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5.6 Misconduct reporting

Misconduct reports from the public

ASIC encourages members of the public to report concerns about corporate and financial services to us. We use this information to direct our regulatory activities to identify and address harms to investors and consumers.

Disrupting scams

Investment and loan scams are common among the types of scams reported to ASIC, the police and the ACCC. Often the scammers create a fake investment company, impersonate a real credit provider, or use websites and documentation that look legitimate in order to lure victims. Initial contact can be unexpected, triggered by an unrelated online inquiry or by clicking on an advertisement on social media. The scams may promise high returns on investments, or cheap and easy loans. The perpetrators are often sophisticated criminal groups operating outside of Australia.

ASIC’s work focuses on disrupting the activity, including warning the public and working with institutions to prevent further victims. Where possible, we alert Australian banks to specific accounts being used for scams, often triggering investigations by the bank.

ASIC publishes lists of ‘Companies you should not deal with’ and ‘Fake regulators and exchanges’ on Moneysmart to alert the public to these entities.

This year, we warned consumers not to deal with Loan Way, an unregistered entity without an Australian credit licence that was advertising fast, low-interest rate loans requiring limited documentation. After people had paid an ‘application fee’ of hundreds of dollars, Loan Way would stop responding and fail to provide the loan.

Dealing with high-volume reports of misconduct about offshore conduct

In June and July 2019, ASIC received and dealt with over 2,500 reports of misconduct. This equated to three months of reports received in one month.

A large number of the reports were from overseas-based investors about an entity called My Group Fintech Co Pty Ltd. An entity with that name was registered in Australia, Saint Vincent and the Grenadines. We published information on our website – ‘ASIC responds to investor concerns about My Group Fintech Co Pty Ltd’ – outlining ASIC’s role and the options for people impacted. We made inquiries of the Australian company and considered information received from foreign regulators, but the conduct was wholly offshore where ASIC had no jurisdiction; nor had the company likely carried on business in Australia.

Recording, assessing and responding to reports of misconduct is a key part of our regulatory work, as the reports provide valuable information about the entities we regulate. In this case ASIC was able to efficiently record and respond to these reports by implementing a combination of technology and traditional assessment techniques.

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 10 business days, about any significant breach (or likely breach) of their obligations. Failure to report a significant breach is an offence and may result in penalties.

From 30 March 2020, AFS licensees must submit breach reports via the ASIC Regulatory Portal.

Breach reporting – ASIC Regulatory Portal

From 30 March 2020, AFS licensees and auditors were able to lodge notifications of breaches of the law using ASIC’s Regulatory Portal. The portal enables online lodgement in one place of breaches, updates and communication with ASIC.

We also introduced enhanced report content and increased digitisation, allowing for improved data capture and analysis.

We communicated with lodgers throughout the change in process, explaining the concept and the information needed in their future reports, and considered feedback from lodgers during a series of usability testing sessions. We updated relevant guidance (RG 34 and RG 78), kept lodgers informed via our website and email, and met with licensees and auditors to discuss issues before the portal was launched. We have a dedicated ASIC email address for lodger queries and feedback.

A transition period, in which lodgers could continue to use previous lodgement methods up to 30 May 2020, allowed time to adapt to the new portal.

The portal is now being used to lodge hundreds of digitised notifications to ASIC each month.

Statutory reports from liquidators, administrators and receivers

We received 8,040 initial reports from external administrators this year. Of these, 7,163 reported suspected offences by company officers, with the remainder lodged because the return to unsecured creditors may be less than 50 cents in the dollar.

Of the 7,163 that reported misconduct, we requested supplementary reports from the external administrators in 1,070 cases. These supplementary reports typically set out the results of the external administrator’s inquiries and the evidence to support the alleged offences.

We referred 23% of supplementary reports assessed in 2019–20 for compliance, investigation or surveillance action, compared to 24% in 2018–19.