement of Financial Position 165

Statement of Changes in Equity 166

Cash Flow Statement 167

Administered Schedule of Comprehensive Income 168

Administered Schedule of Assets andLiabilities 169

Administered Reconciliation Schedule 170

Administered Cash Flow Statement 171

Notes to and forming part of the financial statements

Overview 172

Note 1: Departmental financial performance 175

1.1 Expenses 175

1.2 Own-source revenue 177

Note 2: Income and expenses administered on behalf of Government 179

2.1 Administered - expenses 179

2.2 Administered - income 180

Note 3: Departmental financialposition 182

3.1 Financial assets 182

3.2 Non-financial assets 183

3.3 Payables 186

3.4 Other provisions 187

Note 4: Assets and liabilities administered on behalf of the Government 188

4.1 Administered-financialassets 188

4.2 Administered - payables 189

Note 5: Funding 191

5.1 Appropriations 191

5.2 Special Accounts 195

5.3 Regulatory charging summary 197

5.4 Net cash appropriation arrangements 198

Note 6: People and relationships 198

6.1 Employee provisions 198

6.2 Key management personnel remuneration 200

6.3 Related party disclosures 201

Note 7: Managing uncertainties 201

7.1 Contingent assets and liabilities 201

7.2 Financial instruments 204

7.3 Administered-financial instruments 206

7.4 Fair value measurement 207

Note 8: Other information 207

8.1 Aggregate assets and liabilities 207

8.2 Expenditure relating to statutory boards and tribunal 208

8.3 Assets of deregistered companies vesting in ASIC 209

8.4 Security deposits from dealers, investment advisers and liquidators 209

8.5 Budgetary reports and explanations of major variances 210

ASIC Annual Report 2018-19 160

INDEPENDENT AUDITOR’S REPORT

To the Treasurer

To the Minister for Revenue and Financial Services

Opinion

In my opinion, the financial statements of the Australian Securities and Investments Commission (‘the Entity’) for the year ended 30 June 2019:

(a) comply with Australian Accounting Standards - Reduced Disclosure Requirements and the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 ; and

(b) present fairly the financial position of the Entity as at 30 June 2019 and its financial performance and cash flows for the year then ended.

The financial statements of the Entity, which I have audited, comprise the following statements as at 30 June 2019 and for the year then ended:

â¢ Statement by the Accountable Authority and Chief Financial Officer; â¢ Statement of Comprehensive Income; â¢ Statement of Financial Position; â¢ Statement of Changes in Equity; â¢ Cash Flow Statement; â¢ Administered Schedule of Comprehensive Income; â¢ Administered Schedule of Assets and Liabilities; â¢ Administered Reconciliation Schedule; â¢ Administered Cash Flow Statement; and â¢ Notes to and forming part of the financial statements, comprising an Overview and other

explanatory information.

Basis for opinion

I conducted my audit in accordance with the Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards. My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the Entity in accordance with the relevant ethical requirements for financial statement audits conducted by the Auditor-General and his delegates. These include the relevant independence requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) to the extent that they are not in conflict with the Auditor-General Act 1997. I have also fulfilled my other responsibilities in accordance with the Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Accountable Authority’s responsibility for the financial statements

As the Accountable Authority of the Entity, the Chair is responsible under the Public Governance, Performance and Accountability Act 2013 (the Act) for the preparation and fair presentation of annual financial statements that comply with Australian Accounting Standards - Reduced Disclosure Requirements and the rules made under the Act. The Chair is also responsible for such internal control as the Chair determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

GPO Box 707 CANBERRA ACT 2601 19 National Circuit BARTON ACT Phone (02) 6203 7300 Fax (02) 6203 7777

Independent Auditor’s Report

Financial Statements 161

In preparing the financial statements, the Chair is responsible for assessing the ability of the Entity to continue as a going concern, taking into account whether the Entity’s operations will cease as a result of an administrative restructure or for any other reason. The Chair is also responsible for disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the assessment indicates that it is not appropriate.

Auditor’s responsibilities for the audit of the financial statements

My objective is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance,but is not a guarantee that an audit conducted in accordance with the Australian National Audit Office Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with the Australian National Audit Office Auditing Standards, I exercise professional judgement and maintain professional scepticism throughout the audit. I also:

â¢ identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

â¢ obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control;

â¢ evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Accountable Authority; â¢ conclude on the appropriateness of the Accountable Authority’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to

events or conditions that may cast significant doubt on the Entity’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the Entity to cease to continue as a going concern; and â¢ evaluate the overall presentation, structure and content of the financial statements, including the

disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

I communicate with the Accountable Authority regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

Australian National Audit Office

Lorena Skipper Acting Executive Director Delegate of the Auditor-General

Canberra 20 August 2019

ASIC Annual Report 2018-19 162

Statement by the Accountable Authority and Chief Financial Officer

Inouropinion,theattachedfinancialstatementsfortheYearended30June2019comply with subsection 42(2) of the Public Governance, Performance and Accountability Act 2013 (PGPAAct),andarebasedonproperlymaintainedfinancialrecordsaspersubsection41(2) of the PGPA Act.

In our opinion, at the date of this statement, there are reasonable grounds to believe that the Australian Securities and Investments Commission will be able to pay its debts as and when they fall due.

J.R.F. Shipton E. L. Hodgson

Chair ChiefFinancialOfficer

20 August 2019 20 August 2019

Financial Statements 163

Statement of Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2019

Notes

2019 $’000

2018 $’000

NET COST OF SERVICES

Expenses

Employeebenefits 1.1A 227,035 209,526

Suppliers 1.1B 157,468 149,915

Depreciation and amortisation 3.2A 46,122 40,709

Finance costs - unwinding of restoration provision 224 30

Impairmentlossallowanceonfinancialinstruments-trade and other receivables 7.2B 589 859

Write-downandimpairmentofotherassets 1.1C 205 71

Total expenses 431,643 401,110

LESS:

Own-source revenue

Rendering of services 3,282 1,943

Operating sublease rent and property recoveries 2,460 2,674

Other revenue 1.2A 5,701 36,258

Total own-source revenue 11,443 40,875

Gains

Reversal of write-downs and impairment 3.1B 510 1,294

Total gains 510 1,294

Net Cost of Services 419,690 358,941

Total revenue from Government 1.2B 374,313 348,041

Surplus/(Deficit) (45,377) (10,900)

OTHER COMPREHENSIVE INCOME

Items not subject to subsequent reclassification to net cost of services

Changes in asset revaluation reserve 5,363 -

Total comprehensive income/(loss) (40,014) (10,900)

The above statement should be read in conjunction with the accompanying notes.

ASIC Annual Report 2018-19 164

Statement of Financial Position AS AT 30 JUNE 2019

Notes

2019 $’000

2018 $’000

ASSETS

Financial assets

Cash and cash equivalents 3.1A 65,221 62,703

Trade and other receivables 3.1B 135,158 122,430

Total financial assets 200,379 185,133

Non-financial assets

Leasehold improvements 3.2A 28,802 26,057

Plant and equipment 3.2A 20,661 22,102

Computer software 3.2A 86,855 90,445

Prepayments 10,377 13,846

Total non-financial assets 146,695 152,450

Total assets 347,074 337,583

LIABILITIES

Payables

Suppliers 3.3A 49,621 42,485

Other payables 3.3B 40,113 40,540

Total payables 89,734 83,025

Provisions

Employee provisions 6.1A 76,017 68,455

Other provisions 3.4A 18,280 14,685

Total provisions 94,297 83,140

Total liabilities 184,031 166,165

Net assets 163,043 171,418

EQUITY

Contributed equity 436,058 404,419

Reserves 22,500 17,137

Accumulateddeficit (295,515) (250,138)

Total equity 163,043 171,418

The above statement should be read in conjunction with the accompanying notes.

Financial Statements 165

Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2019

Notes

2019 $’000

2018 $’000

CONTRIBUTED EQUITY

Opening balance 404,419 364,970

Transactions with owners

Contributions by owners

Equity injections - Appropriations 7,294 22,185

Departmental capital budget 24,345 17,264

Total transactions with owners 31,639 39,449

Closing balance as at 30 June 436,058 404,419

RETAINED EARNINGS

Opening balance (250,138) (235,316)

s51 withholding of prior year appropriations - (3,922)

Comprehensive income

Surplus/(Deficit)fortheperiod (45,377) (10,900)

Total comprehensive loss (45,377) (10,900)

Closing balance as at 30 June (295,515) (250,138)

ASSET REVALUATION RESERVE

Opening balance 17,137 17,137

Comprehensive income

Other comprehensive income 5,363 -

Total comprehensive income 5,363 -

Closing balance as at 30 June 22,500 17,137

TOTAL EQUITY

Opening balance 171,418 146,791

s51 withholding of prior year appropriations - (3,922)

Comprehensive income

Other comprehensive income 5,363 -

Surplus/(Deficit)fortheperiod (45,377) (10,900)

Total comprehensive loss (40,014) (10,900)

Transactions with owners

Contributions by owners

Equity injections - Appropriations 7,294 22,185

Departmental capital budget 5.1A 24,345 17,264

Total transactions with owners 31,639 39,449

Closing balance as at 30 June 163,043 171,418

The above statement should be read in conjunction with the accompanying notes.

ASIC Annual Report 2018-19 166

Cash Flow Statement FOR THE YEAR ENDED 30 JUNE 2019

Notes

2019 $’000

2018 $’000

OPERATING ACTIVITIES

Cash received

Appropriations 370,324 390,181

Operating cash received 3,282 1,920

Net GST received 14,261 15,882

Cost recoveries 3,649 32,649

Other cash received 5,008 11,449

Total cash received 396,523 452,081

Cash used

Employees 220,589 210,220

Suppliers 162,252 164,096

TransferstotheOfficialPublicAccount 12,032 47,827

Total cash used (394,873) (422,143)

Net cash from/(used by) operating activities 1,651 29,938

INVESTING ACTIVITIES

Cash used

Purchase of leasehold improvements, plant and equipment and intangibles 38,160 46,448

Net cash (used by) investing activities (38,160) (46,448)

FINANCING ACTIVITIES

Cash received

Appropriations - contributed equity 39,027 42,014

Net cash from financing activities 39,027 42,014

Net increase/(decrease) in cash held 2,518 25,504

Cash and cash equivalents at the beginning of the reporting period 62,703 37,199

Cash and cash equivalents at the end of the reporting period 3.1A 65,221 62,703

The above statement should be read in conjunction with the accompanying notes.

Financial Statements 167

Administered Schedule of Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2019

Notes

2019 $’000

2018 $’000

NET COST OF SERVICES

Expenses

Grants 2.1A 12,953 3,552

Impairmentlossallowanceonfinancialinstruments 2.1B 61,944 53,948

Claims for unclaimed monies 2.1C 53,521 65,813

Promotional costs for MoneySmart initiatives 570 547

Total expenses 128,988 123,860

LESS:

Own-source revenue

Taxation revenue

Fees 800,216 760,857

Supervisory cost recovery levies 50,157 27,824

Total taxation revenue 850,373 788,681

Non-taxation revenue

Supervisory cost recovery levies 223,204 208,542

Feesandfines 2.2A 199,054 219,023

Unclaimedmonieslodgements 2.2B 70,862 88,477

Total non-taxation revenue 493,120 516,042

Total revenue 1,343,493 1,304,723

Net contribution by services 1,214,505 1,180,863

The above schedule should be read in conjunction with the accompanying notes.

ASIC Annual Report 2018-19 168

Administered Schedule of Assets andLiabilities AS AT 30 JUNE 2019

Notes

2019 $’000

2018 $’000

ASSETS

Financial assets

Cash and cash equivalents 1,859 1,641

Supervisory cost recovery levies receivable 282,438 236,366

Feesandfinesreceivable 4.1A 143,150 137,087

Trade and other receivables 4.1B 8,600 6,424

Total assets administered on behalf of Government 436,047 381,518

LIABILITIES

Payables and provisions

Suppliers and other payables 4.2A 31,707 29,872

Unclaimedmoniesprovisions 4.2B 347,790 348,936

Total liabilities administered on behalf of Government 379,497 378,808

Net assets/(liabilities) 56,550 2,710

The above schedule should be read in conjunction with the accompanying notes.

Financial Statements 169

Administered Reconciliation Schedule AS AT 30 JUNE 2019

2019 $’000

2018 $’000

Opening assets less liabilities as at 1 July 2,710 (241,167)

Net contribution by services:

Administered income 1,343,493 1,304,723

Administered expenses (128,988) (123,860)

1,214,505 1,180,863

Transfers (to)/from the Australian Government

AppropriationtransfersfromOfficialPublicAccount:

Special (unlimited) and ordinary appropriations

Appropriation Act No. 1 15,004 5,566

Banking Act unclaimed monies 16,535 28,109

Life Insurance Act unclaimed monies 4,081 3,609

Section 77 PGPA Act 37,104 39,012

TotalofappropriationtransfersfromOfficialPublicAccount 72,724 76,296

AdministeredtransferstoOfficialPublicAccount (1,233,389) (1,013,282)

Closing assets less liabilities as at 30 June 56,550 2,710

The above schedule should be read in conjunction with the accompanying notes.

ASIC Annual Report 2018-19 170

Administered Cash Flow Statement FOR THE YEAR ENDED 30 JUNE 2019

2019 $’000

2018 $’000

OPERATING ACTIVITIES

Cash received

Corporations Act, National Consumer Credit Protection Act, Business Names Registration (Fees) Act and Superannuation Industry (Supervision) Act 1,158,389 920,811

Corporation Act unclaimed monies 50,665 63,652

Banking Act unclaimed monies 12,902 6,512

Life Insurance Act unclaimed monies 7,295 18,312

Total cash received 1,229,251 1,009,287

Cash used

Refunds paid to:

Company shareholders 34,050 36,613

Deposit-taking institution account holders 16,537 28,109

Life insurance policy holders 4,081 3,609

Promotion expenses for MoneySmart Initiatives 10,528 560

Grants 3,220 3,578

Net GST paid (46) (28)

Total cash used (68,368) (72,441)

Net cash from operating activities 1,160,883 936,846

Cash from Official Public Account for:

Appropriations 72,724 76,296

Less: Cash to Official Public Account for:

Corporations Act, National Consumer Credit Protection Act and Business Names Registration (Fees) Act fees and charges 1,162,527 924,806

Corporations Act unclaimed monies 50,665 63,652

Banking Act unclaimed monies 12,902 6,512

Life Insurance Act unclaimed monies 7,295 18,312

Total cash to Official Public Account (1,233,389) (1,013,282)

Net (decrease) in cash held 218 (140)

Cash and cash equivalents at the beginning of the reporting period 1,641 1,781

Cash and cash equivalents at the end of the reporting period 1,859 1,641

The above schedule should be read in conjunction with the accompanying notes.

Financial Statements 171

Notes to and forming part of the financial statements FOR THE YEAR ENDED 30 JUNE 2019

Overview

Objectives of the Australian Securities and Investments Commission (ASIC)

ASIC is an independent Commonwealth Government body operating under the Australian Securities and Investments Commission Act 2001 (ASIC Act) to administer the Corporations Act 2001, and other legislation, throughout Australia. ASICisanot-for-profitentityandour objectives, outlined in s1(2) of the ASIC Act, include:

âº thepromotionofconfidentand informed participation of investors and consumersinthefinancialsystem;

âº the maintenance, facilitation and improvement in the performance of thefinancialsystemandtheentities within that system in the interests of commercial certainty, reducing businesscosts,andtheefficiencyand development of the economy; and

âº to administer the laws that confer functions and powers on it effectively and with a minimum of procedural requirements.

ASIC collects and administers revenue under the Corporations Act 2001 and the National Consumer Credit Protection Act 2009 and prescribed fees set by the Corporations (Fees) Act 2001, the Corporations (Review Fees) Act 2003, the National Consumer Credit Protection Act 2009, the Business Names Registration (Fees) Regulations 2010 and Superannuation Industry (Supervision) Act 1993. In addition, ASIC collects taxation revenue under the ASIC Supervisory Cost Recovery Levy Act 2017, the ASIC Supervisory Cost Recovery Levy (Collection) Act 2017, the ASIC Supervisory Cost Recovery Levy (Consequential Amendments) Act 2017, the ASIC Supervisory Cost Recovery Levy Regulations 2017; and the ASIC Supervisory Cost Recovery Levy (Consequential Amendments) Regulations 2017. This revenue is not available to ASICandisremittedtotheOfficial Public Account (OPA). Transactions and balances relating to these fees are reported as administered items. Administered items are distinguished by shading in these financial statements.

ASIC Annual Report 2018-19 172

ASIC is structured to deliver a single outcome, and the result is in the Statement of Comprehensive Income:

To allow markets to allocate capital efficiently to fund the real economy by promoting investor and financial consumer trust and confidence, facilitating fair, orderly and transparent markets and delivering efficient and accessible registration.

The continued existence of ASIC in its present form and with its present programs is dependent on Government policy and on continuing funding by Parliament for ASIC’s administration and programs.

Basis of preparation

Thefinancialstatementsaregeneral purposefinancialstatementsand are required by section 42 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act).

Thefinancialstatementsandnoteshave been prepared in accordance with the:

âº Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR; and

âº Australian Accounting Standards - Reduced Disclosure Requirement issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

Thefinancialstatementshavebeen prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on theresultsorthefinancialposition.

Thefinancialstatementsarepresentedin Australian dollars and values are rounded to the nearest thousand dollars unless otherwisespecified.

New Accounting Standards

From 1 July 2018, AASB 139 Financial Instruments: Recognition and Measurement was replaced by AASB 9 Financial Instruments.ASIC’sfinancial instruments consist of cash and cash equivalents, trade debtors, trade creditorsandgrantspayable.Underthe newstandardASICusesthesimplified approach and continues to measure financialinstrumentsatamortisedcost. This is shown in Note 7.2. All other new accounting standards, amendments to standards and interpretations that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material effect and are not expected to have a future material effect onASIC’sfinancialstatements.

Taxation

ASIC is exempt from all forms of taxation exceptFringeBenefitsTax(FBT)andthe Goods and Services Tax (GST).

Financial Statements 173

Reporting of Administered activities

Administeredrevenues,expenses,assets,liabilitiesandcashflowsaredisclosedin the Administered Schedules and related notes.

Except where otherwise stated, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of Australian Accounting Standards.

Prior period adjustments

In 2018-19, ASIC made a prior year adjustment relating to the over accrual of revenue relatingtothesupervisionofAustralia’sfinancialmarketsandcompetitionformarket services and the Supervisory cost recovery levies. The table below summarises the adjustments to the prior year.

Note

2018 $’000 Adjustments $’000

2018

(Restated) $’000

Administered Schedule of ComprehensiveIncome

Non-taxation revenue

Supervisory cost recovery levies 219,548 (11,006) 208,542

Statement of Financial Position

Financial Assets

Supervisory cost recovery levies receivable 247,372 (11,006) 236,366

Feesandfinereceivable 4.1A 137,812 (725) 137,087

Administered Reconciliation Schedule

Opening assets less liabilities as at 1 July (240,443) (725) (241,168)

Administered Income 1,315,730 (11,006) 1,304,724

Closing assets less liabilities as at 30 June 14,441 (11,731) 2,710

Events after the reporting period

There were no events occurring after balance date that had a material effect on the DepartmentalorAdministeredfinancialstatements.

ASIC Annual Report 2018-19 174

Note 1: Departmental financial performance

ThissectionanalysesthefinancialperformanceofASICfortheyearended30June2019

1.1 Expenses

2019 $’000

2018 $’000

1.1A: Employee benefits

Wagesandsalaries 167,415 155,664

Superannuation

Defined-benefit schemes 11,133 11,380

Defined-contribution schemes 21,101 19,684

Leave and other entitlements 28,253 19,974

Separation and redundancies1,2 (867) 2,824

Total employee benefits 227,035 209,526

1 Separation and redundancy costs are generally calculated on the basis of two weeks pay for every year of service for each employee with a minimum of four weeks and a maximum of 48 weeks.

2 The Separation and redundancies amount of ($0.867m) is mainly attributable to a downward revision to provisions for employee restructuring (refer to Note 6.1A: Employee provisions - Restructuring provision and Note 3.4A: Other provisions - Provision for restructuring).

Accounting Policy Accounting policies for employee related expenses are detailed in Note 6. People and relationships.

Financial Statements 175

2019 $’000

2018 $’000

1.1B: Suppliers

Goods and services supplied or rendered

Legal and forensic costs 32,382 27,835

Consultants and specialist services 28,843 27,249

Officecomputerandsoftwareexpenses 27,896 28,394

Information costs 9,189 9,489

Property-related outgoings 8,180 9,161

Travel 6,260 5,048

Other goods and services 4,354 3,968

Learning and development 3,884 3,445

Bank fees 2,888 2,730

Communications 2,661 2,227

Postage and freight 2,405 2,951

Security 2,008 1,985

Recruitment 1,569 1,463

Total goods and services supplied or rendered 132,519 125,945

Goods supplied 2,142 2,244

Services rendered 130,377 123,701

Total goods and services supplied or rendered 132,519 125,945

Other suppliers

Operating lease rentals 22,736 21,926

Workerscompensationexpense 2,024 1,930

Fringebenefitstax 189 114

Total other suppliers 24,949 23,970

Total suppliers 157,468 149,915

ASIC Annual Report 2018-19 176

Leasing commitments

ASIC,initscapacityaslessee,hasarangeoflong-termleaseswithfixeddatesforexpiry.In 2018-19, ASIC entered into new leases in Adelaide and Traralgon.

2019 $’000

2018 $’000

Commitments for minimum lease payments in relation to non-cancellable operating leasesare payable as follows:

Within1year 22,565 26,902

Between 1 to 5 years 56,307 43,445

More than 5 years 16,575 32,597

Total operating lease commitments 95,447 102,944

Accounting Policy Operating lease payments (net of lease incentives), are expensed on a straight line-basis, whichisrepresentativeofthepatternofbenefitsderivedfromtheleasedassets.

1.1C: Write-down and impairment of other assets

Write-offofplant&equipment 205 71

Total write-down and impairment of other assets 205 71

1.2 Own-source revenue

Accounting Policy

Rendering of services

Revenue from rendering of services is recognised when the resources have been purchased. Revenue is recognised when:

âº The amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and

âº TheprobableeconomicbenefitsassociatedwiththetransactionwillflowtoASIC.

Operating lease revenue

Operating sublease revenue is recognised as revenue on commencement of the leaseundertheMemorandumofUnderstanding.Theleasestermsareona12month rolling basis.

Financial Statements 177

2019 $’000

2018 $’000

1.2A: Other revenue

Cost recoveries1 3,648 34,094

Other2 2,053 2,164

Total other revenues 5,701 36,258

1 Amounts recovered by ASIC for court costs, investigations, professional fees, legal costs and prosecution disbursements.

2 Includes resources received free of charge (auditors’ remuneration) of $0.380m (2018: $0.360m).

Accounting Policy

Resources received free of charge

Resources received free of charge are recognised as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased iftheyhadnotbeendonated.Useofthoseresourcesisrecognisedasanexpense. Resources received free of charge are recorded as either revenue or gains depending on their nature.

