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Australian Securities and Investments Commission (ASIC)—Report for 2020-21


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Annual Report 2020-21 asic.gov.au

© Australian Securities and Investments Commission

ISSN 1448-3416 (Print) ISSN 1448-370X (Online) October 2021

Australian Securities and Investments Commission

JOSEPH LONGO Chair

Level 7, 120 Collins Street GPO Box 9827 Melbourne VIC 3000

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

asic.gov.au

XX October 2021

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 2021.

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 17AD to 17AH 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.

Yours faithfully

Joseph Longo Chair

01

Contents

1 ASIC’s role 05

Chair’s report 06

1.1 ASIC’s role and responsibilities 09

1.2 ASIC’s structure and management 11

1.3 Government priorities 22

1.4 Financial summary 27

2 ASIC’s annual performance statement 29

Chair’s statement 30

Our purpose 30

2.1 Performance objectives 30

2.2 Key results 31

2.3 ASIC Service Charter results 37

2.4 Analysis: Implementing our performance obectives 40

2.5 Registry services and outcomes 68

2.6 Unclaimed money 72

3 ASIC’s achievements by sector 73

Industry funding 74

3.1 Deposit taking and credit 75

3.2 Insurance 81

3.3 Financial advice 85

3.4 Investment management, superannuation and related services 88

3.5 Market infrastructure 92

3.6 Market intermediaries 95

3.7 Corporate 99

3.8 Large financial institutions 109

4 ASIC’s people 111

4.1 Workforce planning 112

4.2 Diversity and inclusion at ASIC 115

5 Financial Statements 119

6 Appendices 181

6.1 Appendices relating to ASIC’s governance and operations 182

6.2 Appendices relating to assessments 209

6.3 Appendices relating to statements required by law 214

6.4 Five-year summary of key stakeholder data 233

ASIC Annual Report 2020-21 02

7 Glossary 235

8 Compliance index 241

8.1 Reporting requirements under the Public Governance, Performance and Accountability Act 2013 242

8.2 Additional compliance reporting requirements 253

9 General index 257

Contact details inside back cover

03

ASIC Annual Report 2020-21 04

1ASIC’s roleChair’s report 061.1 ASIC’s role and responsibilities 091.2 ASIC’s structure and management 111.3 Government priorities 221.4 Financial summary 27 ASIC’s role 05

Chair’s report

On behalf of my fellow Commissioners, I am pleased to present this annual report for 2020-21.

Having been appointed as Chair on 1 June 2021, I am proud to have been given the opportunity to lead ASIC at this important time for the organisation.

The past year has been a challenging and significant one for ASIC. We have worked with the Government to help Australian businesses and consumers recover from the economic impact of the COVID-19 pandemic, and prioritised finalising the implementation of the important reforms arising from the Financial Services Royal Commission (Royal Commission).

We have also had to confront some shortcomings in our own organisation. This was important for us to acknowledge and address to ensure that we meet the high standards set for us, and that we expect of ourselves, as we do from those we regulate.

Internal governance

The Auditor-General’s report on the ASIC 2019-20 financial statements and Dr Vivienne Thom AM’s subsequent review of ASIC’s governance (the Thom Review) highlighted that some of ASIC’s internal systems and processes needed to improve.

At 30 June 2021, ASIC had implemented a number of the recommendations of the Thom Review directed at ASIC through a program of change designed to deliver long-term improvement to ASIC’s risk and compliance practices and capabilities. ASIC completed its implementation of the recommendations of the Thom Review in August 2021.

We also established a Chief Risk Officer and a Head of Office function. Respectively, these roles will support our new risk management framework and increase internal oversight and executive accountability, enabling the Commission to focus on strategic regulatory and statutory decision making and stakeholder management.

COVID-19 pandemic response

Supporting Australia’s recovery from the economic impacts of the COVID-19 pandemic has been central to ASIC’s work across 2020-21 and will continue to be a priority in the year ahead.

ASIC Annual Report 2020-21 06

We coordinated our COVID-19 pandemic response with peer regulators, adjusted our strategic priorities and provided a range of concessions and targeted interventions that supported businesses and consumers. We continue to monitor the key vulnerabilities of our regulated population, to protect consumers and provide certainty for markets and businesses.

