ASIC broadens technology focus to clamp down on scams, crypto assets

The corporate regulator is widening its focus on digital misconduct by prioritising scams and crypto assets, as it threatens enforcement action to protect consumers.

ASIC chairman Joe Longo said the regulator will take ‘strong and targeted enforcement action’ to protect consumers and investors. Picture: David Geraghty

The corporate regulator is widening its focus on digital misconduct by prioritising scams and crypto assets, as it threatens “strong and targeted” enforcement action to protect consumers.

The Australian Securities and Investments Commission released a new corporate plan for the next four years on Monday, highlighting a strategic agenda and areas of concern. Tackling technology risks was one the regulator’s four key external priorities.

“We will broaden our focus to other digitally enabled misconduct as emerging technologies and products change our financial ecosystem. Our focus will include scams and crypto-assets,” the plan said.

ASIC chairman Joe Longo said the regulator would continue to be “an active litigator” against misconduct.

“ASIC will take strong and targeted enforcement action to protect consumers and investors and to maintain trust and integrity in the financial system,” he added.

“ASIC is looking to the longer term and planning over the next four years. But we’ve seen that scenarios can change quickly. We remain alert to changes and developments in our operating and regulatory environment, and we will continue to make rapid, strategic decisions to adapt where needed.

“When we do so, it will be transparent.”

The new ASIC plan noted Australians lost more than $242m to investment scams in the first half of 2022, cautioning a “diverse range of technologies” were enabling scams. Last year, bank transfers were the most common payment method for scams, with $129m in losses reported while 4730 reports of crypto investment scams were accompanied by $99m in reported losses.

ASIC’s actions in the crypto industry will include supervising and assessing product disclosure statements of major crypto offerings within the Australian jurisdiction and implementing a regulatory model for exchange-traded products that have underlying crypto investments.

“Our regulatory environment is changing and evolving – climate risk, our ageing population, emerging data and digital technologies, and significant volatility in the crypto-assets market are all having a transformational impact,” the document said.

ASIC wants to increase its use of data and boost consumer education in an effort to disrupt and stop scams where possible.

“Scammers are taking advantage of heightened economic uncertainty and using social media and other technology to target consumers,” the plan said.

The Australian Securities and Investments Commission released a new corporate plan for the next four years on Monday.

Another of ASIC’s external priorities centred on sustainable finance and ensuring market integrity, governance and transparency as companies set targets and goals around carbon emissions.

“We will take action to prevent harms arising from greenwashing and to support effective climate and sustainability governance and disclosure,” the regulator said.

ASIC flagged it would take enforcement action against misconduct in that area including where there was misleading marketing by entities.

The remaining two priorities included protecting consumers as they prepared for retirement, focusing on superannuation, managed investments and financial advice and enforcing its product design and distribution rules. The design and distribution obligations came into effect in October 2021, and essentially require products to be adequately and fairly designed and to target the right consumers.

ASIC said it would “closely supervise” ASX’s implementation of the CHESS system replacement – which has been marred by lengthy delays – and warned it would provide ministerial advice around any changes to operating rules, including whether to disallow them.

“We will also analyse and assess the ASX operating rules changes necessary for the CHESS replacement, and provide ASIC’s advice to the Minister’s delegate as to whether to disallow all or a part of the changes,” the plan said.

ASIC also said it would support the establishment of a compensation scheme of last resort, subject to legislation being passed and enacted.

The regulator plans to implement a levy to support the scheme, which aims to provide compensation to eligible victims of financial misconduct.

The corporate plan also noted ASIC’s review of whistleblower programs from a sample of companies it regulates. The regulator wants to understand how they deal with whistleblower information and whether it is used to address misconduct or bring about change.

“We will also communicate our expectations and good practices regarding whistleblower programs,” ASIC said.

ASIC’s internal priorities included investment in technology and modernising its business registers.

As at July 1, ASIC employed 2068 people. The regulator’s funding amounts to $446m in 2022–23, 11 per cent lower than the prior year.