1.2B: Revenue from Government

Appropriations:

Departmental appropriations 338,096 321,762

Departmental special appropriations3 36,217 26,279

Total revenue from Government 374,313 348,041

3 A special account is a limited special appropriation that notionally sets aside an amount that can be expended for a particular purpose. $36.2m of ASIC’s 2018-19 ordinary annual appropriation has been allocated to the Enforcement Special Account, which was established to fund the costs arising from the investigation and litigationofmattersofsignificantpublicinterest.

Accounting Policy

Revenue from Government

Amounts appropriated for departmental appropriations for the period (adjusted for any formal additions and reductions) are recognised as revenue from Government when ASIC gains control of the appropriation. Appropriations receivable are recognised at their nominal amounts.

ASIC Annual Report 2018-19 178

Note 2: Income and expenses administered on behalf of Government

This section analyses the activities that ASIC does not control but administers on behalfoftheGovernment.Unlessotherwisenoted,theaccountingpoliciesadoptedare consistent with those applied for departmental reporting.

2.1 Administered - expenses

2019 $’000

2018 $’000

2.1A: Grants

Rendering of services

Insolvency practitioners 2,953 3,552

Ecstra Foundation1 10,000 -

Total grants 12,953 3,552

1 In the 2018-19 Budget, the Federal Government provided a one-off grant in administered funding to be providedtotheEcstraFoundationtosupportinitiativeswhichenhancefemalefinancialcapability.The grant was paid in June 2019.

Accounting Policy ASIC administers payments to registered insolvency practitioners to undertake preliminary investigations of suspected breaches of directors’ duties and fraudulent conductandtoreporttheoutcomeoftheirfindingstoASICforfurtheraction as appropriate.

Grant liabilities are recognised to the extent that (i) the services required to be performed by the grantee have been performed or (ii) the grant eligibility criteria have beensatisfied,butpaymentsduehavenotbeenmade.WhentheGovernmententers into an agreement to make these grants and services, but services have not been performedorcriteriasatisfied,thisisconsideredacommitment.

2.1B: Impairment loss allowance on financial instruments

Impairment of receivables 58,374 51,251

Waiveroffeesandchargesowing 3,570 2,697

Total impairment on financial instruments 61,944 53,948

Financial Statements 179

2019 $’000

2018 $’000

2.1C: Claims for unclaimed monies

Claims - Bank and deposit taking institution account holders 9,533 2,969

Claims - Life Insurance policy holders 4,036 13,133

Claims - Corporations Act 2001 39,952 49,711

Total other expenses 53,521 65,813

Accounting Policy Refer to Note 4.1 for the policy pertaining to the impairment of receivables and fee waivers.

In determining whether a fee should be waived in whole or part, ASIC considers theextenttowhichthecompany’sofficersoritsrepresentativescontributedtothe circumstances of the matter, in accordance with Part 7 of the Finance Minister’s Delegation under section 63 of the PGPA Act.

Administered expenses for refunds of unclaimed monies under the Banking Act 1959, Life Insurance Act 1995 and Corporations Act 2001 are recognised by estimating the value of claims likely to be repaid in respect of unclaimed money collected by ASIC as at balance date. The methodology used to determine the value of probable claims is determined by an independent actuary. Successful claims are paid out of the provision account.

2.2 Administered - income

Accounting Policy

All administered revenues are revenues relating to the course of ordinary activities performed by ASIC on behalf of the Government.

Administered revenue is generated fromfeesandfinesunderthe following legislation:

âº Corporations (Fees) Act 2001

âº Corporations (Review Fees) Act 2003,

âº National Consumer Credit Protection (Fees) Regulation 2010,

âº Business Names Registration (Fees) Regulation 2012 and

âº Superannuation Industry (Supervision) Act 1993.

Administered fee revenue is recognised on an accruals basis when:

âº the client or the client group can be identifiedinareliablemanner;

âº an amount of prescribed fee or other statutory charge is payable by the client or client group under legislative provisions; and

âº the amount of the prescribed fee or other statutory charge payable by the client or the client group can be reliably measured.

Administered taxation revenue is recognised at its nominal amount due and an expense is recognised for impaired debts.

ASIC Annual Report 2018-19 180

2019 $’000

2018 $’000

Non-taxation revenue

2.2A: Fees and fines

Fines 134,579 155,196

Searches and information brokers fees 64,475 63,827

Total fees and fines 199,054 219,023

2.2B: Unclaimed monies lodgements

Corporations Act 2001 unclaimed monies 50,665 63,652

Banking Act 1959 unclaimed monies 12,902 6,513

Life Insurance Act 1995 unclaimed monies 7,295 18,312

Total unclaimed monies 70,862 88,477

Accounting Policy

ASIC undertakes the collection of certain levies on behalf of the Government. These comprise of:

âº the ASIC Supervisory Cost Recovery Levy Act 2017;

âº the ASIC Supervisory Cost Recovery Levy (Collection) Act 2017;

âº the ASIC Supervisory Cost Recovery Levy (Consequential Amendments) Act 2017;

âº the ASIC Supervisory Cost Recovery Levy Regulations 2017; and

âº the ASIC Supervisory Cost Recovery Levy (Consequential Amendments) Regulations 2017.

ASIC also receives non-taxation revenue fromsearchfees,fines-including latefees,courtfines,penaltiesand infringement notices - and from unclaimed monies received under the Banking Act 1959, Life Insurance Act 1995 and Corporations Act 2001. This revenue is not available to ASIC and is transferred to the OPA.

Administered revenue arising from levies is recognised on an accrual basis.

The collectability of debts is reviewed at balance date. Provisions are made when collection of the debt is judged to be less, rather than more, likely.

Financial Statements 181

Note 3: Departmental financialposition

This section analyses ASIC’s assets used to conduct its operations and the operating liabilities incurred as a result. Employee related information is disclosed in the People and Relationships section.

3.1 Financial assets

2019 $’000

2018 $’000

3.1A: Cash and cash equivalents

Cash in special accounts 62,954 59,135

Cash on hand 2,267 3,568

Total cash and cash equivalents 65,221 62,703

Cash in special accounts does not include amounts held in trust. ($12.196m in 2019 and $4.908m in 2018).

3.1B: Trade and other receivables

Goods and services receivables:

Goods and services 5,179 1,551

Total goods and services receivables (gross) 5,179 1,551

Less impairment allowance (602) (616)

Total goods and services receivables (net) 4,577 935

Appropriations receivables:

Appropriations receivable 126,040 117,407

Total appropriations receivable 126,040 117,407

Other receivables:

GSTreceivablefromtheAustralianTaxationOffice 4,541 4,088

Total other receivables 4,541 4,088

Total trade and other receivables (net) 135,158 122,430

Trade and other receivables are expected to be recovered:

No more than 12 months 135,158 122,430

Credit terms for goods and services were within 30 days (2018: 30 days)

ASIC Annual Report 2018-19 182

2019 $’000

2018 $’000

Reconciliation of the movement in the impairment allowance account

As at 1 July 616 1,051

Amounts recovered and reversed (510) (1,294)

Increase recognised in net cost of services 496 859

Total as at 30 June 602 616

Accounting Policy

Receivables

Tradereceivablesandotherreceivablesareclassifiedas‘loansandreceivables’and recorded at face value less any impairment. Trade receivables are recognised where ASIC becomes party to a contract and has a legal right to receive cash. Trade receivables are derecognised on payment.

Financial assets are assessed for impairment at the end of each reporting period. Allowances are made when collectability of the debt is no longer probable.

3.2 Non-financial assets

3.2A: Reconciliation of the opening and closing balances of leasehold improvements, plant & equipment and intangibles

Leasehold improvements $’000

Plant & equipment $’000

Computer software $’000 Total

$’000

As at 1 July 2018

Gross book value 91,079 58,939 344,598 494,616

Accumulated depreciation/amortisation and impairment (65,022) (36,837) (254,153) (356,012)

Total as at 1 July 2018 26,057 22,102 90,445 138,604

Additions:

by purchase 3,366 5,378 2,079 10,823

internally developed - - 27,855 27,855

Total additions 3,366 5,378 29,934 38,678

Revaluations and impairments recognised in operating result 3,804 1,559 - 5,363

Depreciation/amortisation expense (4,425) (8,173) (33,524) (46,122)

Write-offsrecognisedintheoperatingresult - (205) - (205)

Total as at 30 June 2019 28,802 20,661 86,855 136,318

Financial Statements 183

Leasehold improvements $’000

Plant & equipment $’000

Computer software $’000 Total

$’000

Total as at 30 June 2019 represented by:

Gross book value 94,213 65,616 374,532 534,361

Accumulated depreciation/amortisation and impairment (65,411) (44,955) (287,677) (398,043)

Total as at 30 June 2019 28,802 20,661 86,855 136,318

The carrying value of leasehold improvements, plant & equipment and computer Hardware was reviewed at 30 June 2019. No indicators of impairment were found.

Accounting Policy Assets are recorded at cost of acquisition, except where stated below.

The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.

Asset Recognition Threshold

Purchases of leasehold improvements, plant and equipment are initially recognised at cost in the Statement of Financial Position, except for purchases costing less than $2,000, which are expensed in the year of acquisition (other than where they form part of agroupofsimilaritemswhicharesignificantintotal).

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to ‘make good’ provisions taken up by ASIC where there exists an obligation to restore the premises to their original condition at the conclusion of the lease. These costs are included in the value of ASIC’s property expenses with a corresponding provision for the ‘make good’ recognised.

Revaluations

Following initial recognition at cost, leasehold improvements, plant and equipment were carried at latest revaluation less accumulated depreciation and accumulated impairment losses.Valuationsareconductedwithsufficientfrequencytoensurethatthecarrying amounts of assets did not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depended on the volatility of movements in market values for the relevant assets. An independent valuation of ASIC’s assets was undertaken as at 30 June 2019.

ASIC Annual Report 2018-19 184

Accounting Policy (continued)

Revaluation adjustments are made on a class basis. Any revaluation increment was credited to equity under the heading of asset revaluation reserve except to the extent that it reversed a previous revaluation decrement of the same asset class that was previouslyrecognisedinthesurplus/deficit.Revaluationdecrementsforaclassofassets arerecogniseddirectlyinthesurplus/deficitexcepttotheextentthattheyreverseda previous revaluation increment for that class.

Any accumulated depreciation as at the revaluation date was eliminated against the gross carrying amount of the asset and the asset was restated to the revalued amount.

Depreciation

All depreciable leasehold improvements, plant and equipment assets are written down to their estimated residual values over their estimated useful lives to ASIC, using the straight-line method of depreciation.

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.

Depreciation rates applying to each class of depreciable asset are based on the following useful lives:

2019 2018

Leasehold improvements Residual lease term Residual lease term

Plant and equipment 2 to 80 years 2 to 80 years

Financial Statements 185

Accounting Policy

Impairment

Allassetswereassessedforimpairmentasat30June2019.Whereindicationsof impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

The recoverable amount of an asset is the higher of its fair value less costs of disposal and its valueinuse.Valueinuseisthepresentvalueofthefuturecashflowsexpectedtobederived fromtheasset.Wherethefutureeconomicbenefitofanassetisnotprimarilydependenton theasset’sabilitytogeneratefuturecashflows,andtheassetwouldbereplacediftheentity were deprived of the asset, its value in use is taken to be its current replacement cost.

Derecognition

An item of property, plant and equipment is derecognised upon disposal or when no furtherfutureeconomicbenefitsareexpectedfromitsuseordisposal.

Intangibles

ASIC’s intangibles comprise software either purchased or internally developed for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Software is amortised on a straight-line basis over its anticipated useful life. The useful life of ASIC’s hardware is 2 to 10 years (2018: 2 to 10 years).

All software assets were assessed for indications of impairment as at 30 June 2019.

Significant accounting judgements and estimates

In the process of applying the accounting policies listed in this note, ASIC has made assumptionsorestimatesinthefollowingareasthathavethemostsignificantimpacton theamountsrecordedinthefinancialstatements:

âº The fair value of leasehold improvements and property, plant and equipment is assessed at market value or current replacement cost as determined by an independent valuer and is subject to management assessment between formal valuations.

3.3 Payables

Note

2019 $’000

2018 $’000

3.3A: Suppliers

Trade creditors and accruals 7.2A 41,832 32,723

Operating lease rent payable 7,789 9,762

Total suppliers 49,621 42,485

Supplier payables are settled per the terms of the purchase order or contract and are expected to be settled within 12 months.

ASIC Annual Report 2018-19 186

2019 $’000

2018 $’000

3.3B: Other payables

Other unearned revenue 9,199 7,176

Property lease incentives1 17,818 19,335

Salaries and bonuses 12,384 12,335

Separations and redundancies 505 1,674

Other 207 20

Total other payables 40,113 40,540

1 Lease incentives are amortised over the lease term.

3.4 Other provisions

Provision for restructuring $’000

Provision for restoration costs $’000

Provision for settlement costs $’000

Total Other Provisions $’000

As at 1 July 2018 1,142 8,873 4,670 14,685

Additions - - 7,150 7,150

Amounts reversed (353) (1,426) (2,000) (3,779)

Amortisation of restoration provision discount - 224 - 224

Total as at 30 June 2019 789 7,671 9,820 18,280

Accounting Policy

Restoration costs

ASIC currently has seven lease agreements (2018: seven) for the leasing of premises which have provisions requiring ASIC to restore the premises to their original condition attheconclusionofthelease.Theprovisionreflectsthecurrentbestestimateofthese futurerestorationcostsdiscountedtoreflectthepresentvalueofthefuturepayments.

Settlement costs

ASIC recognises a provision for the estimated costs that will be paid on settlement of current legal proceedings based on past history of settlement costs.

The accounting policy for the provision for restructuring is contained in Note 6 People and relationships.

Financial Statements 187

Note 4: Assets and liabilities administered on behalf of the Government

This section analyses assets used to conduct operations and the operating liabilities incurred as a result of activities that ASIC does not control but administers on behalf oftheGovernment.Unlessotherwisenoted,theaccountingpoliciesadoptedare consistent with those applied for departmental reporting.

4.1 Administered - financial assets

2019 $’000

2018 $’000

4.1A: Taxation receivables

Feesandfinesreceivable 220,744 206,689

Total taxation receivables (gross) 220,744 206,689

Less impairment loss allowance

Feesandfines 77,594 69,602

Total taxation receivables (net) 143,150 137,087

Taxation receivables are due from entities that are not part of the Australian Government.

Credit terms for goods and services were within 30 days (2018: 30 days)

4.1B: Trade and other receivables

Information brokers’ fees 8,463 6,241

GST receivable 137 183

Total trade and other receivables (gross) 8,600 6,424

ASIC Annual Report 2018-19 188

Accounting Policy

Receivables

Administered receivables are recognised at their nominal value less an impairment allowance. The Finance Minister has determined that statutory receivables are not financialinstrumentsandaccordinglyASIChasassessedadministeredreceivablesfor impairment under AASB 136 Impairment of Assets (FRR 26.3).

The impairment allowance is raised against receivables for any doubtful debts and any probable credit amendments, and is based on a review of outstanding debts at balance date. This includes an examination of individual large debts and disputed amounts with reference to historic collection patterns.

The impairment allowance expense is calculated using estimation techniques to determine an estimate of current receivables which are unlikely to be collected in the future.

Administered receivables that are irrecoverable at law or are uneconomic to pursue are written off under s63 of the PGPA Act.

4.2 Administered - payables

2019 $’000

2018 $’000

4.2A: Suppliers and other payables

Supplier payables 233 191

Refund of fees payable 16,669 15,295

Unallocatedmonies 7,008 6,634

Grants payable1 1,023 1,290

Other non-current payables2 6,774 6,462

Total payables 31,707 29,872

All payables are for entities that are not part of the Australian Government.

All payables, with the exception of Other non-current payables, are expected to be settled within 12 months. Settlement is usually made within 30 days.

1 Settlement is made according to the terms and conditions of each grant. This is usually within 30 days of performance and eligibility.

2 Other non-current payables are over payments of fees where payments are made to ASIC in error. The settlementperiodisexpectedtobegreaterthan12monthsastheseareunidentifiedpayments.

Financial Statements 189

2019 $’000

2018 $’000

4.2B: Unclaimed monies provisions

Corporations Act 2001 claims 197,957 192,054

Banking Act 1959 claims 123,229 130,233

Life Insurance Act 1995 claims 26,604 26,649

Total other provisions 347,790 348,936

Accounting Policy

Provisions

The provisions recognised in the Administered Schedule of Assets and Liabilities are for estimated claims payable from collections of unclaimed monies administered by ASIC as at balance date. ASIC adopted a provision for future claims based on an independent valuation calculated by a registered actuary, under AASB 137 Provisions, Contingent Liabilities and Contingent Assets.

Significant accounting judgements and estimates

The provision has been estimated taking into account the historic claims pattern experiencedsince2002andtheoutstandinglodgements.Theestimatereflectsthe volatility of unclaimed monies lodgements and claims from year to year, which is impacted by factors including economic events, legislative change, media exposure andthebehaviourofclaimants,eachofwhichhasdifferedsignificantlyfromyeartoyear andovertime.Theestimatedfutureflowofrefundsovertimehasbeendiscountedto present value at a risk-free rate of interest based on government bond rates with similar terms to the expected refunds. Allowance has been made for payment of compounding interest for all claims from 1 July 2013 on unclaimed balances in accordance with actual legislated interest rates and estimated future interest rates based on economist expectationsforinflationinthemediumtolongerterm,notinglegislatedinterestrates are linked to movements in the CPI.

ASIC Annual Report 2018-19 190

Note 5: Funding

ThissectionidentifiesASIC’sfundingstructure.

5.1 Appropriations

5.1A: Annual appropriations (‘recoverable GST exclusive’)

Annual appropriations for2019

Annual

appropriation $’000

Adjustments to appropriation1 $’000

Total

appropriation $’000

Appropriation applied in 2019 (current and prior years)

$’000 Variance2 $’000

Departmental

Ordinary annual services 374,313 12,032 386,345 400,204 (13,859)

Capital Budget 24,345 - 24,345 25,958 (1,613)

Other Services

Equity Injections 7,294 - 7,294 13,069 (5,775)

Total Departmental 405,952 12,032 417,984 439,231 (21,247)

Administered

Ordinary annual services 19,683 - 19,683 14,905 4,778

Total Administered 19,683 - 19,683 14,905 4,778

1 Section 74 receipts.

2 The variance in the departmental expenses is due to accrued expenses from the prior year being drawn down in the current year from operating and equity funding, as well as unspent appropriation from departmental capital budget.

Accounting Policy

Equity Injections

Amounts appropriated which are designated as ‘equity injections’ for a year (less any formal reductions) and Departmental Capital Budgets (DCB) are recognised directly in contributed equity in that year.

Financial Statements 191

Annual appropriations for2018

Annual

appropriation1 $’000

Adjustments to appropriation2 $’000

Total

appropriation $’000

Appropriation applied in 2018 (current and prior years)

$’000 Variance $’000

Departmental

Ordinary annual services 348,041 47,827 395,868 364,885 30,983

Capital Budget 20,868 - 20,868 14,236 6,632

Other Services

Equity Injections 22,185 - 22,185 27,777 (5,592)

Total Departmental 391,094 47,827 438,921 406,898 32,023

Administered

Ordinary annual services 7,302 - 7,302 5,439 1,863

Total Administered 7,302 - 7,302 5,439 1,863

1 Determination under section 51 of the PGPA Act. Appropriation Act (No. 1) DCB 2017-2018 reduced by $3.604m.

2 Section 74 receipts

ASIC Annual Report 2018-19 192

2019 $’000

2018 $’000

5.1B: Unspent annual appropriations (‘recoverable GST exclusive’)

Departmental

Appropriation Act (No. 1) 2016-2017 1 3,922 3,922

Supply Act (No. 2) 2016-2017 - 229

Appropriation Act (No. 2) 2016-2017 - 3,634

Appropriation Act (No. 1) 2017-2018 - 97,146

Appropriation Act (No. 1) DCB 2017-2018 2 3,604 11,375

Appropriation Act (No. 2) 2017-2018 1,951 4,376

Appropriation Act (No. 3) 2017-2018 - 7,818

Appropriation Act (No. 1) 2018-2019 75,767 -

Appropriation Act (No. 1) DCB 2018-2019 6,158 -

Appropriation Act (No. 3) 2018-2019 31,885 -

Appropriation Act (No. 2) 2018-2019 21 -

Appropriation Act (No. 4) 2018-2019 492 -

Enforcement Special Account 62,954 59,135

Total departmental 186,754 187,635

Unspentdepartmentalappropriationsincludecashbalancesof$2.267m(2018:$4.135m).

1 Includes $3.922m quarantined under section 51 of the PGPA Act. The balance of this appropriation is not available beyond 30 June 2019, following the repeal of Appropriation Act (No.1) 2016-2017 on 1 July 2019.

2 Includes $3.604m quarantined under section 51 of the PGPA Act.

2019 $’000

2018 $’000

Administered

Appropriation Act (No. 1) 2017-2018 1,473 3,810

Appropriation Act (No. 1) 2018-2019 6,032 -

Appropriation Act (No. 3) 2018-2019 1,045 -

Total administered 8,550 3,810

Unspentadministeredappropriationsincludecashbalancesof$0.564m(2018:$0.465m). Comparatives have changed as closing cash at bank was not previously included.

Financial Statements 193

5.1C: Special appropriations (‘recoverable GST exclusive’) Appropriation applied

Authority Type Purpose

2019 $’000 2018 $’000

s69 Banking Act 1959, Administered Unlimited ASIC has responsibility for the administration of unclaimed

monies from banking and deposit taking institutions. ASIC receives special appropriations from the OPA (section 69 Banking Act 1959) to refund amounts to banking and deposit taking institution account holders. 16,535 28,109

s216 Life Insurance Act 1995, Administered Unlimited ASIC has responsibility for the administration of unclaimed

monies from life insurance institutions and friendly societies. ASIC receives special appropriations from the OPA (section 216 Life Insurance Act 1995 ) to refund amounts to life insurance policy holders. 4,081 3,609

s77 PGPA Act, Corporations Act 2001, National Consumer Credit Protection Act 2009, Business Names Registration (Fees) Regulations 2010 and Superannuation Industry (Supervision) Act 1993. (Refunds of overpaid Corporations Act fees and charges), Administered

Unlimited ASIC has responsibility for the administration and collection of Corporations Act fees and charges. All fees and charges are deposited into the OPA as received. Refunds of overpayments are appropriated under section 77 of the PGPA Act.

4,150 4,040

s77 PGPA Act, Corporations Act 2001 (Refunds of unclaimed money held under s1341 Corporations Act 2001), Administered

Unlimited ASIC has responsibility for the administration of unclaimed monies under s1341 of the Corporations Act 2001.