Looking ahead, we remain committed to supporting economic recovery as one of our key strategic priorities for 2021-22. Our work will include:

› identifying and pursuing ways to maintain and improve the fair and efficient operation of capital markets and the corporate sector, to facilitate business investment and confident participation by investors in the financial system

› through a dedicated unit within ASIC, seeking ways to change how we administer the law to minimise the costs and burdens of regulatory requirements for our regulated population and consumers

› promoting innovation (e.g. through the Innovation Hub and the enhanced regulatory sandbox) and considering competition in our work

› working with industry and other regulators to enhance cyber resilience

› expanding our use of data and digital technology to inform markets and consumers, and to support faster, better regulatory outcomes

› facilitating novel business models and transactions, including by exercising ASIC’s regulatory relief powers as appropriate

Financial Services Royal Commission

In 2020-21 we finalised much of the enforcement action arising from the Royal Commission.

We also welcomed the introduction of new regulatory tools and powers that will position us to better achieve our regulatory purpose and deliver maximum benefit for consumers and investors. This includes our expanded conduct role in superannuation, the new product design and distribution obligations, and changes to the breach reporting regime and to the prohibition on hawking.

Commission and staff

This year, we have seen changes to ASIC’s Commission. Along with welcoming new Deputy Chair, Sarah Court, I would like to take this opportunity to thank outgoing Chair James Shipton and Deputy Chair Daniel Crennan QC for their valued contributions to ASIC’s work.

I would also like to acknowledge the leadership of Deputy Chair Karen Chester, particularly during her period as Acting Chair, and my fellow Commissioners Cathie Armour, Sean Hughes and Danielle Press, for their work and unwavering commitment to ASIC.

Most of all, I want to thank ASIC’s 2,000-plus staff for their resilience and professionalism in a challenging period. They have worked diligently to ensure that ASIC performed its functions and delivered for the Australian community.

ASIC’s role 07

Looking ahead

The aftermath of the Royal Commission and the COVID-19 pandemic have had a profound impact on how we work, and have highlighted the importance of having the right organisational infrastructure to support our regulatory and enforcement functions and responsibilities.

One of my first priorities as Chair was to commission an independent review of our infrastructure to enhance ASIC’s strength and effectiveness by improving some of its internal capabilities. We will implement the recommendations of this review across the coming year.

Our approach to enforcement is also key to our effectiveness as a regulator. ASIC must be an active and credible law enforcement agency and we will use our full enforcement toolkit as appropriate. Criminal charges, civil cases, enforceable undertakings, product interventions, financial penalties, bannings and licence conditions - they are all on the table and will be used to achieve what’s right. We will hold individuals and corporations to account and will act quickly and decisively to disrupt, deter and punish misconduct.

Productive relationships with other regulators are also essential for ASIC. During the upcoming year, we will continue to engage with our peer regulators, especially the Australian Prudential Regulation Authority (APRA), to share information, avoid duplication and promote common approaches to regulation.

I am confident in ASIC and its future as a strong, professional and trusted regulator that is committed to working with stakeholders to support the Australian economy.

Joseph Longo Chair

ASIC Annual Report 2020-21 08

1.1 ASIC’s role and responsibilities

ASIC is Australia’s integrated corporate, markets, financial services and consumer credit regulator. ASIC is established under the Australian Securities and Investments Commission Act 2001 (ASIC Act).

Our vision

Our vision is for a fair, strong and efficient financial system for all Australians.

Our regulatory purpose

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

› change behaviours to drive good consumer and investor outcomes

› act against misconduct to maintain trust and integrity in the financial system

› promote strong and innovative development of the financial system

› help Australians to be in control of their financial lives.

Our legislative responsibilities

The ASIC Act states that ASIC has the function of monitoring and promoting market integrity and consumer protection in relation to the Australian financial system and the payments system.

It requires ASIC to strive to:

› maintain, facilitate and improve the performance of the financial system and entities within it in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy

› promote confident and informed participation by investors and consumers in the financial system

› administer the law effectively and with minimal procedural requirements

› receive, process and store - efficiently and quickly - the information we receive

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

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

ASIC’s role 09

We enforce the law and regulate companies, financial markets and financial services under the following key legislation:

› ASIC Act

› Business Names Registration Act 2011

› Corporations Act 2001 (Corporations Act)

› Insurance Contracts Act 1984

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

We also administer parts of the following legislation:

› Banking Act 1959

› Life Insurance Act 1995

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

› Retirement Savings Accounts Act 1997

› Superannuation (Resolution of Complaints) Act 1993

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

Our regulatory approach

In everything we do, we are guided by our vision of a fair, strong and efficient financial system for all Australians.

Our regulatory toolkit includes supervision and surveillance, enforcement, financial capability work, industry engagement, guidance and input into law reform.

