In this article, we discuss key enforcement and regulatory activities ASIC has undertaken in the first half of 2023. This article focuses on corporate governance-related activities. In particular, we look at ASIC’s activities in relation to reporting and disclosures, whistleblowing and greenwashing.
Actions against directors
In the reporting period between January 2023 to June 2023, ASIC reported 11 enforcement outcomes relating to directors’ duties and governance failures. Most (eight) of these outcomes were criminal proceedings, two were civil proceedings and one was an administrative proceeding. This is a significant increase from the last two reporting periods (January to June 2022 and July to December 2022) where ASIC only reported one enforcement outcome relating to directors’ duties and governance failures over the two reporting periods.
Reporting and Disclosures
ASIC is undertaking significant educational and enforcement activities relating to reporting and disclosure obligations, including disclosures in annual reports.
In February 2023, the Federal Court ordered GetSwift Limited to pay a $15 million penalty for breaches of continuous disclosure laws. This is the largest penalty ever issued in Australia for a breach of continuous disclosure laws. Various directors were also ordered to pay penalties and disqualified in connection with these breaches. The penalties ordered against directors ranged from $75,000 to $2 million and the disqualification periods ranged from two years to fifteen years. The penalties ordered against the directors in this case are amongst the highest penalties ordered against directors for corporate misconduct.
ASIC has also taken action regarding continuous disclosure obligations against a range of other companies. In January 2023, Australian Mines Limited was ordered to pay a $450,000 penalty for breaches of continuous disclosure obligations and its managing director was fined $70,000 and disqualified for two years. In February 2023, ASIC also commenced proceedings against Noumi Limited for continuous disclosure failures. ASIC has also commenced proceedings against Noumi Limited’s former CEO and CFO for breaches of their duties in connection with the continuous disclosure failures.
In early 2023, ASIC also advised companies to ensure material business risks are adequately disclosed in annual reports. This announcement stems from ASIC’s surveillance activities which have raised concerns that material business risks are not being adequately disclosed in the operating and financial review of the directors’ report. Various listed entities have made additional disclosures relating to material business risks following ASIC inquiries of their 30 June 2022 annual reports.
“ASIC reiterates the importance of a high-quality operating and financial review, including disclosure of material risks that may affect the achievement of a listed entity’s strategies and prospects. Directors must provide investors with useful and meaningful information about the impact on current and future performance of changing and uncertain market conditions.”  -ASIC Commissioner Danielle Press
ASIC also highlighted key focus areas for half and full-year reports for reporting periods ending on 30 June 2023. ASIC urged companies to assess the impact of uncertain markets and economic conditions when preparing their reports. ASIC highlighted the following focus areas for reporting:
- asset values;
- solvency and going concern assessments;
- events occurring after year end and before completing the financial report
- disclosures in the financial report and operating financial review; and
- the impact of a new accounting standard for insurers.
In the first half of 2023, ASIC has taken educational and enforcement actions relating to whistleblower disclosure. In March 2023, ASIC released Report 758 which discusses good governance practices for handling whistleblower disclosures. ASIC reviewed the whistleblower programs of seven companies across a range of industries. In this report, ASIC provides industry insights and best practice guidance observed in its review.
In March 2023, ASIC, for the first time took action against a company for alleged breaches of the whistleblower provisions. In these civil penalty proceedings, ASIC is alleging that TerraCom Limited engaged in conduct that caused detriment to a whistleblower. ASIC has also commenced actions against TerraCom Limited’s managing director, chief commercial officer, former chair and a former director, alleging that they engaged in conduct that harmed the whistleblower.
ASIC continued to take strong action in relation to potential greenwashing claims in 2023. This action is in line with its 2023 enforcement priority of targeting misleading conduct in relation to sustainable finance including greenwashing. Since 1 July 2022, ASIC has issued over $140,000 in infringement notices and commenced 3 civil penalty proceedings in relation to greenwashing. ASIC is likely to continue expanding its greenwashing enforcement and surveillance activities in the second half of 2023.
In May 2023, ASIC published Report 763 detailing its greenwashing activities in the period between 1 July 2022 and 31 March 2023. This report focuses on ASIC’s surveillance and enforcement activities since the release of its Information Sheet 271 (How to Avoid Greenwashing). The key themes of ASIC’s regulatory interventions were:
- net zero statements and targets,
- the use of terms such as ‘carbon neutral’, ‘clean’ or ‘green’,
- fund labels and scope; and
- application of investment exclusions and screens.