32,955 34,971

Total 57,721 70,729

ASIC Annual Report 2018-19 194

5.2 Special Accounts

Enforcement Special Account

ASIC Trust and Other Moneys Special Account

2018

Deregistered Companies Trust Moneys Special

Account

Security

Deposits Special

Accounts

Investigations,

Legal

Proceedings, Settlements and Court Orders Special Account

2019

$’000

2018

$’000

2019

$’000

2018

$’000

2019

$’000

2018

$’000

2019

$’000

2018

$’000

2019

$’000

2018

$’000

Balance carried forward from previous year

59,135

33,064

4,908

3,504

467

Appropriation for the reporting period

36,217

26,279

51,556

327

791

Costs recovered

2,213

29,355

118

Available for payments

97,565

88,698

56,582

337

4,334

472

Cash payments from the Special Account

(34,611)

(29,563)

(44,386)

(21)

(225)

Adjustments

4,592

(4,109)

(472)

(11)

Balance carried forward to the next period

62,954

59,135

12,196

4,908

Balance represented by: Cash held in entity bank accounts

12,196

4,908

CashheldintheOfficialPublicAccount

62,954

59,135

62,954

59,135

12,196

4,908

Financial Statements 195

1 Appropriation: s78 Public Governance, Performance and Accountability Act 2013. Establishing Instrument: s78 Public Governance, Performance and Accountability Act 2013. Purpose: the Enforcement Special Account (ESA) is a departmental special account which was established by a determination of the Finance Minister on 23August2016tofundthecostsofASICarisingfromtheinvestigationandlitigationofmattersofsignificant public interest.

2 Appropriation: s78 Public Governance, Performance and Accountability Act 2013. Establishing Instrument: s78 Public Governance, Performance and Accountability Act 2013. Purpose: the ASIC Trust and Other Moneys Special Account was established by a determination of the Finance Minister on 31 March 2018, to consolidate the three Special Accounts above, which expired due to the sunsetting provisions of the Legislations Act 2003.

3 Appropriation: s78 Public Governance, Performance and Accountability Act 2013. Establishing Instrument: s78 Public Governance, Performance and Accountability Act 2013. Purpose: the Deregistered Companies Trust Moneys Special Account was established by the Finance Minister on 18 February 2008 to manage property vesting in the Commonwealth as a result of the deregistration provisions of the Corporations Act 2001. This special account expired on 31 March 2018 due to the sunsetting provisions of the Legislations Act 2003.

4 Appropriation: s78 Public Governance, Performance and Accountability Act 2013. Establishing Instrument: s78 Public Governance, Performance and Accountability Act 2013. Purpose: the ASIC Security Deposits Special Account was established by a determination of the Finance Minister on 18 February 2008 to manage security deposits lodged with ASIC by registered liquidators, licensed securities dealers, licensed investment advisers andfinancialserviceslicensees.Thisspecialaccountexpiredon31March2018duetothesunsettingprovisions of the Legislations Act 2003.

5 Appropriation: s78 Public Governance, Performance and Accountability Act 2013. Establishing Instrument: s78 Public Governance, Performance and Accountability Act 2013. Purpose: the ASIC Investigations, Legal Proceedings, Settlements and Court Orders Special Account was established by a determination of the Finance Ministeron18February2008tomanagemoneyorotherpropertytemporarilyheldbyASICforthebenefitof a person other than the Commonwealth as a result of investigations conducted by ASIC, legal proceedings to which ASIC is a party, deeds of settlement to which ASIC is a party, enforceable undertakings accepted by ASIC and court orders referring to ASIC. This special account expired on 31 March 2018 due to the sunsetting provisions of the Legislations Act 2003.

ASIC also has a Services for Other Entities and Trust Moneys Special Account - Australian Securities and Investments Commission (SOETM). This account was established under s78 Public Governance, Performance and Accountability Act 2013. The SOETM combines the purposes of the Other Trust Moneys and the Services for other Government and Non-agency Bodies special accounts into a single standard-purpose Special Account. The SOETM enables ASIC to continue to hold and expend amounts on behalf of persons or entities other than the Commonwealth. The SOETM will typically be used to accommodate small amounts of miscellaneous monies, for example, amounts received in connection with services performed for or on behalf of any persons or entities that are not agencies as prescribed under the PGPA Act, such as other governments. For the year ended 30 June 2019, the account had a nil balance and there were no transactions debited or credited to it during the current or prior reporting period.

ASIC Annual Report 2018-19 196

5.3 Regulatory charging summary

2019 $’000

2018 $’000

Amounts applied

Departmental

Appropriation applied 286,961 247,372

Total amounts applied 286,961 247,372

Expenses

Departmental 286,961 247,372

Total expenses 286,961 247,372

External Revenue

Administered

Fees for services 13,600 -

ASIC Supervisory Cost Recovery Levy 273,361 247,372

Total external revenue 286,961 247,372

Regulatory charging activities

On 20 April 2016, the Australian Government announced it would introduce an industry funding modelforASIC.UndertheindustryfundingmodelASIC’sregulatorycostswillberecovered from the industry sectors we regulate, through a combination of:

a) general industry levies (cost recovery levies);

b) statutory industry levies; and

c) cost recovery fees (fees for service), for user-initiated, transaction-based activities where we provideaspecificservicetoindividualentities.

ASIC’s costs associated with regulatory activities will be recovered from industry as outlined in ASIC’s Cost Recovery Implementation Statement. Activities include:

âº stakeholder engagement âº education âº guidance âº surveillance

âº enforcement âº policy advice.

The cost recovery implementation statement for the above activities is available at:

https://download.asic.gov.au/media/5169042/ cris-asic-industry-funding-model-2018-19-published-27-june-2019.pdf

Financial Statements 197

5.4 Net cash appropriation arrangements

2019 $’000

2018 $’000

Total comprehensive income/(loss) less depreciation/ amortisation expenses previously funded through revenue appropriations 6,108 29,809

Plus: depreciation/amortisation expenses previously funded through revenue appropriation (46,122) (40,709)

Total comprehensive (loss) - as per the Statement of Comprehensive Income (40,014) (10,900)

Note 6: People and relationships

Thissectiondescribesarangeofemploymentandpost-employmentbenefitsprovided to our people and our relationships with other key people.

6.1 Employee provisions

2019 $’000

2018 $’000

6.1A: Employee provisions

Annual leave entitlement 22,127 21,203

Long service leave entitlement 49,986 41,278

Restructuring provision 1,712 3,822

Redundancy provision 2,192 2,152

Total employee provisions 76,017 68,455

ASIC Annual Report 2018-19 198

Accounting Policy Liabilitiesfor‘short-termemployeebenefits’(asdefinedinAASB119 Employee Benefits ) andterminationbenefitsexpectedwithin12monthsoftheendofthereportingperiod are measured at their nominal amounts.

Otherlongtermemployeebenefitsaremeasuredasnettotalofthepresentvalueofthe definedbenefitobligationsattheendofthereportingperiodminusthefairvalueatthe reporting period of plan assets (if any) of which the obligations are to be settled directly.

Leave

Theliabilityforemployeebenefitsincludesprovisionforannualleaveandlongservice leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of ASIC is estimated to be less than the annual entitlement for sick leave.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time leave is taken, including ASIC’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has been determined by reference to the work of an independent actuary dated 18 December 2018. Actuarial reviews of long service leave areundertakenatleasteveryfiveyears.Theestimateofthepresentvalueoftheliability takesintoaccountattritionratesandpayincreasesthroughpromotionandinflation.

Superannuation

ASIC employees are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS Accumulation Plan (PSSap) or other superannuation funds held outside the Australian Government.

TheCSSandPSSaredefined-benefitschemesoftheAustralianGovernment.ThePSSap isadefined-contributionscheme.

Theliabilityfordefinedbenefitsisrecognisedinthefinancialstatementsofthe Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance’s administered schedule and notes.

ASICmakesemployercontributionstoitsemployees’defined-benefitsuperannuation schemesatratesdeterminedbyanactuarytobesufficienttomeetthecurrentcostto the Government, and ASIC accounts for the contributions as if they were contributions todefinedcontributionplans.

The liability for superannuation recognised as at 30 June represents outstanding contributions.

Separation and redundancy

Provisionismadeforseparationandredundancybenefitpayments.ASICrecognisesa provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Financial Statements 199

Accounting Policy continued

Restructuring

ASIC recognises a provision for restructuring when the Government has announced a funding measure which will result in a future reduction in functions, resources and staff and the costs associated with these future reductions can be reliably estimated.

Significant accounting judgement and estimates

âº Leave provisions involve assumptions based on the expected tenure of existing staff, patterns of leave claims and payouts, future salary movements and future discount rate.

6.2 Key management personnel remuneration Key management personnel (KMP) are those persons having authority and responsibility for planning, directing and controlling the activities of ASIC, directly or indirectly. ASIC has determined the key management personnel to be members of the Commission, the Portfolio Minister and Minister for Revenue and Financial Services and other Australian Government entities and ASIC Executive Directors. Key management personnel remuneration is reported in the table below:

2019 $’000

2018 $’000

Short-termemployeebenefits 6,558 3,902

Post-employmentbenefits 622 437

Otherlong-termbenefits 150 406

Total key management personnel remuneration expenses1 7,330 4,745

The total number of key management personnel who are included in the above table is 22 (2018: 13).Duringthefinancialyear,anoverpaymenttoaformerKMPtotalling$1,672wasidentified. This payment is a recoverable payment under s16A(1) of the Remuneration Tribunal Act 1973 and is repayable to the Commonwealth.

1 Theabovekeymanagementpersonnelremunerationexcludestheremunerationandotherbenefitsofthe PortfolioMinister.ThePortfolioMinister’sremunerationandotherbenefitsaresetbytheRemunerationTribunal and are not paid by ASIC.

ASIC Annual Report 2018-19 200

6.3 Related party disclosures

Related party relationships

ASIC is an Australian Government controlled entity. Related parties to ASIC are Key Management Personnel including the Commission members and ASIC Executive Directors that have the responsibilities for planning, directing, and controlling ASIC’s resources.

Transactions with related parties

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. Such transactions include the payment or refund of taxes, receipt of a Medicare rebate or higher education loans. These transactions have not been separately disclosed in this note.

ASIC transacts with other Australian Government controlled entities consistent with normal day-to-day business operations provided under normal terms and conditions, including the paymentofworkerscompensationandinsurancepremiums,sub-leasingofofficespaceand paymentofsuperannuationcontributions.Thesearenotconsideredindividuallysignificantto warrant separate disclosure as related party transactions.

DuringthefinancialyearASICenteredintotransactionswithaKMPforrelocationpurposes totalling $86,208.

Note 7: Managing uncertainties

ThissectiondescribeshowASICmanagesfinancialriskswithinitsoperatingenvironment.

7.1 Contingent assets and liabilities

2019 $’000

2018 $’000

7.1A: Departmental contingent liabilities and assets

Contingent assets

Claims for costs

Balance from previous period 6,239 2,881

Adjustments to prior period contingent receivables:

Assets relinquished (2,914) (487)

Revisions to estimates 2,064 (1,000)

New contingent receivables 4,249 4,845

Total contingent assets 9,638 6,239

Net contingent assets 9,638 6,239

Financial Statements 201

Quantifiable contingencies (ASIC Departmental)

The above contains 20 matters (2018: 12 matters) of contingent assets disclosed in respect to matters which ASIC has received an award of costs in its favour, however agreement with respect to the quantum payable to ASIC has not been reached. ASIC has estimated these matters represent a combined receivable of $9.638m (2018: $6.239m), which is disclosed as a contingent asset because realisation of this debt is not virtually certain.

Unquantifiable contingencies (ASIC Departmental)

ASIC is party to many civil litigation matters arising out of its statutory duty to administer and enforce laws for which it is responsible.

Like any corporate body, ASIC may from time to time be the subject of legal proceedings for damages brought against it or may receive notice indicating that such proceedings may be brought. In either case ASIC, like any other party to civil litigation, may be required to pay the other party’s costs if ASIC is unsuccessful. In accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets, ASIC has not disclosed the value of these matters on the grounds that it may seriously prejudice the outcome of these cases.

As at the date of this report there are civil matters that may result in an award of costs in favour or against ASIC.

Civil litigation brought, or threatened to be brought, against ASIC as a defendant

There is, at the date of this report, four matters of this type where proceedings are current. In this matter, ASIC denies liability and is of the view that, save for having to pay legal fees and other out-of- pocket expenses, it is likely that ASIC will:

âº successfully defend the actions instituted; and âº not be required to pay any damages.

Conversely, ASIC, like any other party to civil litigation, may be entitled to recover costs arising outofsuchlitigationifitissuccessful.Inadditiontothemattersspecificallyreferredtoin this note, ASIC has legal action pending in a number of other matters, however, due to the uncertainty over the outcome of outstanding and pending court cases, duration of court cases and the legal costs of the opposing party, ASIC is unable to reliably estimate either its potential payments to, or potential cost recoveries from, opposing litigants. There may also be other matters where ASIC has received an award of costs in its favour, however no contingent asset has been disclosed as recovery of the debt is not probable. There may also be other matters wherenocontingencyhasbeenquantifiedbecausethecostsawardedfororagainstASICare estimated to be less than $20,000 each.

Accounting Policy Contingent liabilities and contingent assets are not recognised in the Statement of Financial Position but are reported in this note. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.

Significant accounting judgements and estimates

Noaccountingassumptionsorestimateshavebeenidentifiedthathaveasignificantrisk of causing a material adjustment to carrying amounts of assets and liabilities within the next reporting period.

ASIC Annual Report 2018-19 202

Quantifiable administered contingencies - Banking Act, Life Insurance Act and Corporations Act administration An actuarial assessment of the number of claims that are likely to be lodged with ASIC in respect to unclaimed monies was conducted by a registered actuary. ASIC adopted the registered actuary’s calculation for the likely claims payable, excluding interest and reported in Note 4.2B.

The contingent liability represents an estimate of the principal unclaimed monies that have been lodged with ASIC but where the likelihood of a successful claim is regarded as remote. No allowance has been made for the compounding interest, which is payable for a successful claim lodged from 1 July 2013 in accordance with legislated interest rates. The contingent liability has been calculated by deducting from the total principal balance, excluding interest, of unclaimed monies lodged but not yet claimed, the undiscounted amount of the provision for future refunds excluding any interest:

Banking Act 1959 $475.864m (2018: $463.273m) Life Insurance Act 1995 $73.882m (2018: $69.098m) Corporations Act 2001 $345.075m (2018: $318.626m)

Unquantifiable administered contingencies Therearenounquantifiableadministeredcontingentliabilities.

Accounting Policy Administered contingent liabilities represent a repayment estimate of unclaimed monies that are considered remote. There are no administered contingent assets as at 30 June 2019 (2018: nil).

Financial Statements 203

7.2 Financial instruments

Notes

2019 $’000

2018 $’000

7.2A: Categories of financial instruments

Financial assets under AASB 139

Loans and receivables:

Cash and cash equivalents1 3.1A 3,568

Trade receivables 3.1B 935

Total financial assets at amortised cost 4,503

Financial assets under AASB 9

Financial assets at amortised cost

Loans and receivables:

Cash and cash equivalents1 3.1A 2,267

Trade receivables 3.1B 4,577

Total financial assets at amortised cost 6,844

Total financial assets 6,844 4,503

Financial liabilities

Financial liabilities at amortised cost

Trade creditors 3.3A 41,832 32,723

Total financial liabilities at amortised cost 41,832 32,723

1 Cash and cash equivalents is cash on hand only and is recognised at its nominal amount.

ASIC Annual Report 2018-19 204

Accounting Policy

Financial assets

WiththeimplementationofAASB 9 Financial Instrumentsforthefirsttimein2019,ASIC classifiesitsfinancialassetsinthefollowingcategory:

âº Cash and cash equivalents are measured at nominal amounts. âº Trade receivables are measured at amortised cost

TheclassificationdependsonbothASIC’sbusinessmodelformanagingthefinancial assetsandcontractualcashflowcharacteristicsatthetimeofinitialrecognition. Financial assets are recognised when the entity becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash and derecognisedwhenthecontractualrightstothecashflowsfromthefinancialasset expire or are transferred upon trade date.

Comparatives have not been impacted by the application of AASB 9.

Financial assets at amortised cost

Financial assets included in this category need to meet two criteria:

1. thefinancialassetisheldinordertocollectthecontractualcashflows;and

2. thecashflowsaresolelypaymentsofprincipalandinterest(SPPI)ontheprincipal outstanding amount.

Amortised cost is determined using the effective interest method.

Effective interest method

Incomeisrecognisedonaneffectiveinterestratebasisforfinancialassetsthatare recognised at amortised cost.

Impairment of financial assets

Financial assets are assessed for impairment at the end of each reporting period based onthesimplifiedapproach.

Thesimplifiedapproachfortradedebtorsisused.Thisapproachalwaysmeasuresthe loss allowance as the amount equal to the lifetime expected credit losses.

A write-off constitutes a derecognition event where the write-off directly reduces the grosscarryingamountofthefinancialasset.

Financial liabilities at amortised cost

Supplier payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

Accounting judgement and estimates

Noaccountingassumptionsorestimateshavebeenidentifiedthathaveasignificantrisk ofcausingamaterialadjustmenttocarryingamountsoffinancialassetsandliabilities within the next reporting period.

TheapplicationofAASB9hashadnoimpactontheclassificationorcarryingamountof Trade receivables.

Financial Statements 205

2019 $’000

2018 $’000

7.2B: Net gains or losses on financial assets

Financial assets at amortised cost

Impairment 589 859

Net gain/(loss) on financial assets at amortised cost 589 859

7.3 Administered - financial instruments

Notes

2019 $’000

2018 $’000

7.3A: Categories of financial instruments

Financial assets under AASB 139

Cash and cash equivalents1 1,641

Trade receivables 4.1B 6,241

Total financial assets at amortised costs 7,882

Financial assets under AASB 9

Financial assets at amortised cost

Loans and receivables:

Cash and cash equivalents1 1,859

Trade receivables 4.1B 8,600

Total financial assets at amortised cost 10,459

Total financial assets 10,459 7,882

Financial liabilities

Financial liabilities at amortised cost

Grants payable 4.2A 1,023 1,290

Suppliers payables 4.2A 233 191

Total financial liabilities at amortised cost 1,256 1,481

1 Cash and cash equivalents is cash on hand only and is recognised at its nominal amount.

TheapplicationofAASB9hashadnoimpactontheclassificationorcarryingamountof Administered trade receivables or liabilities.

ASIC Annual Report 2018-19 206

7.4 Fair value measurement

Accounting Policy ASIC deems transfers between levels of the fair value hierarchy to have occurred at the end of the reporting period. See Note 3.2A for further details on ASIC’s valuation policy and procedures.

Fair value measurements at the end of the reporting period

2019 $’000

2018 $’000

Non-financial assets:

Leasehold improvements 28,802 26,057

Plant and equipment 20,661 22,102

Total non-financial assets 49,463 48,159

ASICdidnotmeasureanynon-financialassetsatfairvalueonanon-recurringbasisasat 30 June 2019.

Note 8: Other information

8.1 Aggregate assets and liabilities

2019 $’000

2018 $’000

8.1A: Aggregate assets and liabilities

Assets expected to be recovered in:

No more than 12 months 210,756 199,067

More than 12 months 136,318 138,604

Total assets 347,074 337,671

Liabilities expected to be settled in:

No more than 12 months 101,460 89,651

More than 12 months 82,571 76,603

Total liabilities 184,031 166,253

Financial Statements 207

2019 $’000

2018 $’000

8.1B: Administered - aggregate assets and liabilities

Assets expected to be recovered in:

No more than 12 months 434,188 379,877

More than 12 months - -

Total assets 434,188 379,877

Liabilities expected to be settled in:

No more than 12 months 372,723 372,346

More than 12 months 6,774 6,462

Total liabilities 379,497 378,808

8.2 Expenditure relating to statutory boards and tribunal

Accounting Policy Pursuant to Parts 11 and 12 of the ASIC Act and the Superannuation (Resolution of Complaints) Act 1993, ASIC is required to support the Companies Auditors Disciplinary Board and the Superannuation Complaints Tribunal. Employee and administrative expenditure incurred on behalf of this board and the tribunal are included in the Statement of Comprehensive Income of ASIC.

2019 $’000

2018 $’000

Companies Auditors Disciplinary Board 427 525

Superannuation Complaints Tribunal 7,502 6,185

The Superannuation Complaints Tribunal (SCT) is an independent body with distinct responsibilities as set out under the Superannuation (Resolution of Complaints) Act 1993 and has operated under the budgetary umbrella of ASIC since 1 July 1998.

ASIC Annual Report 2018-19 208

8.3 Assets of deregistered companies vesting in ASIC Section 601AD of the Corporations Act 2001 provides that, on deregistration of a company, all of the company’s property vests in ASIC. In 2011-12, ASIC began taking a proactive approach to administering vested property and accounts for any proceeds on realisation of those assets in accordance with its statutory duties.

VestedassetsarenotavailabletoASICandarenotrecognisedinthefinancialstatements.

2019

Quantity

2018

Quantity

Class of asset

Land 638 521

Shares 117 76

Other 90 74

Closing balance 845 671

Land is comprised of real property as described on the relevant Land Titles Registry. Shares are comprised of parcels of shares in both private and publicly listed companies and include those parcels held by the company as trustee. Other assets include such property as intellectual property (e.g. trademarks) and mortgages.

8.4 Security deposits from dealers, investment advisers and liquidators The Corporations Act 2001 and the Corporations Regulations 2001 require applicants for a dealer’s or investment adviser’s licence, and applicants for registration as a liquidator, to lodge a security deposit with ASIC. These monies, deposits, stock, bonds or guarantees are not availabletoASICandarenotrecognisedinthefinancialstatements.

2019 $’000

2018 $’000

Security deposits under Corporations Regulations 2001 regulation 7.6.02AA (dealers and investment advisers)

Cash (at bank) 83 303

Inscribed stock 20 20

Bank guarantees 8,900 8,920

Closing balance 9,003 9,243

Security deposits under the Corporations Act 2001 s1284(1) (liquidators)

Insurance bond 1,800 1,800

Closing balance 1,800 1,800

Financial Statements 209

8.5 Budgetary reports and explanations of major variances

8.5A: Departmental Budgetary Reports

The following tables provide a comparison of the original budget as presented in the 2018-19PortfolioBudgetStatements(PBS)tothe2018-19finaloutcomeaspresentedin accordance with Australian Accounting Standards for ASIC. The budget is not audited. Explanations for variances greater than +/- 10% and greater than +/- $5m are provided.

Statement of Comprehensive Income

Actual

Original Budget Variance

2019 $’000

NET COST OF SERVICES

Expenses

Employeebenefits 227,035 234,677 (7,642)

Suppliers 157,468 112,416 45,052

Depreciation and amortisation 46,122 37,246 8,876

Finance costs - unwinding of restoration provision 224 504 (280)

Impairmentlossallowanceonfinancialinstruments- trade and other receivables 589 - 589

Write-downandimpairmentofassets 205 - 205

Total expenses 431,643 384,843 46,800

LESS:

Own-source revenue

Rendering of services 3,282 3,662 (380)

Operating sublease rent and property recoveries 2,460 2,700 (240)

Other revenue 5,701 2,160 3,541

Total own-source revenue 11,443 8,522 2,921

Gains

Reversal of write-downs and impairment 510 - 510

Total gains 510 - 510

Net Cost of Services 419,690 376,321 43,369

Total revenue from Government 374,313 342,428 31,885

Surplus/(Deficit) (45,377) (33,893) (11,484)

ASIC Annual Report 2018-19 210

Actual

Original Budget Variance

2019 $’000

OTHER COMPREHENSIVE INCOME

Items not subject to reclassification to net cost of services

Changes in asset revaluation reserve 5,363 - 5,363

Total comprehensive income/(loss) (40,014) (33,893) (6,121)

Explanations of major variances Affected line items

Expense

Supplier expenses were higher than budgeted due mainly to the additional revenue from Government received as part of the Mid-Year Economic and Fiscal Outlook (MYEFO) in December 2018 for new budget measures.