We use this toolkit across the industry sectors we regulate to identify and respond to threats and harms, and to achieve our vision.

For most of the issues in our remit, we use a combination of our regulatory tools to achieve outcomes for consumers and investors.

ASIC Corporate Plan

Our Corporate Plan 2020-24 (Corporate Plan) sets out our priorities and actions. These are based on monitoring and analysis of our operating environment, identification of threats and behaviours that lead to harm, and prioritisation of those harms that need to be addressed.

The Corporate Plan outlines the actions we plan to take to address the impact of the COVID-19 pandemic, as well as longer term threats and harms in our regulatory environment.

See pages 35-37 for more detail on our Corporate Plan priorities.

Chapters 2 and 3 set out our achievements against the qualitative and quantitative measures identified in our Corporate Plan.

ASIC Annual Report 2020-21 10

1.2 ASIC’s structure and management

ASIC governance

ASIC continues to make improvements to our governance, structure and decision-making processes. This year, we built on the governance and accountability framework established last year. The framework sets out a clear, transparent and common understanding of ASIC’s governance and accountability structures and processes. The objective of the framework is to promote effective, efficient and impartial decision making at ASIC and to articulate clear accountabilities.

ASIC’s governance and accountability structures are consistent with ASIC being an independent Commonwealth agency that is a statutory body corporate and reflect the legislative framework within which ASIC operates. ASIC’s Chair, Joseph Longo, is the accountable authority under section 9A of the ASIC Act and held this position from 1 June 2021. During the reporting period up to 31 May 2021, James Shipton held the position of ASIC Chair and was the accountable authority except from 23 October 2020 to 31 January 2021, during which period Karen Chester held the position of acting ASIC Chair and was the accountable authority.

Enhanced Risk Management Framework

In July 2020, ASIC introduced the role of Chief Risk Officer and further improved our governance structures by actively enhancing our risk management framework. Our new risk management framework is designed not only to satisfy our risk management obligations under the Public Governance, Performance and Accountability Act 2013 (PGPA Act) but to translate risk management into structured and consistent practices and governance arrangements. This includes a ‘Three Lines of Accountability’ approach, which provides clear management ownership and accountability for risks.

As part of this change, we have implemented an Executive Integrity Committee that is focused on proactively enhancing ASIC’s broader integrity practices by ensuring that the policies, procedures, training, investigation and reporting mechanisms are aligned and effective across key integrity risks, such as fraud, corruption and conflicts of interest.

Head of Office

In March 2021, ASIC established a Head of Office function, consistent with the 2015 ASIC Capability Review recommendation. The new Head of Office, called the Chief Operating Officer (COO), is responsible for operational strategy and management and for delivery to the Commission of cross-group outcomes, including budget development and resource allocation, Commission legislative and policy obligations relating to this, and capability and systems build.

ASIC’s role 11

The implementation of this new function has increased internal oversight and executive accountability and enabled the Commission to give greater focus to strategic matters, regulatory decision making, external engagement and communication.

In June 2021, ASIC established the Office of the Chair, and appointed Louise Macaulay as Chief of Staff to lead the Office. The role of the Chief of Staff is to provide core counsel and advice to the Chair, as well as support on all strategic and operational matters, both internally and externally. The Office of the Chair will operate as a key link between the Chair, Commissioners, ASIC senior executives and key external stakeholders to identify and assess key issues, solve problems and facilitate information flows.

Thom Review

This year, ASIC also implemented a number of the recommendations of the Thom Review directed at ASIC. Following the Thom Review, in early 2021 ASIC developed and started to implement its response action plan. Under this plan, ASIC established an executive integrity committee, completed its review of potential breaches of legislation and policy and launched a revised technology-based compliance incident management (notification) system.

External oversight

External oversight of ASIC was strengthened this year. From 1 January 2021, ASIC came under the jurisdiction of the Australian Commission for Law Enforcement Integrity. This Commission investigates corruption issues involving staff members and former staff members of organisations that fall under its jurisdiction.

In June, the Financial Regulator Assessment Authority Bill 2021 was passed by Parliament, implementing recommendations 6.13 and 6.14 of the Royal Commission. Under the legislation, a new independent body, the Financial Regulator Assessment Authority, will be established to regularly review and report on the effectiveness and capability of ASIC and APRA.

In its first year, the Financial Regulator Assessment Authority will be tasked with assessing the effectiveness and capability of ASIC to assist ASIC Chair Joseph Longo in ensuring ASIC is operating consistently with the Government’s Statement of Expectations and is supporting Australia’s economic recovery from the COVID-19 pandemic.