Suppliers

Depreciation and amortisation expenses were higher than budgeted due to accelerated depreciation associated with the capitalisation of a major computer software asset.

Depreciation and amortisation

Financial Statements 211

Statement of Financial Position

Actual

Original Budget Variance

2019 $’000

ASSETS

Financial assets

Cash and cash equivalents 65,221 37,199 28,022

Trade and other receivables 135,158 109,289 25,869

Total financial assets 200,379 146,488 53,891

Non-financial assets

Leasehold improvements 28,802 25,477 3,325

Plant and equipment 20,661 13,558 7,103

Computer software 86,855 98,824 (11,969)

Othernon-financial assets 10,377 16,573 (6,196)

Total non-financial assets 146,695 154,432 (7,737)

Total assets 347,074 300,920 46,154

LIABILITIES

Payables

Suppliers 49,621 45,571 4,050

Other payables 40,113 27,820 12,293

Total payables 89,734 73,391 16,343

Provisions

Employee provisions 76,017 70,417 5,600

Other provisions 18,280 11,227 7,053

Total provisions 94,297 81,644 12,653

Total liabilities 184,031 155,035 28,996

Net assets 163,043 145,885 17,158

EQUITY

Contributed equity 436,058 434,263 1,795

Reserves 22,500 17,137 5,363

Accumulateddeficits (295,515) (305,515) 10,000

Total equity 163,043 145,885 17,158

ASIC Annual Report 2018-19 212

Explanations of major variances Affected line items

Financial assets

The increase in cash and cash equivalents is mainly attributed to timing differences in funding received and expenditure incurred with respect to the Enforcement Special Account.

Cash and cash equivalents

The increase in trade and other receivables is mainly attributable to timing differences in revenue from Government received and associated expenditure incurred.

Trade and other receivables

Non-financial assets and Equity

Theincreaseinthesenon-financialassetsis attributable to a revaluation at the end of the year. ThisisalsoreflectedinanetincreasetotheAsset Revaluation Reserve and recognised in Other Comprehensive Income. Refer to Note 3.2A.

Leasehold improvements, Plant & equipment and Reserves

Refer to the variance explanation for depreciation and amortisation. Computer software

ThevariationinOthernon-financialassetsisduein part to a reduction in the number of prepayment arrangements in place. Additionally, most of the current prepayment arrangements pertain to 12-month contracts, which are fully amortised within thefinancialyear.

Othernon-financial assets

Payables

The variance is due to a higher level of remaining court costs received in advance (Other unearned income) in relation to Enforcement Special Account (ESA) matters.

Other payables

The variance is due to higher than expected accrued ESA expenses. Other provisions

Financial Statements 213

Statement of Changes in Equity

Actual

Original Budget Variance

2019 $’000

CONTRIBUTED EQUITY

Opening balance 404,419 404,419 -

Transactions with owners

Contributions by owners

Equity injections - Appropriations 7,294 5,499 1,795

Departmental capital budget 24,345 24,345 -

Total transactions with owners 31,639 29,844 1,795

Closing balance as at 30 June 436,058 434,263 1,795

RETAINED EARNINGS

Opening balance (250,138) (271,622) 21,484

Comprehensive income

Surplus/(Deficit)fortheperiod (45,377) (33,893) (11,484)

Total comprehensive loss (45,377) (33,893) (11,484)

Closing balance as at 30 June (295,515) (305,515) 10,000

ASSET REVALUATION RESERVE

Opening balance 17,137 17,137 -

Comprehensive income

Other comprehensive income 5,363 - 5,363

Total comprehensive income 5,363 - 5,363

Closing balance as at 30 June 22,500 17,137 5,363

TOTAL EQUITY

Opening balance 171,418 149,934 21,484

Comprehensive income

Other comprehensive income 5,363 - 5,363

Surplus/(Deficit)fortheperiod (45,377) (33,893) (11,484)

Total comprehensive loss (40,014) (33,893) (6,121)

Transactions with owners

Contributions by owners

Equity injections - Appropriations 7,294 5,499 1,795

Departmental capital budget 24,345 24,345 -

Total transactions with owners 31,639 29,844 1,795

Closing balance as at 30 June 163,043 145,885 17,158

ASIC Annual Report 2018-19 214

Explanations of major variances Affected line items

Theincreasetothedeficitismainlyattributable to the increase in depreciation and amortisation expense (refer to variance explanation for depreciation and amortisation).

Surplus/(Deficit)fortheperiod- Retained earnings

Cash Flow Statement

Actual

Original Budget Variance

2019 $’000

OPERATING ACTIVITIES

Cash received

Appropriations 370,324 352,180 18,144

Operating cash received 3,282 3,662 (380)

Net GST received 14,261 - 14,261

Cost recoveries 3,649 - 3,649

Other cash received 5,008 4,500 508

Total cash received 396,523 360,342 36,181

Cash used

Employees 220,589 234,677 (14,088)

Suppliers 162,252 113,064 49,188

TransferstotheOfficialPublicAccount 12,032 3,353 8,679

Total cash used 394,873 351,094 43,779

Net cash from/(used by) operating activities 1,651 9,248 (7,597)

INVESTING ACTIVITIES

Cash used

Purchase of property, plant and equipment 38,160 39,092 (932)

Total cash used (38,160) (39,092) 932

Net cash (used by) investing activities (38,160) (39,092) 932

FINANCING ACTIVITIES

Cash received

Appropriations - contributed equity 39,027 29,844 9,183

Total cash received 39,027 29,844 9,183

Net cash from financing activities 39,027 29,844 9,183

Financial Statements 215

Actual

Original Budget Variance

2019 $’000

Net increase/(decrease) in cash held 2,518 - 2,518

Cash at the beginning of the reporting period 62,703 37,199 25,504

Cash at the end of the reporting period 65,221 37,199 28,022

Explanations of major variances Affected line items

Cash received

Net GST received is not budgeted for in the Portfolio Budget Statements (PBS). This item is offset against the Cash used - Suppliers original budget disclosed in the PBS.

Net GST received/Suppliers

Please refer to explanation for Cash and cash equivalent. Appropriations - contributed equity

Cash used

Suppliers expenses were higher than budget due mainly to the combination of additional revenue from Government received at MYEFO for new budget measures and Net GST received offset (see variance comment for Net GST received).

Suppliers

The increase relates to higher Own-source revenue receipts. These receipts are unpredictable and therefore subject to variation.

TransferstotheOfficialPublicAccount

ASIC Annual Report 2018-19 216

8.5B: Administered budgetary reports

The following tables provide a comparison of the original budget as presented in the 2018-19 PortfolioBudgetStatements(PBS)tothe2018-19finaloutcomeaspresentedinaccordance with Australian Accounting Standards for the entity. The budget is not audited. Explanations of variances greater than +/- 10% and greater than +/- $5m are provided.

Administered Schedule of Comprehensive Income

Actual Original Budget Variance

2019 $’000

EXPENSES

Grants 12,953 14,610 (1,657)

Impairmentlossallowanceonfinancialinstruments 61,944 56,907 5,037

Claims for unclaimed monies 53,521 42,820 10,701

Promotional costs for MoneySmart initiatives 570 572 (2)

Total expenses 128,988 114,909 14,079

LESS:

Own-source revenue

Taxation revenue

Fees 800,216 802,998 (2,782)

Supervisory cost recovery levies 50,157 41,829 8,328

Total taxation revenue 850,374 844,827 5,547

Non-taxation revenue

Supervisory cost recovery levies 223,204 232,373 (9,169)

Feesandfines 199,054 188,678 10,376

Unclaimedmonies 70,862 50,693 20,169

Total non-taxation revenue 493,120 471,744 21,376

Total revenue 1,343,493 1,316,571 26,923

Net contribution by services 1,214,505 1,201,662 12,844

Explanations of major variances Affected line items

The increase in claims for unclaimed monies is due to the revaluation adjustment of the claims provision. Refer to the Accounting Policy note at 4.2B.

Claims for unclaimed monies/ Non-taxation revenue unclaimed monies

The increase is due to new expenditure measures approved as part of MYEFO, leading to higher than budgeted cost recoveries.

Supervisory cost recovery levies/ Taxation revenue

Financial Statements 217

Administered Schedule of Assets and Liabilities

Actual Original Budget Variance

2019 $’000

ASSETS

Financial assets

Cash and cash equivalents 1,859 2,517 (658)

Supervisory cost recovery levies receivable 282,438 - 282,438

Feesandfinesreceivable 143,150 182,568 (39,418)

Trade and other receivables 8,600 212 8,388

Total assets administered on behalf ofGovernment 436,047 185,297 250,750

LIABILITIES

Payables and provisions

Suppliers and other payables 31,707 20,896 10,811

Unclaimedmoniesprovisions 347,790 311,699 36,091

Total liabilities administered on behalf ofGovernment 379,497 332,595 46,902

Net assets/(liabilities) 56,550 (147,298) 203,848

Explanations of major variances Affected line items

Thevarianceisduetotheclassification,wherethe Supervisory cost recovery levies receivable and Trade and other receivables were budgeted for in Fees and finesreceivable.Theincreaseintotalreceivables arises as the Supervisory cost recovery levies were recognised in the budget on a cash basis whereas the actuals are recognised on an accrual basis.

Supervisory cost recovery leviesreceivable/Feesandfines receivable/Trade and other receivables

This is mainly due to an increase in the value of unidentified paymentsreceived. Suppliers and other payables

The provision has been impacted by an actuarial review of claims patterns and economic factors resulting in lower discount rate being applied.

Unclaimedmoniesprovisions

ASIC Annual Report 2018-19 218

8Appendices8.1 Appendices relating to how our people achieve our vision 2208.2 Appendices relating to assessments 2388.3 Appendices relating to statements required by law 2528.4 Five-year summary of key stakeholder data 264 Appendices 219

8.1 Appendices relating to how our people achieve our vision

The role of the Commission

The Commission is responsible for ASIC’s strategic direction and priorities. The Commission meets twice each month (except January and December) to:

âº decide on matters within ASIC’s regulatory functions and powers that havestrategicsignificance

âº oversee management and operations of ASIC as an Australian Government agency.

The Commission appoints and evaluates the performance of its executive directors and senior executive leaders and approves budgets and business plans for each team.

For more information on ASIC’s corporate structure, see Section 1.2

Commissioners are appointed by the Governor-General, on the nomination of the Treasurer.

The Treasurer may nominate only those peoplewhoarequalifiedbyknowledge of, or experience in, business, the administrationofcompanies,financial markets,financialproductsandfinancial services, law, economics or accounting.

Commissionersareappointedonfixed terms that may be terminated only for the reasons set out in section 111 of the ASIC Act. The Remuneration Tribunal sets Commissioners’ remuneration, which is not linked to their performance.

The ASIC Act requires Commissioners to disclose to the Minister direct or indirect pecuniary interests in corporations carrying on business in Australia, businesses in Australia, interests regulated by ASIC, or expectations, understandings, arrangements or agreements for future business relationships.

Chris Savundra, General Counsel, is the primary source of legal advice to the Commission, providing legal counsel to the Commission on major regulatory and enforcement matters. Kathleen Cuneo was ActingChiefLegalOfficerfromJanuary 2018 to January 2019, while Chris Savundra had oversight of ASIC’s work in assisting the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Other independent legal and accounting expertsalsoadviseonspecificmatters.

The Commission delegates various powers and functions to executive directors, senior executive leaders, Regional Commissioners, and employees reporting to them, to ensure that ASIC’s businessiscarriedoutefficientlyand effectively. Delegations are reviewed regularly, and the Commission requires its delegates to act in accordance with policies and procedures approved by the Commission. The Commission held 36 meetings in 2018-19.

ASIC Annual Report 2018-19 220

Table 8.1.1 Commission meetings, 2018-19

Commissioner Eligible to attend Attended

James Shipton 20 scheduled meetings

16 unscheduled meetings

19 16

Peter Kell 9 scheduled meetings

9 unscheduled meetings

Daniel Crennan 19 scheduled meetings

15 unscheduled meetings

18 15

Karen Chester 10 scheduled meetings

6 unscheduled meetings

10 6

Cathie Armour 20 scheduled meetings

16 unscheduled meetings

17 13

John Price 20 scheduled meetings

16 unscheduled meetings

19 14

Danielle Press 16 scheduled meetings

13 unscheduled meetings

15 12

Sean Hughes 11 scheduled meetings

8 unscheduled meetings

10 8

Note: Commission members are unable to formally form part of a Commission meeting when they are overseas, even where they join the discussion by telephone.

UnscheduledCommissionmeetings are called to obtain the Commission’s decisiononspecificissueswhererequired outside of the meeting timetable.

The Commission also meets on a weekly basis to:

âº discuss rapidly evolving matters or those that require early input or an update on approach or strategy

âº coordinate Commissioners’ activities.

In 2018-19, ASIC began a program to reform our governance, structure and decision-making processes in light of recommendations from the Royal Commission and the application of the executive accountability regime. Phase 1 of this program is scheduled to be completed in late 2019.

Additional information on ASIC’s internal governance is published on our website.

Appendices 221

Audit Committee and audit services

The Audit Committee operates independently of management and plays a key role in assisting the Chair to discharge his responsibilities for the efficient,effective,economicaland ethical use of Commonwealth resources. The Committee does this by providing independent assurance to the Chair onASIC’sfinancialandperformance reporting, risk oversight and management,

and system of internal control. ASIC’s Audit Committee Terms of Reference are available on our website.

The Committee reviewed ASIC’s 2018-19 financialstatementsandprovidedadvice to the Chair and Commissioners on thepreparationandreviewoffinancial statements before the Chair signed them. The Committee met four times during the year, supplemented by two special meetings.

Table 8.1.2 Audit Committee meetings, 2018-19

Member Eligible to attend Attended

Geoffrey Applebee

First appointed as an independent member on 1 February 2010 4 main meetings 4

Reappointed as independent member and Chairman on 1 September 2015 2 special meetings 2

David Prothero

First appointed as an independent member on 1 March 2011 4 main meetings 4

Reappointed as independent member and Deputy Chairman on 1 July 2016 2 special meetings 2

Retired from the Committee on 30 June 2019

Adrian Walkden

First appointed as an independent member on 9 November 2017 2 main meetings 2

Retired from the Committee on 31 December 2018 2 special meetings 2

ASIC Annual Report 2018-19 222

Member Eligible to attend Attended

Cathie Armour

ASIC Commissioner 4 main meetings 4

First appointed as a committee member on 13 June 2018 2 special meetings 2

Peter Achterstraat AM

First appointed as a committee member on 22 February 2019 2 main meetings 2

Independent members Geoffrey Applebee and David Prothero are chartered accountants and company directorswithsignificantfinancial, business and community experience. AdrianWalkdenwasChiefInformation OfficerforaseparateCommonwealth entityandhassignificantinformation technology experience within an Australian Government setting. Peter AchterstraatistheNSWProductivity Commissioner and has held a number ofseniorNSWStateGovernment appointments, as well as being a former Deputy Commissioner of Taxation with the ATO. The internal appointee, Cathie Armour, is a Commissioner of ASIC.

Internal audit services are provided by internal audit employees from ASIC’s Internal Audit and Operational Risk team, supported by specialist private sector internal audit providers as needed. The AustralianNationalAuditOfficeprovides external audit services. Senior external and internal audit representatives attend Audit Committee meetings.

Geoffrey Applebee Chairman Audit Committee July 2019

Boards, committees andpanels

Weactivelyengagewithourstakeholders, including through the advisory panels listed below, to gain a deeper understanding of industry and consumer developments, consult on policy matters, and identify threats and harms in the sectors we regulate.

Australian Government Financial Literacy Board

The Australian Government Financial Literacy Board was established in 2005. It is a non-statutory body that provides independent and strategic guidance to theGovernmentandASIConfinancial literacy and capability issues.

The Board met twice during 2018-19. It supported the launch of the 2018 National Financial Capability Strategy at Parliament House in Canberra. The Board also providedfeedbackonASIC’sfinancial capability priorities, including the design of the next generation MoneySmart website, an enhanced stakeholder engagement strategy, and improvements to the MoneySmart Teaching program.

Appendices 223

ASIC Business Advisory Panel

The Business Advisory Panel (formerly the Business Advisory Committee) enables direct consultation with the business community about our registry and licensing services, with an emphasis on small business.

It advises on strategic direction, including proposed legislative and policy changes, as well as operations and improvement initiatives, with a focus on registry and assessing the impacts to business. Panel members are drawn from a wide range of business, industry and professional organisations.

ThePanelmettwicein2018-19.Significant themes of engagement across the year were the Government proposals to modernise ASIC’s business registers andintroduceaDirectorIdentification Number. The Panel’s feedback on the experiences of businesses and agents in using our registry services was useful in informing the development of proposals and our improvement priorities.

Consumer Advisory Panel

The Consumer Advisory Panel (CAP) was established in 1999 and advises ASIC on current issues affecting consumers and retailinvestorsinthefinancialservices and wealth management industries. The CAP also informs ASIC’s surveillance, enforcement,policyandfinancial education initiatives.

The CAP meets three times a year and a joint meeting is held annually with the Consumer Consultative Committee of the Australian Competition and Consumer Commission (ACCC).

This year, the CAP focused on the challenges faced by vulnerable consumers andspecificfinancialissuesfacedbyolder people nearing retirement, including responsible lending for car loans and small amount loans, credit cards, buy now pay later products, reverse mortgages, debt collection and debt management practices, insurance claims handling, superannuationadvice,andconflicted remuneration. The CAP also considered the effectiveness of enforceable undertakings, remediation, industry codes, and competition from a consumer perspective. It engaged with various areas of current law reform, including:

âº implementation of product intervention powers and issuer and distributor obligations

âº reform to the dispute resolution framework

âº professional standards reforms for financialadvisers

âº thefindingsandrecommendationsof the Royal Commission.

Digital Finance Advisory Panel

The Digital Finance Advisory Panel (formerly the Digital Finance Advisory Committee) was established in 2015. It helpsASICsupportinnovationinfinancial services and markets. The Panel provides advice and feedback on opportunities, developments and emerging risks for start-upfintechandregtechbusinesses. ASIC’s engagement with those businesses is channelled through its Innovation Hub.

Membersaredrawnfromthefintech, regtech, venture capital, consumer and academic sectors, and serve in their personal capacity. Representatives of Treasury,APRA,theRBA,theOfficeof

ASIC Annual Report 2018-19 224

the Information Commissioner, the ACCC, the Australian Transaction Reports and AnalysisCentre(AUSTRAC)andAustrade attend as observers. Other agencies also attend as observers when relevant issues are being discussed.

In 2018-19, the Panel met four times and advised on topics including:

âº the impact of the Consumer Data Right, the New Payments Platform, andOpenBankingonthefinancial technologies sector

âº the state of crypto-assets and initial coin offerings in Australia

âº ongoing reviews of the development of regulatory technologies in the region.

Director Advisory Panel

The Director Advisory Panel was established in 2013 to enable ASIC to gain a deeper understanding of developments and systemic risks in the corporate sector. Members are directors drawn from entities of various sizes, representing different sectors and locations.

In 2018-19, the Panel met twice and discussed a range of matters, including ASIC’s Corporate Governance Taskforce, the effectiveness of disclosure for consumers from a behavioural economics perspective, and the Royal Commission’s interimandfinalreports.

External Advisory Panel

The External Advisory Panel was established in 2009 to help ASIC gain a deeper understanding of developments andissuesinthefinancialservicesindustry and the markets we regulate, enabling us to be more forward-looking in examining

issues and assessing systemic risks. Members are drawn from various sectors and sit in a personal capacity.

During 2018-19, the Panel met four times and provided advice and feedback on, among other things, credit card lending,financialcapabilityandthe2018 National Financial Capability Strategy, direct life insurance, whistleblowing reforms, and ASIC’s new supervisory approaches, including Close and Continuous Monitoring.

Financial Advisers Consultative Committee

The Financial Advisers Consultative Committee was established in 2017. It supplements ASIC’s engagement with thefinancialadviceindustrybyimproving our capacity to identify, assess and respond to emerging trends, and by enhancing our relationships with key stakeholders. Members are practising financialadviserswitharangeofskillsin insurance, superannuation, self-managed superannuationfundsanddigitalfinancial advice. They sit in a personal capacity.

During 2018-19, the Committee met three times and provided feedback on a range of topics, including the Royal Commission, conflictsofinterestinthefinancial advice industry, digital advice, managed discretionary accounts, timeshare and life insurance reforms.

Markets Advisory Panel

The Markets Advisory Panel was established in 2010. It advises on ASIC’s approach to its responsibilities for day-to-day supervision of the Australian market and on broader market developments. Members are drawn

Appendices 225

fromthefinancialservicesindustry,with experience in retail markets, institutional banking and asset management.

During2018-19,thePanelmetfivetimes and provided advice on a wide range of topics, including:

âº our CCM program and onsite model for the supervision of large financial institutions

âº our reviews of exchange-traded products and high-frequency trading in the equities and foreign exchange markets

âº equity raising allocations

âº ASX CHESS replacement

âº market data costs

âº implications of the Royal Commission

âº applicationsandrisksofartificial intelligence and machine learning in financial markets.

Disciplinary or peer reviewpanels

The panels listed below have disciplinary or peer review functions and assist in our regulatory decision making.

Financial Services and Credit Panel

The Financial Services and Credit Panel (FSCP) comprises a pool of industry participants from which sitting panels are drawn. These panels add an element of peer review to the administrative decision-making process and make decisions about whether to ban individuals fromprovidingfinancialservicesor engaging in credit activities. A matter may be referred to the FSCP where we

consider it appropriate for peer review becauseofitssignificance,complexity or novelty.

The FSCP consists of part-time members whoareleadersinthefinancialservices and consumer credit industry. Each sitting panel consists of two members from the FSCP and an ASIC employee member.

During 2018-19, the FSCP made banning orders against four individuals, including JeffreyWorboysandMatthewBarnett. MrWorboysandMrBarnettwerebanned fromprovidingfinancialservicesforsix years due to their failure to exercise the required degree of care and diligence and to act in the best interests of the members of a managed investment scheme they operated.

Liquidator Registration and Disciplinary Committees

Applications for registration as a liquidator, and potential disciplinary action against registered liquidators, are referred to specially convened committees.

Each committee consists of an ASIC Chair, a registered liquidator chosen by the Australian Restructuring, Insolvency and Turnaround Association, and a person appointed by the Minister.

During 2018-19, ASIC registered a total of12liquidators,includingfivewho had applied for registration in the prior year. ASIC received and referred 11 new applications for registration as a liquidator to the committees. Seven of these new applicants were registered, two were registered with conditions, two were not registered, and the outcome of the remaining two applications is yet to be determined.

ASIC Annual Report 2018-19 226

The disciplinary committee heard one disciplinary matter and determined to cancel the registration of a Brisbane-based registered liquidator. A further three registered liquidators were referred to the committee and the referrals had not been heard by 30 June 2019.

The register of liquidators and a summary of disciplinary actions taken can be found on the ASIC website.

Markets Disciplinary Panel

The Markets Disciplinary Panel (MDP) is a peer review panel engaged by ASIC to make decisions about whether infringement notices should be given to market participants for alleged contraventions of the market integrity rules. It consists of part-time members with extensive market or professional experience. Matters are referred to the MDP by ASIC as an alternative to bringing civil proceedings.

During 2018-19, the MDP issued infringement notices in respect of two matters:

âº UBSSecuritiesAustraliaLtdpaid a $120,000 infringement notice in connection with transactions that the MDP considered were not made in the ordinary course of trading and were not in accordance with instructions of UBS’sclients

âº Macquarie Securities (Australia) Limited paid a $300,000 infringement notice in connection with orders and trade reports that the MDP considered did not comply with the rules about regulatory data.

The MDP has had one instance of non-compliance with an infringement notice. In that matter, ASIC commenced civil penalty proceedings in the Federal Court in relation to alleged breaches of the market integrity rules by State One Stockbroking Limited (State One). On 20 November 2018, the court found that State One had failed to maintain the necessary organisational and technical resources for post-trade alerts and it placed bids on behalf of a client that it ought reasonably have suspected had the intention of creating a false or misleading appearance in the market for, or price of, those securities. The court directed State One to pay penalties totalling $350,000. State One also agreed to pay $150,000 to ASIC for its legal and investigative costs for the matter.

The infringement notices issued by the MDP are published on the MDP Outcomes Register on the ASIC website. Compliance with an infringement notice is not an admission of guilt or liability, and the market intermediary is not taken to have contravened subsection 798H(1) of the Corporations Act.

ASIC’s people

ASIC continues to attract and retain highly skilled employees who are instrumental in ensuring that we carry out our regulatory functions and achieve our regulatory goals.

As at 30 June 2019, ASIC had a total of 1,701 employees. Table 8.1.3 shows a breakdown by location for each classificationandTable8.1.4providesa detailed picture of the gender breakdown of our people.

Appendices 227

Table 8.1.3 ASIC employees (FTE), by location, 2018-19

Roles Vic. NSW Qld WA SA Tas ACT NT Total

Chair 1 - - - - - - - 1

Deputy Chair 1 1 - - - - - - 2

Member 3 1 - - - - - - 4

SES 13 26 - 1 1 - 1 - 42

Exec 2 169 249 35 25 8 7 6 - 499

Exec 1 118 202 41 32 11 4 4 1 413

ASIC 4 130 115 42 23 11 3 1 - 325

ASIC 3 102 68 24 14 6 1 2 - 217

ASIC 2 143 13 12 1 2 1 - - 172

ASIC 1 22 - - - - - - - 22

ASIC Act - 4 - - - - - - 4

Total 702 679 154 96 39 16 14 1 1,701

Notes:

1 Net average number over 12 months on net FTE basis (i.e. excluding FTEs working on capital projects).

2 Includes staff at the Superannuation Complaints Tribunal and the CADB.

3 Excludes contractors and secondments from other agencies.

Note: Data rounded - some totals and subtotals may vary.

ASIC Annual Report 2018-19 228

Table 8.1.4 Combined totals for Commissioners and for employees under the ASIC Act and under the Public Service Act 1999, by gender, 2018-19

Ongoing Non-ongoing

Full-time Part-time Full-time Part-time

Roles Female Male Female Male Female Male Female Male Total

Appointee - - - - 3 4 - - 7

Chair - - - - - 1 - - 1

Deputy Chair - - - - 1 1 - - 2

Member - - - - 2 2 - - 4

ASIC Act employees 1 1 - - 9 11 1 - 23

SES - 1 - - 7 10 1 - 19

Other ASIC Act employees 1 - - - 2 1 - - 4

Public Service Act employees 611 629 197 34 101 74 19 6 1,671

SES 10 9 3 1 - - - - 23

Exec 2 162 225 69 15 11 16 1 - 499

Exec 1 120 192 49 8 21 19 4 - 413

ASIC 4 156 98 24 - 26 16 3 1 324

ASIC 3 81 75 16 2 24 15 1 3 217

ASIC 2 76 29 33 7 15 5 6 2 173

ASIC 1 6 1 3 1 4 3 4 - 22

Total 612 630 197 34 113 89 20 6 1,701

Appendices 229

Table 8.1.5 shows how our regulatory resources are deployed, breaking down employee numbers according to the number of full-time equivalent (FTE) employees per regulatory team.

Table 8.1.5 FTE employees for each ASIC regulatory team, 2018-19

Team Total net FTE

Markets

Corporations 38

Financial Reporting and Audit 28

Insolvency Practitioners 24

Market Infrastructure 30

Market Supervision 86

Wealth Management

Financial Advisers 43

Investment Managers 34

Superannuation 22

Financial Services

Credit, Retail Banking and Payments 53

Insurers 22

Financial Capability 43

Close and Continuous Monitoring 9

Office of Enforcement

Financial Services Enforcement

Financial Services Enforcement 36

WealthManagementEnforcement-MajorFinancialInstitutions 60

WealthManagementEnforcement 31

Markets Enforcement

Corporations and Corporate Governance 36

EnforcementWAandCriminalIntelligenceUnit 34

Markets Enforcement 42

ASIC Annual Report 2018-19 230

Team Total net FTE

Other

Assessment and Intelligence 146

Registry 194

Note:thefiguresintheabovetableareindicativeonlyanddonotreflectthefollowingadditionalemployees:

âº an additional 54 FTE staff are employed to work on ESA matters

âº an additional 78 FTE staff provide enforcement support services and legal counsel.

Most of our staff are employed under the ASIC Enterprise Agreement 2019-22, which is ongoing. Table 8.1.6 shows the industrial arrangements for all ASIC employees. Table 8.1.7 shows the salary ranges per annum for ASIC employees.

Wecontinuetoprovideourpeoplewiththeopportunitytoreceiveanannualperformance bonus. Table 8.1.8 shows the performance payments we made in 2018-19.

Table 8.1.6 Industrial arrangements for ASIC employees as at 30 June 20191

Classification ASIC Act s120(3) AWA2 EA3 Total

ASIC 1 - - 23 23

ASIC 2 - - 198 198

ASIC 3 - - 270 270

ASIC 4 - - 373 373

Exec 1 - - 482 482

Exec 2 - - 605 605

SES 19 11 18 48

ASIC Act 5 - - 5

Total 24 11 1,969 2,004

1 The number of industrial arrangements for ASIC employees is calculated based on total headcount as at 30 June 2019, rather than FTE. This is because each industrial instrument belongs to an individual, regardless of their work pattern, and our obligations against those instruments relate to a number of people, not FTE.

2 Australian workplace agreement.

3 Enterprise agreement.

Appendices 231

Table 8.1.7 Salary ranges per annum

Classification Minimum per annum Maximum per annum

ASIC 1 $45,004 $50,735

ASIC 2 $52,339 $63,871

ASIC 3 $66,714 $78,002

ASIC 4 $79,830 $92,179

Exec 1 $104,617 $123,432

Exec 2 $118,513 $169,387

SES $180,000 $319,884

Table 8.1.8 Performance payments, 2018-19, by classification

Classification No. of recipients Aggregate Minimum Maximum Average

ASIC 4 263 $950,285 $557 $13,361 $3,613

Exec 1 438 $2,423,155 $609 $18,917 $5,532

Exec 2 605 $5,397,077 $1,403 $28,477 $8,921

SES 46 $839,007 $6,983 $36,305 $18,239

Note: This table includes payments for the 2017-18 performance year that were paid in 2018-19, plus any pro-rata payments for the 2018-19 performance year for employees who left ASIC in 2018-19.

ASIC Annual Report 2018-19 232

Table 8.1.9 Information about remuneration for key management personnel (KMP)

Short-term benefits

Post-

employment benefits

Other long-term

benefits

Termination benefits

Total

remuneration

Name

Position title

Base salary

($)

Bonuses

($)

Other

benefitsand allowances

($)

Superannuation contributions

($)

Long service leave

Other

long-term benefits

Termination

benefits

($)

Total

remuneration

($)

James Shipton

Chair

758,535

25,000

18,331

801,866

Daniel Crennan

Deputy Chair

588,433

58,213

23,846

13,871

684,363

Karen Chester

Deputy Chair

244,131

23,430

5,620

273,181

John Price

Commissioner

465,606

70,265

37,047

572,918

Peter Kell

Deputy Chair

214,178

33,399

6,035

253,612

Catherine Armour

Commissioner

533,693

25,000

12,915

571,608

Danielle Press

Commissioner

438,327

19,519

10,085

467,931

Sean Hughes

Commissioner

332,749

49,504

7,899

390,152

Christopher Savundra

General Counsel

320,423

23,511

29,738

25,000

8,365

407,037

Carlos Iglesias

Executive Director Operations

314,423

12,768

32,362

54,662

7,953

422,168

Greg Kirk

Executive Director Strategy

303,285

30,215

29,738

53,523

7,604

424,365

Appendices 233

Short-term benefits

Post-

employment benefits

Other long-term

benefits

Termination benefits

Total

remuneration

Rosanne Bell

Executive Director Registry

146,123

10,265

11,904

23,309

3,647

195,248

Timothy Mullaly

Executive Director Financial Services Enforcement

140,164

2,933

11,904

23,846

3,645

182,492

WarrenDay

Executive Director Assessment and Intelligence

146,915

7,332

11,904

25,667

3,581

195,399

Joanna Bird

Executive Director Wealth Management

154,083

10,137

13,643

15,540

3,564

196,967

Michael Saadat

Executive Director Financial Services

152,560

7,241

13,725

23,951

3,598

201,075

Sharon Concisom

Executive Director Markets Enforcement

152,075

4,399

11,904

23,434

3,644

195,456

ASIC Annual Report 2018-19 234

Short-term benefits

Post-

employment benefits

Other long-term

benefits

Termination benefits

Total

remuneration

Greg Yanco

Executive Director Markets

140,193

7,476

13,725

21,182

3,717

186,293

Kathleen Cuneo

Acting Chief LegalOfficer

135,870

20,820

17,156

24,869

3,406

202,121

Matthew Abbott

Senior Executive Leader Corporate Affairs

147,738

4,326

16,013

12,125

3,596

183,798

Clare Lewis

Senior Executive Leader Internal Audit and Operational Risk

140,517

6,865

16,013

11,766

3,421

178,582

Helen O’Loughlin

Chief of Staff

142,859

16,071

16,013

13,462

3,640

192,045

1 This table is prepared on an accrual basis. 2 The remuneration for these positions is set by the Remuneration Tribunal. This is outlined in the Remuneration Tribunal (Remuneration and Allowances for Holders of Full-timePublicOffice)Determination2018. 3 Part year remuneration disclosure - commenced as a KMP on 14 January 2019. 4 Part year remuneration disclosure - ceased as a KMP on 30 January 2019. 5 Part year disclosure - ceased as a KMP on 13 January 2019. 6 Bonusexpensesreportedinthefinancialstatementsrelatingto2018-19servicewerebasedonthebestestimateavailablewhenapproved.Thebonusamountsreported above have incorporated subsequent information.

7 This disclosure includes relocation and housing expenses paid in accordance with ASIC’s relocation policy.

Appendices 235

Table 8.1.10 Information about remuneration for senior executives

Short-term benefits

Post-

employment benefits

Other long-term

benefits

Termination benefits

Total

remuneration

Total remuneration bands ($)

Number of senior executives

Average base salary

($)

Average bonuses

($)

Average other benefitsand

allowances

($)

Average

superannuation contributions

($)

Average

long service leave

Average other long-term benefits

Average termination

benefits

($)

Average total remuneration

($)

0-220,000

100,466

5,915

10,094

15,254

2,494

1,917

136,140

220,001-245,000

171,744

9,429

12,423

31,085

4,277

228,958

245,001-270,000

180,039

21,251

23,790

32,693

4,410

262,183

270,001-295,000

207,073

10,424

27,765

33,536

5,247

284,045

295,001-320,000

237,665

10,347

28,506

24,073

5,732

306,323

320,001-345,000

237,590

19,310

27,510

43,219

5,888

333,517

345,001-370,000

266,853

22,318

27,180

38,873

6,595

361,819

370,001-395,000

292,974

22,223

27,765

34,528

7,324

384,814

1 This table is prepared on an accrual basis.

ASIC Annual Report 2018-19 236

Table 8.1.11 Information about remuneration for other highly paid staff

Short-term benefits

Post-

employment benefits

Other long-term

benefits

Termination benefits

Total

remuneration

Total remuneration bands ($)

Number of senior executives

Average base salary

($)

Average bonuses

($)

Average other

benefitsand allowances

($)

Average

superannuation contributions

Average

long service leave

Average other long-term benefits

Average termination

benefits

($)

Average total remuneration

($)

220,001-245,000

187,439

11,972

30,293

4,342

234,046

245,001-270,000

201,412

14,385

4,168

31,442

5,043

256,450

270,001-295,000

201,839

14,114

29,738

37,794

5,024

288,509

295,001-320,000

251,827

9,156

12,896

33,097

6,263

313,239

1 This table is prepared on an accrual basis.

Appendices 237

8.2 Appendices relating to assessments

Assessing misconduct and other reports

Misconduct reports from the public

Werecordandassesseveryreportof alleged misconduct that we receive and we use this information to identify and respond to misconduct.

In 2018-19, we dealt with 10,249 reports of alleged misconduct. Table 8.2.1 below shows the outcome of the misconduct reports received by ASIC during the financial year.

Table 8.2.1 Misconduct issues, by category, 2018-19

Category 2018-19

Corporations and corporate governance

Governance issues 13%

Failure to provide books and records or a report as to affairs to an insolvency practitioner 8%

Fraud allegations 3%

Insolvency practitioner misconduct 3%

Insolvency matters 3%

Other (e.g. shareholder issues, reporting issues) 15%

Subtotal 45%

Financial services and retail investors

Credit issues 13%

Operating an unregistered managed investment scheme or providing financialserviceswithoutanAFSlicence 6%

General licence obligations 6%

Other (e.g. insurance, advice, misleading or deceptive conduct, unconscionable conduct) 11%

Subtotal 36%

ASIC Annual Report 2018-19 238

Category 2018-19

Market integrity - including insider trading, continuous disclosure, misleading statements, and market manipulation 9%

Registry integrity - including incorrect address recorded on ASIC’s register, lodging false documents with ASIC, and issues with business names 4%

Subtotal 13%

Issues out of ASIC’s jurisdiction 6%

Total 100%

Table 8.2.2 Misconduct issues, by outcome, 2018-19

Misconduct reports Number

Total misconduct reports finalised 1 10,249

Outcome Percentage

Referred for action by ASIC2 21%

Resolved3 12%

Compliance achieved 2%

Warningletterissued 4%

Referred for internal or external dispute resolution 6%

Assistance provided <0.5%

More appropriate agency <0.5%

Analysed and assessed for no further action4 54%

Insufficient evidence 41%

No action 13%

No jurisdiction5 9%

No breach or offences 4%

Total 100%

Appendices 239

1 WhereASICreceivesreportsaboutthesameentityandissue,wemergethesematters.

2 The matters ASIC takes into account when deciding whether or not to commence a formal investigation are set out in more detail in Information Sheet 151 ASIC’s approach to enforcement.

3 This can involve referral to an EDR scheme, ASIC issuing a warning letter to the party that may be in breach of the Corporations Act, ASIC providing assistance to the reporter in the form of guidance and information about how best to resolve the matter themselves, or ASIC taking action to achieve compliance.

4 Preliminary inquiries made and information provided analysed and assessed for no further action by ASIC, due toinsufficientevidenceorotherreason,suchaswhereanotheragencyorlawenforcementbodyorthirdparty (e.g. a liquidator) is better placed to appropriately deal with the underlying issues or is already taking action.

5 Whererelevant,ASICdirectsreporterstotheappropriateagencyorsolution.

Breach reports from licensees and auditors

The Corporations Act requires AFS licensees to tell us in writing within 10 businessdaysaboutanysignificantbreach (orlikelybreach)oftheirobligations.We also receive breach reports from auditors

who have reasonable grounds to suspect a breach of the Corporations Act by the company, managed investment scheme or AFS licensee that they are appointed to audit.

Table 8.2.3 provides a breakdown of the breach reports we assessed in 2018-19 by type and outcome.

Table 8.2.3 Breach reports by type and outcome, 2018-19

Breach

Type Number

Auditor breach reports 705

Breach reports about AFS licensees and managed investment schemes 2,173

Total breach reports finalised 2,878

Outcome Percentage

Referred for action by ASIC 22%

Referred for compliance, investigation or surveillance 19%

Assist existing investigation or surveillance 3%

Analysed and assessed for no further action 78%

No further action 78%

Nooffenceidentified <0.5%

Total 100%

ASIC Annual Report 2018-19 240

For more information about the matters that require an auditor to report a breach of the law to ASIC, see sections 311, 601HG and 990K of the Corporations Act.

Statutory reports from liquidators, administrators and receivers

The Corporations Act requires liquidators, administrators and receivers (i.e. external administrators)toreporttoASICiftheysuspectthatcompanyofficersareguiltyofan offence. Liquidators must also report if the return to unsecured creditors may be less than 50 cents in the dollar.

Table 8.2.4 provides details of the statutory reports that we assessed in 2018-19 by type and outcome.

Table 8.2.4 Statutory reports from liquidators, administrators and receivers,2018-19

Type Number

Initial reports from liquidators, administrators and receivers1 8,106

Reports alleging misconduct 7,227

Reports not alleging misconduct 879

Supplementary reports alleging misconduct 515

Total statutory reports finalised (initial + supplementary) 8,621

Outcome Percentage

Supplementary report analysed and assessed, no further informationrequired2 76%

Supplementary reports referred 24%

Referred for compliance, investigation or surveillance 22%

Assisted existing investigation or surveillance 2%

Total 100%

1 Werequestedafurtherreport(supplementaryreport)fromtheexternaladministratorin14%ofcases.

2 Therewasinsufficientevidencetowarrantcommencingaformalinvestigationin87%ofthecaseswherea supplementary report was requested and subsequently it was determined that no further information was required.Weretainthesereportsforintelligencepurposesforpossiblefutureuse.

Appendices 241

ASIC’s use of compulsory information-gathering powers

Since2010-11,ASIChasreportedtheuseofsignificantcompulsoryinformation-gathering powers under statute. This appendix discloses data by number of instances in 2018-19, with comparative data for 2017-18.

Table 8.2.5 Use of significant compulsory information-gathering powers

Use of significant compulsory information-gathering powers

Number of notices 2018-19

Number of notices 2017-18

Appear for examination

ASIC Act, s191 Requirement to appear for

examination 589 650

ASIC Act, s58 Power to summons a

witness and take evidence 0 0

National Credit Act, s2531 Requirement to provide reasonable assistance 22 50

Give reasonable assistance

Corporations Act, s1317R Power to require assistance in prosecutions 13 25

ASIC Act, s49(3) Power to require

reasonable assistance in prosecutions 14 24

National Credit Act, s51 Requirement to provide reasonable assistance 1 0

Corporations Act, s601FF Power to conduct surveillance/monitor managed investment scheme 0 0

National Credit Act, s274(4) Requirement to provide reasonable assistance 0 0

Corporations Act, s912E Power to require

assistance and disclosure of books and information from an AFS licensee 148 412

ASIC Annual Report 2018-19 242

Use of significant compulsory information-gathering powers

Number of notices 2018-19

Number of notices 2017-18

Produce documents

National Credit Act, s266 Requirement to produce books (credit activities) 91 123

National Credit Act, s267 Requirement to produce books 128 114

ASIC Act, s30 Notice to produce books

about affairs of body corporate or registered scheme 899 1,014

ASIC Act, s31 Notice to produce books

aboutfinancialproducts 27 74

ASIC Act, s32A Notice to produce books

aboutfinancialservices 4 7

ASIC Act, s33 Notice to produce books

in person’s possession 1,433 1,470

Provide access

ASIC Act, s29 Power to inspect books 0 0

Corporations Act, s821D Power to require access to a CS facility 0 0

Provide information

ASIC Act, s12GY(2) ASIC to require claims to

be substantiated 0 0

ASIC Act, s37(9)(a) Power requiring

explanation of books 2 0

Corporations Act, s601HD Power to request information about compliance plan of a registered scheme 0 0

National Credit Act, s49(1) Requirement to provide information (statement) 126 138

Appendices 243

Use of significant compulsory information-gathering powers

Number of notices 2018-19

Number of notices 2017-18

Corporations Act, s912C Power to require information from an AFS licensee 735 640

National Credit Act, Sch 2 item 17 Power to require information (obtain statement or audit report) 0 0

Corporations Act, s672A Power to require disclosure of relevant interests 8 45

Corporations Act, s672B Power to require

disclosure of relevant interests 0 0

National Credit Act, s37(4) Power to request information or audit report from licence applicant 0 0

Corporations Act, s792D Power to require reasonable assistance from a market licensee 3 13

Provide information and produce books

ASIC Act, s30A Notice to auditors

requiring information or books 35 43

ASIC Act, s30B Notice to registered

liquidators requiring information or books 6 3

Search warrants

Crimes Act 1914, s3E Warrantstosearch

premises/conveyance or person 662 55

ASIC Act, s36 Warranttosearch

premises 0 0

1 These notices may include directions to provide reasonable assistance or produce documents.

2 Of the 66 warrants issued (for 13 individual investigations) in 2018-19, 57 were executed.

ASIC Annual Report 2018-19 244

Table 8.2.6 Use of other powers

Use of other powers

Number of notices 2018-19

Number of notices 2017-18

Obligations of carriers and carriage service providers

Telecommunications Act 1997, s313 Request for help as is reasonably necessary for enforcing the criminal law

and laws imposing pecuniary penalties 0 0

Provide documents, information or evidence

Mutual Assistance in Business Regulation Act 1992, s10(2)

Requirement to produce documents, to give information or to appear to give evidence and produce documents 30 31

Licensing and professional registration activities

ASIC assesses applications for AFS licencesandcreditlicences.Wealso maintain a number of professional registers for registered companies, SMSFs, auditors and liquidators.

Our licensing and registration function is an important element of our regulatory framework as it governs entry into the financialsystem.Weusearisk-based approach to assessment, with the aim of devoting the most resources to assessing the most complex and high-risk applications. This is to ensure that only suitable persons and organisations are licensed or registered.

Examples include four instances where applicants challenged ASIC’s decision to refusetograntthemafinancialservices licencebecausewewerenotsatisfied that they were suitable, by appealing our refusal to the Administrative Appeals Tribunal (AAT). The AAT upheld ASIC’s decision to refuse to grant an AFS licence

inallfourinstances.Inafifthcase,the applicant agreed to tailored licence conditions to appropriately address ASIC’s concerns.Thiswasthenconfirmedby the AAT.

In 2018-19, we assessed over 2,080 applications for AFS licences and credit licences.Weapprovedover800AFS licences, 4 limited AFS licences and 356 credit licences.

Of the 1,178 AFS licence and credit licence applications that were approved (including both new licences and licence variations), 711 (60%) were approved in a form different in scope from the licence authorisations sought by the applicant or the standard conditions. For AFS licence applications, approximately 57% were approved with changes to the form of the licence, while for credit licence applications this proportion was approximately 68%.

Therewere1,592financialservices licence applications under consideration during the relevant period. Of these, 822

Appendices 245

were approved, 134 were rejected for lodgementduetomaterialdeficiencies, 172 were withdrawn, 9 were refused and the remaining 455 were still under assessment. Of the 822 approved applications, 467 (57%) were approved with alterations to the original application.