Further information about ASIC’s governance and the role of the Commission is set out in the Appendices on pages 97-98.

ASIC Annual Report 2020-21 12

ASIC organisational structure

Strategy

Chief Legal Office Risk & Integrity

Markets

Assessment & Intelligence

Commission

Office of Enforcement

Cathie Armour Commissioner

Sarah Court Deputy Chair

Karen Chester Deputy Chair

Sean Hughes Commissioner Danielle Press Commissioner

Joseph Longo Chair

Chief Accountant

Corporations

Financial Reporting & Audit

Insolvency Practitioners

Market Infrastructure

Market Supervision

Financial Services Enforcement

Wealth Management Enforcement

Wealth

Management - Major Financial Institutions

Credit & Banking

Financial Advisers

Insurers

Investment Managers

Superannuation

Corporations & Corporate Governance

Enforcement WA & Criminal Intelligence Unit

Markets Enforcement

Close & Continuous Monitoring

Licensing

Misconduct & Breach Reporting

Small Business Engagement & Compliance

Behavioural Research & Policy

International

Strategic Intelligence

Strategic Policy

Administrative Law

Commission Counsel

Delegates Panel

Special Counsel

Internal Audit

Chief Risk Office

Financial Services & Wealth

Financial Services Enforcement Markets Enforcement

Supervision Group

Governance

Regulatory groups

Communications

Consumer Insights & Communications

Corporate Affairs

Operations

Corporate Services

Data & Analytics

Finance

Information Technology

People & Development

Registry Interactions & Services

Regulatory Systems & Improvement

Specialist Services

Strategy and operational groups

Office of the Chair

Chief Operating Officer

ASIC’s role 13

ASIC Commissioners

Joseph Longo

Chair

Joseph Longo commenced as ASIC Chair on 1 June 2021.

Sarah Court

Sarah Court commenced as ASIC Deputy Chair on 1 June 2021.

Karen Chester

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

Cathie Armour

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

Danielle Press

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

Sean Hughes

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

James Shipton

James Shipton ceased his role as ASIC Chair on 31 May 2021. He commenced as ASIC Chair on 1 February 2018.

Daniel Crennan QC

Daniel Crennan ceased his role as ASIC Deputy Chair on 25 October 2020. He commenced as ASIC Deputy Chair on 16 July 2018.

ASIC Annual Report 2020-21 14

ASIC Executive Committee

Executive Director Markets Enforcement

Sharon Concisom

Chief Supervisory Officer Supervision Group

Suneeta Sidhu

Chair Commission

Joseph Longo

Executive Director Financial Services Enforcement

Tim Mullaly

Chief Operating Officer

Warren Day

Executive Director Assessment and Intelligence (Acting)

Diana Steicke

Executive Director Financial Services and Wealth

Joanna Bird

General Counsel

Chris Savundra

Executive Director Strategy

Greg Kirk

Executive Director Markets

Greg Yanco

ASIC Executive Committee members as at 30 June 2021.

The above list does not reflect standing attendees.