There were 682 credit licence applications under consideration during the relevant period. Of these, 356 were approved, 67 were rejected for lodgement due tomaterialdeficiencies,154were withdrawn and the remaining 104 were

under assessment. Of the 356 approved applications, 244 (68%) were approved with alterations to the original application.

Weassessedover218applications for registration as auditors (including company auditors and SMSF auditors). Of these applications, we approved 148, 1wasrejectedduetomaterialdeficiencies and58werewithdrawn.Wealsocancelled or suspended 568 registrations.

Table 8.2.7 provides a breakdown of the type and number of applications we assessed in 2018-19 compared to 2017-18.

Table 8.2.7 ASIC’s licensing and professional registration activities

2018-19 2017-18

AFS licences, including limited AFS licences (new and variations)

Approved 822 758

Refused/Withdrawn 315 410

Cancelled/Suspended 358 204

In progress 455 561

Australian credit licences (new and variations)

Approved 356 430

Refused/Withdrawn 221 188

Cancelled/Suspended 552 331

In progress 104 204

Registered auditors - registered company auditors, authorised audit company andSMSF auditors

Approved 148 195

Refused/Withdrawn 59 95

Cancelled/Suspended 568 632

In progress 11 39

ASIC Annual Report 2018-19 246

2018-19 2017-18

Registered liquidators

Approved 12 -

Refused/Withdrawn 2 -

In progress 9 -

Reports required under statute and other reporting requirements

ASIC Act

As required by section 136(1)(a), ASIC reports that in 2018-19 we issued one legislative instrument under the SIS Act, namely ASIC legislative instrument 2018/1080 made on 14 December 2018 under section 335 in Part 29 of the SIS Act.

Wedidnotexerciseourpowersunder Part 15 of the Retirement Savings Account Act 1997.

As required under section 136(1)(c), ASIC reports that during 2018-19 we conducted onejointinspectionwiththeUSPublic Company Accounting Oversight Board under the terms of an agreement between thetwoorganisations.Wedidnotconduct any joint inspections with the Canadian Public Accountability Board or the Luxembourg Commission de Surveillance du Secteur Financier or share any information with them under the relevant provisions of the ASIC Act during 2018-19.

Commonwealth fraud control guidelines

ASIC has a fraud control policy and plan in place, which is reviewed every two years and approved by the Operational RiskCommittee.Wehaveappropriate fraud prevention, detection, investigation and reporting mechanisms in place, considering the nature of ASIC’s activities. Wehavetakenallreasonablemeasuresto deal appropriately with fraud.

External scrutiny of ouragency

Financial Services Royal Commission

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was announced on 30 November 2017 and the Hon. Kenneth Hayne AC QC was appointed as Commissioner on 14 December 2017. The Commissionerprovidedthefinalreportof the Royal Commission to Government on 1 February 2019.

On 4 February 2019, the Treasurer released the Government’s response to the Royal Commission. ASIC published an update in February 2019 on our planned actions

Appendices 247

to implement the Royal Commission recommendations. The Royal Commission reinforced and informed the program of change that ASIC began in 2018 and is continuing to implement.

For more information on the Royal Commission, see Section 1.8

Judicial decisions and decisions of administrative tribunals

There were no judicial decisions, administrative tribunal decisions, or decisions by the Australian Information Commissioner in 2018-19 that have had, ormayhave,asignificantimpacton ASIC’s operations.

Australia’s Financial Reporting Council Auditor Disciplinary Processes

In April 2019, the Financial Reporting Council (FRC) released its report, which made a number of recommendations for improvement in the processes of ASIC, the CADB, Chartered Accountants ANZ, CPA Australia, and the IPA. The report focused on matters related to taking enforcement actions against or disciplining registered company auditors (RCAs) who do not meet the standards expected of them.

The FRC report was partly a response to a recommendation by the PJC for a review of ASIC’s enforcement powers in relation to auditors.

The report recommended that ASIC:

âº have better integrated systems to track enforcement matters across ASIC and a more structured approach to auditor surveillance matters:

- On 1 June 2018, we introduced anewworkflowsystemforASIC regulatory and enforcement activities, common across all ASIC teams, including our surveillance of potential RCA misconduct matters. This system will capture processes, documents and decision points in a common structured way using consistent terminology across ASIC.

âº should evaluate its criteria for audit enforcement actions and explain how the‘Whynotlitigate?’operational self-discipline would apply to RCA misconduct matters:

- ASIC will re-evaluate its criteria for taking auditor enforcement actions, and the types of outcomes that it may seek, including the use of enforceable undertakings and referrals of matters to the CADB as part of our implementation of the newOfficeofEnforcement.

âº should consider the division of resources between audit inspectionandfinancialreporting surveillance work:

- Auditfirminspections,surveillances onauditsofconcern,andfinancial reporting surveillances are all conducted within ASIC’s Financial Reporting and Audit team.

- Resources will continue to be dynamically allocated within the team to achieve the best outcomes forqualityfinancialreporting supported by quality audits.

âº should publish the results of audit inspections in greater detail, including namingfirms:

ASIC Annual Report 2018-19 248

- ASIC has decided to publish the percentageoffindingsfornamed auditfirmsinitsnextauditfirm inspection report.

Reports by Parliamentary Joint Committees

In 2018-19, ASIC contributed to the following responses and reports produced by the Parliamentary Joint Committee on Corporations and Financial Services:

âº Oversight of ASIC, the Takeover Panel and the Corporations Legislation No. 1 of the 45th Parliament, 1 May 2019

âº The operation and effectiveness of the Franchising Code of Conduct, 14 March 2019

âº Options for greater involvement by private sector life insurers in work rehabilitation, 24 October 2018.

Senate Standing Committees

During2018-19,ASICtestifiedbeforethe Senate Economics Committees numerous times and provided answers to Questions on Notice.

ASIC was involved in the following reportsfinalisedbytheSenate Economics Committees:

âº Standing Committee on Economics, Review of the Australian Securities and Investments Commission Annual Report 2017, tabled 10 September 2018

âº Senate Economics Legislation Committee, Banking System Reform (Separation of Banks) Bill 2019, 8 May 2019

âº Senate Economics Legislation Committee, Parliamentary Joint Committee on the Australia Fund Bill 2018, 3 April 2019

âº Senate Economics Legislation Committee, Lower Tax Bill 2018, 2 April 2019

âº Senate Economics Legislation Committee, Australian Business Securitisation Fund Bill 2019 [Provisions], 26 March 2019

âº ASIC also contributed to the following reports:

- Banking System Reform (Separation of Banks) Bill 2019, 8 May 2019

- Parliamentary Joint Committee on the Australia Fund Bill 2018, 3 April 2019

- Lower Tax Bill 2018, 2 April 2019

- Australian Business Securitisation Fund Bill 2019 [Provisions], 26 March 2019

- Parliamentary Joint Committee on Corporations and Financial Services, Oversight of ASIC, the Takeover Panel and the Corporations Legislation No. 1 of the 45th Parliament, 1 May 2019

- Parliamentary Joint Committee on Corporations and Financial Services, The operation and effectiveness of the Franchising Code of Conduct, 14 March 2019

- Parliamentary Joint Committee on Corporations and Financial Services, Options for greater involvement by private sector life insurers in work rehabilitation, 24 October 2018.

Other reports

Thisfinancialyear,therewereno:

âº statementsofsignificantissues reported to the Minister relating to ASIC’snon-compliancewithfinancelaw

Appendices 249

âº reports issued by the Auditor-General relatingtothefinancialstatementsof Australian Government entities

âº capability reviews of ASIC.

ASIC was examined in the report on the Commonwealth Ombudsman’s monitoring of agency access to stored communications and telecommunications data under Chapters 3 and 4 of the Telecommunications (Interception and Access) Act 1979, issued in November 2018.

Freedom of Information Act 1982

Members of the public have the right to apply to ASIC for access to documents in ASIC’s possession under the Freedom of Information Act 1982 (FOI Act).

Applications must be in writing, state that they are made under the FOI Act, provide information to identify the documents requested, and provide details of where notices under the FOI Act can be sent to the applicant.

Requests by email should be sent to: foirequest@asic.gov.au

or you may lodge a mail request to:

Senior Manager Administrative Law Team GPO Box 9827 Melbourne VIC 3001

For further information on how to apply, visit our website at www.asic.gov.au.

Categories of documents in ASIC’s possession include, for operational matters:

âº licence and professional registration applications

âº applications from businesses, correspondence, internal working papers, policy proposals and submissions

âº administrative, civil and criminal enforcement matters, including documents obtained under ASIC’s compulsory powers.

And, for other matters, categories of documents include:

âº law reform, including submissions and proposal papers

âº correspondence with members of the public, government entities, parliamentary committees, business entities and other bodies

âº administration, including accommodation, accounts, expenditure, invoices, audit, human resources, recruitment and employee management, delegation and authorisation

âº reference materials, including those contained in the library, handbooks, guidelines, manuals, regulatory documents, media releases, information releases, pamphlets and annual reports

âº other documents held as public information (in the ASCOT database).

Members of the public can inspect ASIC regulatory documents, information brochures, media releases, reports, legislative instruments and other regulatory publications on our website.

ASIC Digest, which includes ASIC regulatory documents and additional information, is published by Thomson Reuters under the terms of an agreement with ASIC.

ASIC Annual Report 2018-19 250

ASIC Digest is available by subscription from Thomson Reuters, telephone 1300 304 197.

Information from ASIC’s registers and databases that is available to the public for the payment of a fee cannot be obtained under the FOI Act.

Agencies subject to the FOI Act must publish information for the public as part of the Information Publication Scheme. This requirement is in Part 2 of the FOI Act and has replaced the former requirement to publish a section 8 statement in an annual report.

ASIC’s Information Publication Scheme Plan, showing what information is published in accordance with the scheme requirements, can be found at https://asic.gov.au/about-asic/ freedom-of-information-foi/information- publication-scheme/.

Grants programs

The Assetless Administration Fund (AA Fund) is a grant scheme established by the Government and administered by ASIC. The scheme may fund liquidators for:

âº preliminary investigations and reports into the failure of companies with few or no assets, where it appears that enforcement action may result from the investigations and reports

âº the winding up of companies under Part 5.4C of the Corporations Act

âº actions to recover assets where fraudulent or unlawful phoenix activity is suspected

âº review and reporting by a reviewing liquidator of companies in external administration involving suspected illegal phoenix activity.

On 1 July 2018, ASIC was allocated $4.610 million. On 1 January 2019, an increase in funding of $1.238 million was allocated to help fund liquidators taking asset recovery action, in particular relating to illegal phoenix activity. The total funding allocation for 2018-19 was $5.848 million. ASIC paid and committed the amount of $3.651 million to liquidators in 2018-19.

In 2018-19, under the grant scheme, ASIC received 724 applications for funding comprising:

âº 582 banning (EX02) applications

âº 141 ‘Matters other than s206F - Director banning’ (EX03) applications

âº 1 application for a liquidator to recover assets.

ASIC granted funding for:

âº 226 banning (EX02) applications

âº 69 ‘Matters other than s206F - Director banning’ (EX03) applications

âº 1 application for a liquidator to recover assets.

ASIC appointed liquidators and funded:

âº 15 windings up of abandoned companies

âº 2 reviewing liquidators to report on eight matters.

Reports funded by the AA Fund assisted in approximately 88% of director bannings (44 out of 50).

Information on grants by ASIC under the AA Fund can be found at www.asic.gov.au/for-finance - professionals/registered-liquidators/your- ongoing-obligations-as-a-registered- liquidator/assetless-administration-fund/.

Appendices 251

8.3 Appendices relating to statements required by law

Portfolio budget statement outcomes

Table 8.3.1 Agency resource statement, 2018-19

Actual available

appropriation for 2018-19 $’000

Cash

payments made1 2018-19 $’000

Balance remaining 2018-19 $’000

Ordinary annual services2

Departmental

Departmental appropriation3 579,221 393,672 185,549

Administered expenses

Outcome 1 - Bill 1

Administration fund 19,683 14,905 N/A

Total ordinary annual services A 598,904 408,577 N/A

Other services

Departmental non-operating

Equity injections4 15,304 13,069 2,235

Total other services B 15,304 13,069 2,235

Total available appropriations (A+B) 614,208 421,646 N/A

Special appropriations limited by criteria/amount

Banking Act 1959 N/A 16,535 N/A

Life Insurance Act 1995 N/A 4,081 N/A

Total special appropriations C N/A 20,616 N/A

Total appropriations excluding special accounts (A+B+C) 614,208 442,261 N/A

ASIC Annual Report 2018-19 252

Actual available

appropriation for 2018-19 $’000

Cash

payments made1 2018-19 $’000

Balance remaining 2018-19 $’000

Special Account5

Opening balance 59,135 N/A N/A

Appropriation receipts 36,217 N/A N/A

Costs recovered 2,213 N/A N/A

Payments made N/A 34,611 N/A

Total special account D 97,565 34,611 N/A

Total resourcing (A+B+C+D) 711,773 476,872 N/A

Less appropriations drawn from annual appropriations above and credited to special accounts (36,217) N/A N/A

Total net resourcing for ASIC 675,556 476,872 N/A

1 Does not include GST.

2 Appropriation Bill (No. 1) 2018-19, Appropriation Bill (No. 3) 2018-19, prior year departmental appropriation and section 74 relevant agency receipts.

3 Includes $24.345 million for the Departmental Capital Budget. For accounting purposes, this amount has been designated as ‘contributions by owners’.

4 Appropriation Bill (No. 2) 2018-19.

5 Does not include Special Public Money.

Appendices 253

Table 8.3.2 Expenses by outcome

Budget1 2018-19 (1) $’000

Actual expenses 2018-19 (2) $’000

Variance column (1) minus column (2)

$’000

Outcome 1: Improved confidence in Australia’s financial markets through promoting informed investors and financial consumers, facilitating fair and efficient markets, and delivering efficient registry systems.

A Administered expenses funded by administered appropriations 19,683 13,523 6,160

B Departmental expenses funded by departmental appropriations and own-source revenue 384,843 431,643 (46,800)

Total for Outcome 1 (A+B) 404,526 445,166 (40,640)

Average FTE2 1,719 1,700 19

1 Based on the 2018-19 forecast as set out in ASIC’s 2018-19 Portfolio Budget Statements.

2 2018-19PortfolioBudgetStatementsquotedtheaveragestaffinglevel,whichisdifferentfromFTE.Theaverage staffinglevelincludesemployeesworkingoncapitalprojects,whiletheFTEexcludesemployeesworkingon capital projects.

Managing property vested in ASIC or the Commonwealth

ASIC administers the property of deregistered companies. This property remains vested in ASIC or, in the case of trust property, the Commonwealth until it is lawfully dealt with or evidence is provided that the property no longer vests in ASIC or the Commonwealth for some other reason.

ASIC accounts for any proceeds on realisation of property vested in it by transferring such proceeds, less the expenses incurred in dealing with the property,intotheOfficialPublicAccount in accordance with our statutory duties.

The proceeds are treated like any other unclaimed money for which ASIC is responsible.

In 2018-19, the number of new cases received increased to 1,497 and the numberofcasesfinalisedincreased to 1,488.

Table 8.3.3 below shows vested properties of deregistered companies by number of cases.

ASIC Annual Report 2018-19 254

Assets of deregistered companies vesting in ASIC or the Commonwealth

Section 601AD of the Corporations Act provides that when a company is deregistered, all of its property vests in ASIC or, in the case of trust property, theCommonwealth.Weaccountforany proceeds on realisation of those assets in accordance with our statutory duties.

Wegenerallyonlydealwithvested property once an application is made by a third party for us to exercise powers under section 601AE or section 601AF of theCorporationsAct.Wedonotconsider itpracticaltovalueanyidentifiedvested property and, consequently, such property is not recorded or disclosed in these financial statements.

Table 8.3.3 Vested properties of deregistered companies (by number of cases)

Claims by type 2018-19 2017-18

Total new cases 1,497 1,417

Totalfinalisedcases 1,488 1,425

Property disposals

Transferred 92 82

Sold 9 6

No longer vested1 723 693

Other2 51 47

Total property disposals 875 828

1 Property is removed from ASIC’s records when the company is reinstated, a third party lawfully deals with the asset, or evidence is provided that the property no longer vests in ASIC.

2 Includes where the vested property interest has been discharged, released, surrendered or withdrawn.

Appendices 255

Environmental performance

This section describes ASIC’s environmental performance in accordance with government policy. In 2018-19, we continued to mitigate our impact on the environment through the initiatives discussed below.

Energy efficiency

Our total electricity consumption has reduced by 39% since 2010-11.

WeminimiseourconsumptionofofficeenergywithinitiativesincludingLEDlighting, motion sensor-controlled lighting, and the use of power-saving mode for ICT equipment.

Table 8.3.4 Consumption of office energy

Indicator 2018-19 2017-18

Lightandpower-ASICtenancies(kWh) 2,810,828 2,895,023

MJ per person 4,337 5,347

Lightandpower-ASICcomputercentres(kWh) 764,292 852,217

MJ per m2 5,823 6,586

Greenhouse gas emissions (tonnes CO2-e) - attributed to all light and power 3,420 3,731

Note: Energy consumption includes sub-tenanted areas that are not separately metered. Contains extrapolated data for 0.23% of total consumption.

Waste reduction

Our digitisation strategies include using online legislation and electronic working methods to review lengthy reports and papers online rather than in printed form. Default duplex settings on printers and automatic overnight job purging further reduce our use of copy paper.

ASIC Annual Report 2018-19 256

Table 8.3.5 Waste reduction

Indicator 2018-19 2017-18

OfficepaperpurchasedbyFTE(A4reams/FTE) 4 7

Percentageofofficepaperpurchasedwithrecycledcontent 100% 98%

Toner cartridges recycled (kgs) 571 452

IT equipment recycled or re-used (tonnes) 5.5 6.8

Since 2014-15, we have reduced our consumption of office paper purchased by FTE by 67%.

Travel

ASIC employees are authorised to travel only when there is a demonstrated business need and when alternative communication tools, such as telephone and video conferencing, are notappropriate.Thisyear,thereweremorethan32,000videoconnections,bothintra-office andofficetoexternallocations,a24%increaseonlastyearasanalternativetoairtravel.

Table 8.3.6 Type and amount of travel undertaken by ASIC employees

Indicator 2018-19 2017-18

Ground travel1

Totalnumberoffleetvehicles 3 5

Totaldistancetravelledbyfleetvehicles(kms) 43,041 62,351

Averagefuelconsumptionoffleetvehicles(litres/100kms) 7.11 8.23

Totaldirectgreenhouseemissionsoffleet(tonnesCO 2-e) 8.09 12.10

Total distance travelled using GoGet carshare (kms) 3,483 4,644

Air travel

Totaldistanceofairflights(kms) 10,849,207 11,278,871

Totalgreenhouseemissionsofflights(tonnesCO 2-e) 1.036 not available

Alternative meeting communications

Total number of video conferencing calls 9,113 7,741

1 Thefleetdataisfortheperiod1Aprilto31Marcheachyear.

Appendices 257

Property

ASIC continues to reduce its environmental footprint, including by the expansion of activity-based working in our officesnationally,whichhasenabledusto increase the number of people located in ourSydneyandMelbourneofficeswithout increasing the space footprint. In 2018-19 we also reduced the space footprint in our Adelaideoffice.

Information and engagement

Wecontinuedtoprovideinformation to employees on our intranet and at induction on sustainable initiatives. Our employees are also provided with our twice-annual performance reporting and participate in environmental activities such as Earth Hour.

Consultancies and expenditure on advertising

Commonwealth Electoral Act 1918

Section 311A of the Commonwealth Electoral Act 1918 requires agencies to report expenditure on services provided by advertising agencies, market research organisations, polling organisations, direct mail organisations and media advertising organisations.

Sums less than $13,200 are not required to be reported. All sums are GST inclusive and are actual expenditures for

2018-19. During 2018-19, ASIC conducted the advertising campaigns set out in Table 8.3.7 below.

Further information on ASIC’s advertising campaigns is available on our website. Information on advertising campaign expenditure greater than $250,000 is available in the reports on Australian Government advertising prepared by the Department of Finance. Those reports are available at www.finance.gov.au .

Table 8.3.7 Expenditure on advertising agency services, 2018-19

Agency Expenditure ($) Purpose

Mediabrands Australia Pty Ltd 13,235 GradAustralia advertising - online profile andGenerationOne Indigenous Careers Guide 2019

Mediabrands Australia Pty Ltd 14,680 2020 GradConnection yearly subscription

Mediabrands Australia Pty Ltd 32,065 e-financial careersadvertising

The Nielsen Company (Australia) Pty Ltd

74,453 Advertising Monitoring Services

ASIC Annual Report 2018-19 258

Agency Expenditure ($) Purpose

Mediabrands Australia Pty Ltd 13,986 2019 Graduate advertising - GradConnection gold package and diversity bundle

Australian Public Service Commission

25,545 2018-19 Public Service Gazette (APS Jobs Advertising)

Mediabrands Australia Pty Ltd 23,766 UniversalMcCann-Seekstandout 150 ad pack

Mediabrands Australia Pty Ltd 38,523 Seek job ads 3 Ã 50

Mediabrands Australia Pty Ltd 57,041 LinkedIn package 2019

Total 293,294

Table 8.3.8 Expenditure on services by market research, polling, direct mail and media advertising organisations, 2018-191

Agency Expenditure ($) Purpose

Mobius Marketing 19,360 Mobius web design

Fuji Xerox Business Force Pty Ltd 52,970 On boarding letter mailout

A.C.N. 613 066 541 Pty Ltd

76,120 Reverse mortgage questionnaire

Bastion Insights Pty Ltd 87,890 Market and social research with consumers to explore their practices, attitudes and understanding relevant to the ePayments Code

Bastion Insights Pty Ltd 168,135 Consumer research school banking project

Cultural Perspectives Pty Ltd 17,424 Research project, small business strategy for culturally and linguistically diverse

communities

Cutthru Pty Ltd 79,750 Life insurance claims data CR

Appendices 259

Agency Expenditure ($) Purpose

Deloitte Touche Tohmatsu

50,000 Development of a report on the mortgage broker industry addressing trends in the market, such as volume of lending and commission arrangements

Heartward Pty Ltd 71,850 Timeshare consumer research

Heartward Pty Ltd 79,976 Consumer experience of comprehensive

motor vehicle claims investigations

Kiel Advisory Group Pty Ltd

140,525 Provision of qualitative research services

Les Bell and Associates Pty Ltd

53,575 Consumer research and report on impacts of proposed changes to fees and cost disclosure in PDSs and periodic statements for superannuation and managed investments

Newgate Communications Pty Ltd

96,569 Market and social research - credit card repayments consumer research

String Research Insights Consulting Pty Ltd

71,370 Development of monitor/questionnaire

The Lab Insight and Strategy Sydney Pty Ltd

98,340 Research to explore consumers’ attitudes, behaviour and experience in relation to switching motor and home building/ contents insurance

The Seedling Group Pty Ltd 141,099 Exploring how Aboriginal and Torres Strait Islander peoples have become high-level

users of high-cost credit products, such as payday loans, consumer leases, and funeral and life insurance, in order to understand the consumer patterns in the use of these products

Sensis Pty Ltd 34,387 WhitePagesdirectorylistings

Total 1,339,340

1 WehavelistedmarketresearchorganisationsthatarerecognisedbytheAustralianMarket&SocialResearch Society (AMSRS) and the Association of Market and Social Research Organisations (AMSRO).

ASIC Annual Report 2018-19 260

Procurement

Managing procurement

ASIC’s use of Commonwealth resources and expenditure of public money is primarily governed by the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule). Responsibility for compliance with the Commonwealth Procurement Rules (CPRs) lies with the appropriate financialdelegates.

The delegates are supported by a centralprocurementteamofqualified procurementofficers who:

âº develop and maintain our procurement processes and systems to promote compliance with the PGPA Act, the PGPA Rule and the CPRs for all levels of procurement

âº manage complex and high-risk procurement activities, including procurements that are subject to the mandatory procurement procedures of the CPRs.

Our procurement framework aims to facilitate compliance with the core principles and policies of the CPRs, including ‘value for money’, ‘encouraging competition’,‘efficient,effective,ethical and economical use of resources’ and ‘accountability and transparency’.

Weundertakeregularauditsof procurement and any instances of non-compliance are reported through the compliance report and addressed as required through process improvement initiatives.

All major contracts entered into in 2018-19 contained provisions, as required, allowing the Auditor-General access to information held by contractors relating to contract performance.

Using AusTender

ASIC advertises all open tender opportunities through the AusTender website, www.tenders.gov.au.

During 2018-19, ASIC did not implement any standing offer arrangements (procurement panels) and awarded 856 procurement activities (each valued at $10,000 or more reported on AusTender) for a total value of $152.117 million. Of these procurements, 287 were valued in excess of $80,000 for a total value of $132.311 million.

Contracts of $100,000 or more were reported on AusTender, in accordance with the Senate order on departmental and agency contracts. Information on contracts and consultancies awarded by ASIC is also available on the AusTender website. Our annual procurement plan was published on AusTender by 1 July 2018 and was updated as required during the year.

No contracts were exempt from the contract reporting requirements.

Consultancy contracts

During 2018-19, ASIC entered into 49 new consultancy contracts, involving total expenditure of around $6.625 million. In addition, 32 ongoing consultancy contracts were active during the year, involving total expenditure of $7.460 million.

Appendices 261

Table 8.3.9 Consultancy trend data

Business data 2018-19 2017-18

Number of new consultancies 49 43

Expenditure on new consultancies ($ millions) 6.625 4.697

Number of ongoing consultancies 32 22

Expenditure on ongoing consultancies ($ millions) 7.460 3.200

Note:TheabovefiguresareGSTinclusiveandincludeallconsultanciesvaluedover$10,000,asindicatedon AusTender.Thefiguresdifferfromtheconsultancyexpendituresshowninthefinancialstatements,whicharethe value of all consulting costs exclusive of GST. Annual reports contain information about actual expenditure on contracts for consultancies. Information on the value of contracts and consultancies is available on the AusTender website, www.tenders.gov.au.

Policy on selection and engagement of consultants

ASIC’s consultancy budget is managed centrally and business units seeking to engage consultants must prepare a business case seeking funding. Requests to engage consultants must be linked to outcomes in business plans and must contribute to ASIC’s objectives. Once the engagement of a consultant is approved, the procurement method used will be in accordance with the CPRs and ASIC’s procurement policies.

Of the 49 consultants that ASIC engaged during 2018-19:

âº 24 were for specialised or professional skills

âº 1 was for skills not currently available within ASIC

âº 24 were for independent research or assessment.

The method of procurement used was open tender for 27 engagements (including engagements from panels), limited tender for 22 engagements and 0pre-qualifiedtenderengagements.

The consultants were engaged for the following main service categories:

âº accounting services

âº audit services

âº business intelligence consulting services

âº education and training services

âº information technology consulting services

âº internal audits

âº management advisory services

âº market research

âº research programs

âº risk management consultation services

âº strategic planning consultation services.

ASIC Annual Report 2018-19 262

Procurement initiatives to support small business

ASIC supports small business participation in the Australian Government procurement market. Small and medium enterprises and small enterprise participation statistics are available on the Department of Finance website, www.finance.gov.au .

ASIC recognises the importance of ensuring that small businesses are paid on time. The results of the Survey of Australian Government Payments to Small Business are available on the Treasury website, www.treasury.gov.au.

ASIC’s procurement practices support small businesses by:

âº encouraging the use of the Commonwealth Contracting Suite for low-risk procurements valued under $200,000, where applicable

âº presenting information in an accessible format.

Appendices 263

8.4 Five-year summary of key stakeholder data

Business data 2018-19 2017-18 2016-17 2015-16 2014-15

Companies (total) 2.7m 2.6m 2.5m 2.4m 2.2m

New companies registered 223,661 244,510 249,394 246,051 235,182

AFS licensees 6,159 6,170 6,058 5,511 5,198

Authorised market infrastructure providers1 64 65 67 52 50

Registered company auditors 3,962 4,226 4,365 4,483 4,596

Registered liquidators 651 663 711 707 711

Registered managed investment schemes 3,712 3,726 3,632 3,619 3,642

Credit licensees 5,188 5,503 5,576 5,726 5,779

Fundraising documents lodged 794 898 1,017 891 1,078

Control transactions - schemes and bids 73 60 72 64 78

Control transactions - schemes and bids implied target size $34.3bn $32bn $18bn $34.8bn $27.4bn

Fundraising where ASIC required additional disclosure $3.2bn $3.5bn $7.2bn $6.4bn $9.4bn

Recoveries, costs, compensation,finesor assets frozen $77.7m $437.8m $849.7m $217.4m $61.1m

% successful criminal and civil litigations 94% 99% 90% 96% 85%

Criminal and civil litigation and administrative actions concluded2 192 138 220 181 167

ASIC Annual Report 2018-19 264

Business data 2018-19 2017-18 2016-17 2015-16 2014-15

Criminals imprisoned 10 6 13 13 12

Reports of crime or misconductfinalised 10,249 9,567 9,011 9,751 9,669

Total searches of ASIC databases 142.6m 122.5m 90.6m 90.7m 86.2m

Business names (total) 2.3m 2.2m 2.2m 2.1m 2.2m

New business names registered 375,052 366,181 348,266 337,413 327,687

Registered SMSF auditors 5,919 6,039 6,339 6,671 6,669

% company data lodged on time 94.6% 94.6% 94.6% 95% 96%

Fees and charges collected for the Commonwealth $1,273m $1,227m $920m $876m $824m

Employees (average FTEs)3 1,701 1,656 1,640 1,627 1,609

1 Wechangedthemethodologyforreportingthenumberofauthorisedmarketinfrastructureprovidersin 2016-17.Thisfigurenowincludesexemptfinancialmarkets,licensedclearingandsettlement(CS)facilities, exempt CS facilities, licensed trade repositories and credit rating agencies in addition to domestic and overseas financial markets.

2 Excludes summary prosecutions for strict liability offences.

3 Net average number over 12 months on net FTE basis (i.e. excluding FTEs working on capital projects).

Appendices 265

ASIC Annual Report 2018-19 266

9Glossary

Glossary 267

Glossary

AA Fund Assetless Administration Fund

AAT Administrative Appeals Tribunal

ABA Australian Banking Association

ACCC Australian Competition and Consumer Commission

AFCA Australian Financial Complaints Authority

AFS licence Australianfinancialserviceslicence

ANZ Australia and New Zealand Banking Group Limited

APRA Australian Prudential Regulation Authority

APRC Asia-PacificRegionalCommittee

APS Australian Public Service

APY Anangu Pitjantjatjara Yankunytjatjara

ARFP Asia Region Funds Passport

ASIC Act Australian Securities and Investments Commission Act 2001

ASX ASX Limited or the exchange market operated by ASX Limited

ATO AustralianTaxationOffice

AUSTRAC Australian Transaction Reports and Analysis Centre

BBSW Bank bill swap rate

CADB Companies Auditors Disciplinary Board, formerly known as the Companies Auditors and Liquidators Disciplinary Board (CALDB)

CAP Consumer Advisory Panel

CBA Commonwealth Bank of Australia

CCI Consumer credit insurance

CCM Close and Continuous Monitoring

CDPP Commonwealth Director of Public Prosecutions

CFR Council of Financial Regulators

CGTF Corporate Governance Taskforce

ASIC Annual Report 2018-19 268

CHESS ASX Clearing House Electronic Subregister System

Corporations Act Corporations Act 2001

CP Consultation Paper

CPRs Commonwealth Procurement Rules

CRF Corporate Registers Forum

CRIS Cost Recovery Implementation Statement

crowd-sourced funding

Afinancialservicewherestart-upsandsmallbusinessesraise funds, generally from a large number of investors that invest small amounts of money

CS Clearing and settlement

cyber resilience An organisation’s ability to prepare for, respond to and recover from a cyber attack

derivative Afinancialinstrumentwherethevalueisderivedfroman underlying asset, such as a share, commodity or index

digital advice Digital advice (also known as robo-advice or automated advice) istheprovisionofautomatedfinancialproductadviceusing algorithms and technology and without the direct involvement of a human adviser

EDR External dispute resolution

ESA Enforcement Special Account

FCA UKFinancialConductAuthority

financial capability The combination of an individual’s attitude, knowledge, skills, confidenceandabilitytomakesoundfinancialdecisions

fintech Financial technology

FOI Act Freedom of Information Act 1982

FRC Financial Reporting Council

FSAP Financial Sector Assessment Program

FSCP Financial Services and Credit Panel

FTE Full-time equivalent

GAP Guaranteed asset protection

GFIN Global Financial Innovation Network

ICO Initial coin offering

Glossary 269

ICT Information and communications technology

IDPS Investor directed portfolio service

IDR Internal dispute resolution

IMF International Monetary Fund

industry funding A funding model whereby those who create the need for and benefitfromASIC’sregulationbearthecosts.Entitiespaya share of the costs to regulate their subsector through industry levies based on a range of business activity metrics.

INFO Information Sheet

Innovation Hub ASIC’sonlinehubprovidingtailoredcontentforfintech businessesthataredevelopinginnovativefinancialproducts or services

IOP Indigenous Outreach Program

IOSCO International Organization of Securities Commissions

IPA Institute of Public Accountants

IT Information technology

LGBTIQ+ Lesbian, gay, bisexual, trans, intersex and queer

LIBOR London Interbank Offered Rate

marketplace lending Marketplace lending generally describes an arrangement through which retail or wholesale investors invest money (seeking to earn a return), which is then lent to borrowers (consumers or businesses)

MDA Managed discretionary account

MDP Markets Disciplinary Panel

MoneySmart ASIC’s consumer website

NAB National Australia Bank

NAIDOC National Aborigines and Islanders Day Observance Committee

National Credit Act National Consumer Credit Protection Act 2009

OJK Otoritas Jasa Keuangan, the Indonesian Financial Services

Authority

OTC Over-the-counter

ASIC Annual Report 2018-19 270

payday loans Small-amount or short-term loans to individuals that generally attractsignificantlyhigherinterestratesandcoststhanother types of loans

PDS Product disclosure statement

PGPA Act Public Governance, Performance and Accountability Act 2013

PGPA Rule Public Governance, Performance and Accountability Rule 2014

phoenix activity (illegal) Transferring assets of an indebted company to a new company to avoid paying creditors, tax or other employee entitlements

Phoenix Taskforce A cross-agency taskforce the Government established in 2014 to combat illegal phoenix activity.

PJC Parliamentary Joint Committee

RAP Reconciliation Action Plan

RBA Reserve Bank of Australia

RCA Registered company auditor

RE Responsible entity

regtech Regulatory technology; technology designed to address regulatorychallengesinthefinancialservicessector

Regulatory Transformation program

ASIC’sprogramtoincreaseefficiencybyestablishingacommon language across ASIC, streamlining our regulatory business processes, making compliance and interaction with us easier through online portals, and implementing a single technology strategy

REP Report

RG Regulatory Guide

Royal Commission Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Committee

SCT Superannuation Complaints Tribunal

SES Senior Executive Service

SFCT Serious Financial Crime Taskforce

SIS Act Superannuation Industry (Supervision) Act 1993

SMSF Self-managed superannuation fund

Glossary 271

ASIC Annual Report 2018-19 272

10Compliance indexReporting requirements under the Public Governance, Performance and Accountability Act 2013 274Additional compliance reporting requirements 283 Compliance index 273

Reporting requirements under the Public Governance, Performance and Accountability Act 2013

PGPA rule reference Part of report/Description Requirement

Location (page(s))

17AD(g) Letter of transmittal

17AI A copy of the letter of transmittal signed

and dated by the accountable authority onthedatethefinaltextisapproved, with a statement that the report has been prepared in accordance with section 46 of the PGPA Act and any enabling legislation thatspecifiesadditionalrequirementsin relation to the annual report

Mandatory 1

17AD(h) Aids to access

17AJ(a) Table of contents Mandatory 2-3

17AJ(b) Alphabetical index Mandatory 285

17AJ(c) Glossary of abbreviations and acronyms Mandatory 267-271

17AJ(d) List of requirements Mandatory 274-284

17AJ(e) Detailsofcontactofficer Mandatory Inside

back cover

17AJ(f) Entity’s website address Mandatory Inside

back cover

17AJ(g) Electronic address of report Mandatory Inside

back cover

17AD(a) Review by accountable authority

17AD(a) A review by the accountable authority of the entity Mandatory 6-10

17AD(b) Overview of the entity

17AE(1)(a)(i) A description of the role and functions of the entity Mandatory 11-13

ASIC Annual Report 2018-19 274

PGPA rule reference Part of report/Description Requirement

Location (page(s))

17AE(1)(a)(ii) A description of the organisational structure of the entity Mandatory 14-15

17AE(1)(a)(iii) A description of the outcomes and programs administered by the entity Mandatory 38-43, 70-74

17AE(1)(a)(iv) A description of the purposes of the entity as included in the Corporate Plan Mandatory 38, 44

17AE(1)(b) An outline of the structure of the portfolio of the entity Portfolio departments

- mandatory

N/A

17AE(2) Wheretheoutcomesandprograms administered by the entity differ from any Portfolio Budget Statement, Portfolio Additional Estimates Statement or other portfolio estimates statement that was prepared for the entity for the period, details of variation and reasons for change

Mandatory 210-218

17AD(c) Report on the performance of the entity

Annual performance statement

17AD(c)(i); 16F Annual performance statement in accordance with paragraph 39(1)(b) of the PGPA Act and section 16F of the PGPA Rule

Mandatory 37-78

17AD(c)(ii) Reports on financial performance

17AF(1)(a) A discussion and analysis of the entity’s financial performance Mandatory 35-36, 159-218

17AF(1)(b) A table summarising the total resources and total payments of the entity Mandatory 252-254

Compliance index 275

PGPA rule reference Part of report/Description Requirement

Location (page(s))

17AF(2) Iftheremaybesignificantchangesinthe financial resultsduringoraftertheprevious or current reporting period, information on those changes, including the cause of any operating loss of the entity; how the entity has responded to the loss and the actions that have been taken in relation to the loss; and any matter or circumstances that it can reasonably be anticipated will have asignificantimpactontheentity’sfuture operationorfinancialresults

If applicable, mandatory N/A

Management and accountability

Corporate governance

17AG(2)(a) Information on compliance with section 10 (fraud systems) of the PGPA Act Mandatory 247

17AG(2)(b)(i) Acertificationbytheaccountableauthority that fraud risk assessments and fraud control plans have been prepared

Mandatory 247

17AG(2)(b)(ii) Acertificationbytheaccountable authority that appropriate mechanisms for preventing, detecting incidents of, investigating or otherwise dealing with, and recording or reporting, fraud that meetthespecificneedsoftheentityare in place

Mandatory 247

17AG(2)(b)(iii) Acertificationbytheaccountableauthority that all reasonable measures have been taken to deal appropriately with fraud relating to the entity

Mandatory 247

17AG(2)(c) An outline of structures and processes in place for the entity to implement principles and objectives of corporate governance

Mandatory 13, 14-15, 220-223

ASIC Annual Report 2018-19 276

PGPA rule reference Part of report/Description Requirement

Location (page(s))

17AG(2)(d)-(e) Astatementofsignificantissues reported to the Minister under paragraph 19(1)(e) of the PGPA Act that relate to non-compliancewithfinancelawand action taken to remedy non-compliance

If applicable, mandatory N/A

External scrutiny

17AG(3) Informationonthemostsignificant developments in external scrutiny and the entity’s response to the scrutiny

Mandatory 247-251

17AG(3)(a) Information on judicial decisions and decisions of administrative tribunals and by the Australian Information Commissioner thatmayhaveasignificanteffectonthe operations of the entity

If applicable, mandatory 248

17AG(3)(b) Information on any reports on operations of the entity by the Auditor-General (other than reports under section 43 of the Act), a Parliamentary Committee or the Commonwealth Ombudsman

If applicable, mandatory 249-250

17AG(3)(c) Information on any capability review on the entity that was released during the period If applicable, mandatory

249-250

Management of human resources

17AG(4)(a) An assessment of the entity’s effectiveness in managing and developing employees to achieve entity objectives

Mandatory 146-150

17AG(4)(b) Statistics on the entity’s APS employees on an ongoing and non-ongoing basis, including the following:

âº Statisticsonstaffingclassificationlevels

âº Statistics on full-time employees

âº Statistics on part-time employees

âº Statistics on gender

âº Statistics on staff location

âº Statistics on employees who identify as Indigenous

Mandatory 151, 155, 227-237

Compliance index 277

PGPA rule reference Part of report/Description Requirement

Location (page(s))

17AG(4)(c) Information on any enterprise agreements, individualflexibilityarrangements, Australian workplace agreements, common law contracts, and determinations under subsection 24(1) of the Public Service Act

Mandatory 146, 231-232

17AG(4)(c)(i) Information on the number of SES and non-SES employees covered by agreements, arrangements, contracts or determinations during this period

Mandatory 228-231

17AG(4)(c)(ii) The salary ranges available for APS employeesbyclassificationlevel Mandatory 232

17AG(4)(c)(iii) Adescriptionofnon-salarybenefits provided to employees Mandatory 146-150

17AG(4)(d)(i) Information on the number of employees ateachclassificationlevelwhoreceived performance pay

If applicable, mandatory 232

17AG(4)(d)(ii) Information on aggregate amounts of performancepayateachclassification level

If applicable, mandatory 232

17AG(4)(d)(iii) Information on the average amount of performance payments, and the range of suchpayments,ateachclassificationlevel

If applicable, mandatory 232

17AG(4)(d)(iv) Information on the aggregate amount of performance payments If applicable, mandatory

232

Assets management

17AG(5) An assessment of the effectiveness of asset management where asset managementisasignificantpartofthe entity’s activities

If applicable, mandatory 209, 254-255

Purchasing

17AG(6) An assessment of the entity performance against the Commonwealth Procurement Rules

Mandatory 261

ASIC Annual Report 2018-19 278

PGPA rule reference Part of report/Description Requirement

Location (page(s))

Consultants

17AG(7)(a) A summary statement detailing the number of new contracts engaging consultants entered into during the period; the total actual expenditure on all new consultancy contracts entered into during the period (inclusive of GST); the number of ongoing consultancy contracts that were entered into during a previous reporting period; and the total actual expenditure in the reporting year on the ongoing consultancy contracts (inclusive of GST)

Mandatory 261-262

17AG(7)(b) A statement that ‘During [reporting period],[specifiednumber]new consultancy contracts were entered into involving total actual expenditure of$[specifiedmillion].Inaddition, [specifiednumber]ongoingconsultancy contracts were active during the period, involving total actual expenditure of $[specified million].’

Mandatory 261

17AG(7)(c) A summary of the policies and procedures for selecting and engaging consultants and the main categories of purposes for which consultants were selected and engaged

Mandatory 262-263

17AG(7)(d) A statement that ‘Annual reports contain information about actual expenditure on contracts for consultancies. Information on the value of contracts and consultancies is available on the AusTender website.’

Mandatory 262

Compliance index 279

PGPA rule reference Part of report/Description Requirement

Location (page(s))

Australian National Audit Office access clauses

17AG(8) If an entity entered into a contract with a value of more than $100,000 (inclusive of GST) and the contract did not provide the Auditor-General with access to the contractor’s premises, the report must include the name of the contractor, the purpose and value of the contract, and the reason why a clause allowing access was not included in the contract

If applicable, mandatory N/A

Exempt contracts

17AG(9) If an entity entered into a contract or there is a standing offer with a value greater than $10,000 (inclusive of GST) that has been exempted from being published in AusTender because it would disclose exempt matters under the FOI Act, the annual report must include a statement that the contract or standing offer has been exempted, and the value of the contract or standing offer, to the extent that doing so does not disclose the exempt matters

If applicable, mandatory N/A

Small business

17AG(10)(a) A statement that ‘[Name of entity] supports small business participation in the Commonwealth Government procurement market. Small and Medium Enterprises (SME) and Small Enterprise participation statistics are available on the Department of Finance’s website.’

Mandatory 263

17AG(10)(b) An outline of the ways in which the procurement practices of the entity support small and medium enterprises

Mandatory 263

ASIC Annual Report 2018-19 280

PGPA rule reference Part of report/Description Requirement

Location (page(s))

17AG(10)(c) If the entity is considered by the Department administered by the Finance Minister as material in nature - a statement that ‘[Name of entity] recognises the importance of ensuring that small businesses are paid on time. The results of the Survey of Australian Government Payments to Small Business are available on the Treasury’s website.’

If applicable, mandatory 263

Executive remuneration

17AD(da) Information about executive remuneration in accordance with Subdivision C of Division 3A of Part 2 - 3

Mandatory 233-235

Financial statements

17AD(e) Inclusionoftheannualfinancialstatements in accordance with subsection 43(4) of the PGPA Act

Mandatory 159-218

Other mandatory information

17AH(1)(a)(i) If the entity conducted advertising campaigns, a statement that ‘During [reporting period], [name of entity] conducted the following advertising campaigns: [name of advertising campaigns undertaken]. Further information on those advertising campaigns is available at [address of entity’s website] and in the reports on Australian Government advertising prepared by the Department of Finance. Those reports are available on the Department of Finance’s website.’

If applicable, mandatory 258

17AH(1)(a)(ii) If the entity did not conduct advertising campaigns, a statement to that effect If applicable, mandatory

N/A

Compliance index 281

PGPA rule reference Part of report/Description Requirement

Location (page(s))

17AH(1)(b) A statement that ‘Information on grants awarded by [name of entity] during [reporting period] is available at [address of entity’s website].’

If applicable, mandatory 251

17AH(1)(c) Outline of mechanisms of disability reporting, including reference to the website for further information

Mandatory 157

17AH(1)(d) Websitereferencetowheretheentity’s Information Publication Scheme statement pursuant to Part II of the FOI Act can be found

Mandatory 251

17AH(1)(e) Correction of material errors in previous annual report If applicable, mandatory

284

17AH(2) Information required by other legislation Mandatory 247-250

Note: N/A means not applicable.

Source: Department of Finance, Resource Management Guide No. 135 Annual report for non-corporate Commonwealth entities (2016).

ASIC Annual Report 2018-19 282

Additional compliance reporting requirements

Description Requirement

Source of requirement

Location (page(s))

Exercise of ASIC’s powers under Part 15 of the Retirement Savings Accounts Act 1997 and under Part 29 of the Superannuation Industry (Supervision) Act 1993

Mandatory ASIC Act, s136(1)(a) 247

ASIC’s monitoring and promotion of market integrity and consumer protection in relation to the Australianfinancialsystemand theprovisionoffinancialservices

Mandatory ASIC Act, s136(1)(b) 81-111

ASIC’s activities in accordance with each agreement or arrangement entered into by ASIC under section 11(14) of the ASIC Act

Mandatory ASIC Act, s136(1)(c) 247

The operation of the Business Names Registration Act 2011, including details of the level of access to the Business Names Register using the internet and other facilities, the timeliness with which ASIC carries out its duties, functions and powers under the Act, and the cost of registration of a business name under the Act

Mandatory ASIC Act, s136(1)(d) 70-77

The number of times ASIC used an information-gathering power, the provision of the Corporations Act, the ASIC Act, or another law that conferred the power, and the number of times in the previous financialyearthatASICused the power

Mandatory ASIC Act, s136(1)(e), reg 8AAA(1) 242-245

Compliance index 283

Description Requirement

Source of requirement

Location (page(s))

ASIC’s regional administration in referring states and the Northern Territory, including a statement on our performance against service-level performance indicators during the relevant period

Mandatory Corporations Agreement, s603(3) 117-121

Financial services and consumer credit external dispute resolution schemes

Suggested Senate Economics References Committee inquiry into the performance of ASIC, Recommendation 4

143-144, 96-97

Court enforceable undertakings and their effectiveness Suggested Senate Economics References

Committee inquiry into the performance of ASIC, Recommendation 27

10, 41, 48, 57-58, 59, 84, 224, 248

Annual Report 2017-18 errata

On page 37 of the 2017-18 Annual Report, we inadvertently reported the total number ofsurveillancesas‘Over1200’.Over300financialreportingsurveillanceswereomittedin error. In 2017-18, we completed over 1,500 surveillances.

On page 176 of the 2017-18 Annual Report, we inadvertently reported some ‘Initial reports’ in the ‘Supplementary Report’ numbers. Initial reports not alleging misconduct also included some Supplementary Reports, when they should not have. Accordingly, for the 2017-18 year, Initial Reports from liquidators, administrators and receivers alleging misconduct numbered 7,171 and not 6,840; Initial Reports not alleging misconduct numbered 1,036 and not 1,983; Supplementary Reports assessed alleging misconduct numbered600andnot931;andtotalstatutoryreportsfinalised(initial+supplementary) were 8,807 and not 9,754.

ASIC Annual Report 2018-19 284

11General index

General index 285

Abu Dhabi Global Market 72 Accessibility Action Plan 157 achievements, ASIC 10 add-on market 89-90 advertising, ASIC 258-60 advisory panels, ASIC 223-7 Annual Forum, ASIC 6, 130 Annual Performance Statement, ASIC 37-78 Asia Region Funds Passport (ARFP) 46, 70, 129,

131

Asia-PacificEconomicCooperationFinancial Regulators Training Initiative (APEC FRTI) 129

ASIC Enterprise Agreement 2019-22 146 ASIC in the community 125-6 Anzac Day event, ASIC 126 national speaker events 125-6

Assessment and Intelligence, ASIC 21 Assetless Administration Fund (AA Fund) 110, 251 audit seefinancialreportingandaudit Audit Committee, ASIC 222-3 Auditor-General, reports by 250 AusTender 261 Australian Banking Association (ABA) 86 Australian Business Register 26 Australian Financial Complaints Authority

(AFCA) 97, 143-4 Australianfinancialservice(AFS)licen sees see financialadvisers Australian Government Financial Literacy

Board 223 Australian Primary Principals Association 68 Australian Prudential Regulation Authority

(APRA) 29, 87, 105 Australian Public Service (APS) Employee Census 146 Australian Securities and Investments

Commission Act 2001 (ASIC Act) 1, 12, 26, 172, 220, 247 Australian Securities Exchange (ASX) 48, 105, 107 AustralianTaxationOffice(ATO) 26

‘Balance for Better’ 152 Banking Act 1959 12, 78 Banking Code of Practice 86

banks see also Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry bankbillswaprate(BBSW) 48,105 Black Economy Taskforce 128 book up 45, 54, 123 breach reporting 33, 60, 141-2 Brexit,financialimpacts 134 Business Advisory Panel, ASIC 224 Business Names Register 26, 70-3 Business Names Registration Act 2011 12 Business Registration Service 71 buy now pay later arrangements 84-5

CALD communities 156 carfinance,flexcommissionsin 85 car insurance, add-on products in 89-90 Central Australia Aboriginal Media Association

(CAAMA) 124 Chair, ASIC Annual Performance Statement 38 biographical details 16

letter of transmittal 1 management structure 15 report 6-10 Chicago Mercantile Exchange (CME) 102 China, ASIC delegation to 131 climate risk disclosure 106 Close and Continuous Monitoring program

(CCM) 7, 9, 22, 32-3, 39 entities subject to 112 Commissioners, ASIC addition of 14

biographical details 16-17 regional commissioners 23 role of 220-1 commodity market intermediaries 103-4 Commonwealth Electoral Act 1918 258 Commonwealth Ombudsman 250 Commonwealth Procurement Rules (CPRs) 261 community engagement see ASIC in

the community Companies Auditors Disciplinary Board 61 companies register 70-1 competition, ASIC’s mandate regarding 26-7 consultants, ASIC 258-63 Consumer Advisory Panel (CAP) 224

ASIC Annual Report 2018-19 286

consumer protection consumer credit insurance 88 design and distribution obligations see design and distribution obligations online safety 72 product intervention power see product

intervention power protecting vulnerable consumers 9, 45, 122 Corporate Governance Taskforce (CGTF) 9, 34, 45 Corporate Plan, ASIC 13, 38, 44, 70 Corporate Registers Forum (CRF) 72 corporate sector 6, 20, 22, 106-12

auditing seefinancialreportingandaudit corporations 106-7 Director Advisory Panel 225 financialreporting seefinancialreporting

and audit governance and accountability 7, 9, 22, 34, 45, 112, 225 largefinancialinstitutions 112 penalties 25 poor culture, professionalism and

governance 45 registered liquidators 110-11 small business outcomes 108 Corporations Act 2001 12, 26, 108, 140, 141, 142,

143, 172, 240, 241, 255 Cost Recovery Implementation Statement (CRIS) 80 Council of Financial Regulators (CFR) 70, 134 credit see deposit-taking and credit sector Credit, Retail Banking and Payments, ASIC 21 credit licensees 61-3, 81-5, 245-6 criminal convictions 52-9, 139-40

compensatory actions 57 corrective actions 57 CriminalIntelligenceUnit 22,139 delivering timely enforcement action 59 infringement notices 59 Phoenix Taskforce 139 Serious Financial Crime Taskforce 139 small business 108 crowd-sourced funding (CSF) intermediaries 95,

crypto-assets, supporting legitimacy 101-2 currency market intermediaries 103-4 custodians see investment management customer service, ASIC

complaints 77 service charter 75-7 cyber resilience 44, 72, 101, 129

‘A day in the life’ 118 Department of Education and Training 69 deposit product providers 81, 86 deposit-taking and credit sector 81-6, 122

buy now pay later arrangements 84-5 consumer credit insurance 88 Credit, Retail Banking and Payments 21 credit intermediaries 85 credit providers 81-3 deposit product providers 86 payment product providers 86 poor culture, professionalism and

governance 45 small and medium amount credit providers 83-4 Deputy Chairs, ASIC 14 design and distribution obligations 6, 24, 45-6,

Digital Finance Advisory Panel 224-5 Digital Service Provider Terms and Conditions 74 Director Advisory Panel 225 disciplinary or peer review panels 226-7 disclosure regulation 29, 98, 106

fees and costs 95 dispute resolution 96-7 see also Australian Financial Complaints Authority diversity and inclusion, ASIC 151-7

accessibility 156-7 equitablegenderbriefing 153 Indigenous employment initiatives at ASIC 155 multicultural access and equity 156 Rainbow Network 154 Reconciliation Action Plan 154-5 women in ASIC 151-2

education 67-9, 149-50 see also guidance; Innovation Hub, ASIC; MoneySmart, ASIC; online services/tools capacity building 133-4 financialcapability seefinancialcapability financialliteracy seefinancialliteracy FinancialWellbeingNetworksee Financial

WellbeingNetwork Indigenous awareness see Indigenous awareness, ASIC regional action 117-21

General index 287

studentloansandmanagingfinancialfirsts 69 Emerging Threats and Harms Committee 11 employees see people, ASIC enforcement 6, 7, 8, 9, 39-42, 47-52 see also

criminalconvictions;OfficeofEnforcement, ASIC;‘Whynotlitigate?’ civil penalties 25, 47, 48, 59, 98, 227 court enforceable undertakings 48, 57-8, 59, 84 Financial Reporting Council on 248 high deterrence 8, 31 infringement notices 59, 84, 98, 227 international cooperation requests 132 Internal Enforcement Review 31 punitive actions 47-51 small business outcomes 108 WomeninLawEnforcementStrategy 149 environmental performance, ASIC 256-8 ePayments Code 86 equity raising transactions 104 Executive Directors, ASIC 14, 18-19 expenditure summary, ASIC 35-6 External Advisory Panel, ASIC 225 external scrutiny, ASIC 247-51

fees for no service 45, 50 remediation 66, 91 financialadvisers 9,21,56,91-4 bannings 56, 94 Financial Advisers Consultative Committee 225 financialbenchmarks 48,105 financialcapability 21see also education

Australian Government Financial Literacy Board 223 financialliteracy seefinancialliteracy FinancialWellbeingNetwork 69,116 Indigenous communities see Indigenous

awareness, ASIC Innovation Hub see Innovation Hub, ASIC MoneySmart see MoneySmart, ASIC online tools see online services/tools Financial Consumer Protection Taskforce 129 Financial Counselling Australia 118 financialliteracy see also education

Australian Government Financial Literacy Board 223 financialcapability seefinancialcapability financialreportingandaudit 20,60-1,222-3

Audit Committee 222-3

breach reports from licensees and auditors 240 corporate 109 Financial Reporting Council Auditor Disciplinary Processes 248-9 Financial Reporting Council 248

Financial Sector Assessment Program (FSAP) 134 Financial Services and Credit Panel (FSCP) 226-7 Financial Services, ASIC 21-2 Financial Services Reform Implementation

Committee 29 financialstatements,ASIC 159-218 financialsummary,ASIC 35-6 financialtechnology(fintech) 44-5,101,135-6,

224-5

FinancialWellbeingNetwork 69,116 fixedincomemarketintermediaries 103-4 fraud control guidelines (Cth) 247 Freedom of Information Act 1982 (FOI Act) 250-1 funding, ASIC see industry funding model, ASIC

General Insurance Code of Practice 90 Global Financial Innovation Network (GFIN) 136 government inquiries, ASIC submissions to 27-8 grants program, ASIC 251 guidance 65-7 see also education; policy advice

investment management and superannuation 99 lending guidance 67 MoneySmart see MoneySmart, ASIC publications see publications, ASIC studentloansandmanagingfinancialfirsts 69

high-frequency trading 104

illegal phoenix activity 26, 110, 140 Phoenix Taskforce 128, 139 policy advice 69

Independent Broad-based Anti-corruption Commission 121 Indigenous awareness, ASIC 119, 120, 123-5 Central Australian Aboriginal Media

Association 124 Indigenous employment initiatives at ASIC 155

ASIC Annual Report 2018-19 288

Indigenous Outreach Program 9, 69, 123-4 NAIDOCWeek 125 Reconciliation Action Plan 154-5 Indigenous Consumer Action Network 120 Indigenous Outreach Program (IOP) 9, 69, 123-4 Indonesian Financial Services Authority 133 industry funding model, ASIC 80 industry reports 10 Information Broker Agreements 73 information-gathering powers 242-4 infringement notices 59, 84, 98, 227 Innovation Hub, ASIC 44-5, 128, 135-6 international engagement on innovation 136 regtech 45, 128, 136 Insolvency Practice Rules (Corporations) 2016 26 insolvency practitioners see liquidators Insurance Contracts Act 1984 12 Insurance in Superannuation Voluntary Code of

Practice 96 insurance sector 8, 21, 87-90, 95-6 car insurance, add-on products in 89-90 consumer credit insurance 88

insurance claim investigations 90 insurance product distributors 88-90 insurance product providers 87 life see life insurance superannuation insurance 60 International Accounting Standards Board 129 International Association of Insurance

Supervisors 129 International Day of People with Disability 156 international engagement, ASIC 46, 72, 105,

128, 129-34 Asia Region Funds Passport 46, 70, 129, 131 capacity building 133-4 cooperation requests 132 Global Financial Innovation Network 136 International Organization of Securities

Commissions see International Organization of Securities Commissions (IOSCO) promoting regional cooperation 131 International Financial Consumer Protection Organisation (FinCoNet) 129 International Forum of Independent Audit Regulators (IFIAR) 129 International Monetary Fund (IMF) 134 International Organization of Securities Commissions (IOSCO) 129 Annual Meeting 6, 118, 130 Asia-PacificRegionalCommittee 131 Assessment Committee 133

Fintech Network 136 InternationalWomen’sDay 45,152 investigations 7, 30, 32, 49, 50, 52-3, 54, 59, 64, 98, 110, 132, 140, 142

into consumer credit insurance 88 grants for 251 into insurance claims 90 investment management 21, 63, 95-9 Asia Region Funds Passport (ARFP) 46, 70,

129, 131 crowd-sourced funding (CSF) intermediaries 95, 99 managed discretionary account services 63,

95, 99 responsible entities 97-9 wholesale trustees 99

LIBOR (London Interbank Offered Rate) 105 licensing 61-4, 245-7 cancelled licences 64, 98, 99 credit licences 61-3, 245-6

Licensing Technology-Assisted Guidance Tool 136 Market Licence Regime 102 life insurance 78

claims data 87 sale of direct life insurance 60, 89 Life Insurance Act 1995 78 liquidators 20 corporate 110-11 registration and disciplinary committees 226-7 London Interbank Offered Rate 105 Lower Tax Bill 2018 27

managed discretionary account (MDA) services 63, 95, 99 managed funds see investment management; superannuation management structure, ASIC 14-15 margin lenders 81 Market Enforcement, ASIC 22 market infrastructure 20, 100-2

clearing and settlement facility operators 102 established specialised market operators 102 exempt market operators 102

General index 289

large securities exchange operators 101 market integrity 49, 59, 101, 227 market intermediaries 103-5

allocations in equity raising transactions 104 enhanced supervision 103 high-frequency trading 104 oversightoffixedincome,currencyand

commodity market intermediaries 103-4 progress on benchmark reform 105 retail OTC derivatives market 105 Market Licence Regime 102 market supervision, Markets Disciplinary

Panel 59, 227 Markets, ASIC 20 Markets Advisory Panel, ASIC 225-6 Medical Indemnity (Prudential Supervision and

Product Standards) Act 2003 12 misconduct assessing misconduct 238-45 breach reports 141-2, 240-1

extending penalties 25 online scams 72 reports from public 141-3, 238-40 small business outcomes 108 statutory reports 143, 241-5 mission, ASIC 7 MoneySmart, ASIC 120, 121

FinancialWellbeingNetwork 69,116 Grants for Principals 68 National Financial Capability Strategy 67, 115, 117, 223

next generation 114-15 Teaching Program 67-8, 69 UniversitiesProgram 69 website 69, 87, 123 ‘Womentalkmoney’ 114 mortgages 60, 83 Mutual Assistance in Business Regulation Act

1992 132

NAIDOCWeek 125 National Consumer Credit Protection Act 2009 12 National Financial Capability Strategy 67, 115, 117, 223

National Speakers Program, ASIC 125-6

OfficeofEnforcement,ASIC 22,29,31-2,47 recent enforcement metrics 32 OfficeofSmallBusiness,ASIC 128,137 OfficeoftheWhistleblower,ASIC 25,128,138 Ombudsman (Cth) 250 online safety 72 online services/tools see also MoneySmart, ASIC;

registration services ePayments Code 86 organisational structure, ASIC 14-15 ‘Other People’s Money’ 6, 130 Otoritas Jasa Keuangan (OJK) 133 outlook, ASIC 8-9 oversight, ASIC 13

parliamentary inquiries 13, 27, 249 Parliamentary Joint Committee (PJC) on Corporations and Financial Services 27, 249 payment product providers 81, 86 peer review panels 226-7 people, ASIC

ASIC’s vision and 227-37 community contribution see ASIC in the community diversity and inclusion see diversity and

inclusion, ASIC Indigenous awareness see Indigenous awareness, ASIC workforce planning see workforce planning,

ASIC

performance, ASIC see also registration services analysis of key outcomes 44-70 key performance outcome 38 key results 39-43 objectives 38 service charter results 75-7

Phoenix Taskforce 128, 139 policy advice 69-70 see also guidance allocations in equity raising transactions 104 buy now pay later arrangements 85

climate risk 106 contract terms for small business borrowers 82 corporate governance 102 design and distribution obligations 6, 24,

45-6, 69

ASIC Annual Report 2018-19 290

product intervention power 6, 24, 45-6, 69, 85, 122 strengthening penalties 69 whistleblower legislation 69 Portfolio Budget Statement, ASIC 38, 44, 70,

252-4

‘Preparing for Brexit’ 134 procurement 261-3 product intervention power 6, 24, 45-6, 69, 85, 122

property management 254-5 Protected Disclosure Coordinator Forum 121 Public Governance, Performance and Accountability Act 2013 (PGPA Act) 13, 38

Public Governance, Performance and Accountability Rule 2014 (PGPA Rule) 261 publications, ASIC 66 consultation papers 42, 46, 67, 86, 95, 96, 101,

122

guidance notes 107 information sheets 42, 65, 91, 99, 101 media releases 91 regulatory guides 42, 46, 65, 95, 99 reports 42, 60, 81, 82, 83, 84, 86, 89, 90, 91-2,

95, 96, 99, 101, 104, 106, 109, 142 purpose, ASIC 38

Reconciliation Action Plan 154-5 regional action, ASIC 117-21, 129-34 Asia Region Funds Passport 46, 70, 129, 131 Australian Capital Territory 117

capacity building 133-4 Innovation Hub 136 international cooperation requests 132 NewSouthWales 118 Northern Territory 119 promoting regional cooperation 131 Queensland 119-20 South Australia 120 Tasmania 121 Victoria 121 WesternAustralia 121 regional Commissioners, ASIC 23 registered company auditors seefinancial

reporting and audit registered liquidators see liquidators registration services 7, 22, 26, 38, 70-4, 245-7 accessing registry information 72

analysis of key outcomes 72-4 Australian Business Register 26 Business Registration Service 71 Corporate Registers Forum 72 Digital Service Provider Terms and

Conditions 73 gatekeeper conduct 73 Information Broker Agreements 73 liquidator registration 226-7 performance objectives 70-2 small businesses 137 Regtech Liaison Forums 45 regulatory actions 6-7 regulatory approach 11 regulatory technology (regtech) 44-5, 136, 224-5 Reserve Bank of Australia (RBA) 101, 105 responsible entities see investment management retail OTC derivatives issuers 105 Retirement Savings Accounts Act 1997 12, 184 revenue summary, ASIC 35-6 risk management product providers see

insurance sector role, ASIC government priorities 24-8 international engagement see international

engagement, ASIC key achievements 10 legislative responsibilities 12 outlook 8-9 oversight 13 regulatory approach 11 Royal Commission into Misconduct in the

Banking, Superannuation and Financial Services Industry 28-30 Royal Commission into Misconduct in the Banking, Superannuation and Financial

Services Industry 6, 7, 8, 24, 28-30, 95, 247-8

scams, online 72 self-managed superannuation fund (SMSF) services 55 Senate Economics Committees 27-8, 249 Serious Financial Crime Taskforce (SFCT) 128, 139 service charter, ASIC, results 75-7 small business

corporate governance 108 credit providers 83 OfficeofSmallBusiness 128,137

General index 291

procurement 263 unfair contract terms protections 82 social media 45 staff see people, ASIC stakeholders key stakeholder data 264-5 stakeholder engagement 42-3, 65 stakeholder teams, ASIC 20-2 Standing Committee on Economics 27 strategic priorities, ASIC 8-9 superannuation 21, 45, 60, 95-9, 117, 123 see

also Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry conduct regulation 7, 8, 29 policy advice 69 responsible entities 97-9 self-managed superannuation funds 55 supervision and surveillance 60 trustees 95-7 wholesale trustees 99 Superannuation (Resolution of Complaints) Act

1993 12

Superannuation Industry (Supervision) Act 1993 12, 184 supervision and surveillance 20 surveillance and supervision 32-4, 39-40, 60-1

Close and Continuous Monitoring program see Close and Continuous Monitoring program (CCM)

corporate governance review 7, 9, 34, 45 financialreportingandaudit seefinancial reporting and audit intermediary supervision 103 ongoing onsite supervision 33 sector and issue-based 60 supervisory colleges 131

technology seefinancialtechnology(fintech) Telecommunications (Interception and Access) Act 1979 250 threat, harm and behaviour framework 11 traditional trustee company service providers see

investment management Treasury 26, 29, 69, 131

unclaimed money 78, 254-5 unfair contract terms 82

vision, ASIC 6-7, 38

wealth management 21-2 whistleblowers 121 OfficeoftheWhistleblower 25,121,128,138 policy advice 69

protections 25 wholesale investment management trustees 99 ‘Whynotlitigate?’operationaldiscipline 7,29, 31, 47, 248 women

in ASIC 151-2 equitablegenderbriefing 153 Indigenous women 119, 125 superannuation 45, 117 ‘WomenDirectors’event 119 WomeninBankingandFinance 149 WomeninLawEnforcementStrategy 149 ‘Womentalkmoney’ 114 workforce planning, ASIC 146-50

diversity and inclusion see diversity and inclusion, ASIC graduate program 147-8 learning 149-50 mentoring 149 recruitment 146 staffbenefits 146 work health and safety 150 working at ASIC 146 WorldEconomicForum 129

ASIC Annual Report 2018-19 292

Contact details

ForgeneralinformationaboutASIC,specificinformationforASIC’sregulatedpopulations and to do business with ASIC, including searching ASIC’s registers, registering and searching business names, and lodging and updating company or licence details, go to www.asic.gov.au.

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General inquiries

Go to www.asic.gov.au/question or telephone 1300 300 630

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Go to www.asic.gov.au/media, email media.unit@asic.gov.au or telephone 1300 300 630

Annual report contact officer

Senior Manager, Publishing Telephone: 02 9911 5829 Email: peter.richardson@asic.gov.au

For copies of ASIC publications

Go to www.asic.gov.au/publications or telephone 1300 300 630

ASIC Annual Reports are available online at www.asic.gov.au/annual-report

To follow ASIC online:

ASIC media releases

Twitter: @asicmedia

ASIC information for consumers and investors

Twitter: @MoneySmartTeam Facebook:facebook.com/moneysmartAU YouTube:youtube.com/moneysmartAU

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To contact ASIC by mail

For all correspondence with ASIC Commissioners, stakeholder teams, enforcement, strategy group, corporateaffairs,chieflegaloffice and administration:

ASIC, GPO Box 9827 Brisbane, QLD 4001

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Australian Securities and Investments Commission—Report for 2018-19 (2025)