ASIC’s role 15

Stakeholder teams

ASIC’s stakeholder teams and who they regulate

Markets

Greg Yanco - Executive Director

Chief Accountant

Douglas Niven - Chief Accountant

Corporations

Claire LaBouchardiere and Rachel Howitt - Senior Executive Leaders

› Unlisted public companies: 23,360

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

Insolvency Practitioners, Financial Reporting and Audit

Thea Eszenyi - Senior Executive Leader

› Registered company auditors: 3,553

› Entities required to produce financial reports: 30,763

› Registered SMSF auditors: 5,527

› Registered liquidators: 649

› Companies entering external administration: 4,235

Market Infrastructure

Nathan Bourne - Senior Executive Leader

› Licensed domestic and overseas financial markets: 47

› Exempt markets: 3

› Licensed domestic and overseas clearing and settlement facilities: 7

› Exempt clearing and settlement facilities: 1

› Derivative trade repositories: 1

› Credit rating agencies: 6

› Benchmark administrators: 2

Market Supervision

Calissa Aldridge - Senior Executive Leader

› Market participants: 104

› Securities dealers: 1,128

› Investment banks: 24

› Retail OTC derivatives: 64

› Wholesale electricity: 48

ASIC Annual Report 2020-21 16

Financial Services and Wealth

Joanna Bird - Executive Director

Credit and Banking

Tim Gough - Senior Executive Leader

› Australian credit licensees: 4,777

› Credit representatives: 38,776

› Authorised deposit-taking institutions: 142

› Non-cash payment facility providers: 610

› Trustee companies: 11

Financial Advisers

Kate Metz - Senior Executive Leader

› Financial advisers: 19,279

› AFS licensees licensed to provide personal advice: 4,137

› AFS licensees licensed to provide general advice only: 989

Insurers

Emma Curtis - Senior Executive Leader

› General insurers: 81

› Life insurers: 27

› Friendly societies: 11

Investment Managers

Rhys Bollen - Senior Executive Leader

› Responsible entities: 425

› Registered managed investment schemes: 3,616

› Wholesale trustees: 1,647

› MDA operators: 247

› IDPS operators: 83

› Foreign financial services providers: 994

› Custodial service providers: 1,116

› Total assets: $2,452.4 billion

Superannuation

Jane Eccleston - Senior Executive Leader

› Superannuation trustees: 95

› Total assets: $2,221 billion

Supervision

Close and Continuous Monitoring

Suneeta Sidhu - Chief Supervisory Officer (Acting)

Entities subject to supervision:

› AMP Limited

› Australia and New Zealand Banking Group Limited

› Commonwealth Bank of Australia

› National Australia Bank Limited

› Suncorp Group Limited

› Westpac Banking Corporation

Governance

Kim Demarte - Senior Executive Leader (Acting)

The Governance team has a broad range of stakeholders in its various roles supervising governance practices in Australia’s larger entities and licensees, implementing the new Financial Accountability Regime and overseeing the whistleblower policy requirement applying to public companies, large proprietary companies and superannuation trustees.

ASIC’s role 17

Office of Enforcement

FINANCIAL SERVICE 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

Jennifer Balding - Senior Executive Leader

Enforcement Western Australia and Criminal Intelligence Unit

Natalie Dürr - Senior Executive Leader

Markets Enforcement

Molly Choucair - Senior Executive Leader

The Commission has established a number of committees to assist it with the effective and efficient performance of its regulatory and governance roles.

ASIC governance structure

Accountable Authority and Commission

Commission Committees

Specialist Commission Subcommittees

Enforcement Oversight Committee

Emerging Threats & Harms Committee

Commission Enforcement Committee

Commission Regulatory Committee

Commission Risk Committee

Executive Committee

Executive Risk Committee

Digital Governance Subcommittee

Audit

Committee

Management Committees

Work Health & Safety Subcommittee

Integrity Subcommittee

Commission Steering Committee

Regulatory Issues Committee

Regulatory Policy Committee

Specialist Executive Sucommittees

ASIC Annual Report 2020-21 18

Commission meetings

Commission meetings are convened by ASIC’s Chair under section 103 of the ASIC Act. They take place twice a month and may be convened more regularly as required.

Commission Committees

Commission Committees comprise the full Commission and other standing attendees. There are three decision-making Commission Committees, for collective decisions on strategic and/or significant enforcement, regulatory and risk matters:

› Commission Enforcement Committee: Chaired by Deputy Chair Sarah Court, this Committee makes strategic and/or significant enforcement decisions, including in relation to conduct, strategy and focus of major matters and enforcement policies, and oversees ASIC’s enforcement and litigation work.

› Commission Regulatory Committee: Chaired by Deputy Chair Karen Chester, this Committee makes strategic and/or significant decisions relating to regulatory policy, law reform, applications for relief, policy frameworks and reports, and oversees ASIC’s regulatory activities and functions.

› Commission Risk Committee: Chaired by Commissioner Sean Hughes, this Committee considers all types of risk of a strategic and/or significant nature that affect ASIC, its regulated population, Australia’s financial system and Australian consumers. It is responsible for setting and monitoring ASIC’s risk management framework and ASIC’s risk appetite. The Committee monitors

ASIC risk by reviewing whether material risks have been identified, remediation plans are in place and adequate resources have been deployed to appropriately manage risks.

There is one Commission Committee that gives guidance:

› Commission Steering Committee: Chaired by Commissioner Danielle Press, this Committee provides a forum for Commission to be given timely information on emerging issues and to progress issues and initiatives prior to them reaching a decision-making forum. The discussions at the meeting will generally not involve day-to-day organisational issues, however, may include whole-of-organisation frameworks and policies as required.

Specialist subcommittees

The role of the subcommittees is to guide staff members in carrying out their functions and to provide oversight regarding this work. The subcommittees assist the efficiency of the Commission by assessing matters and ensuring their consideration is sufficiently mature before they are escalated to the Commission or Commission Committee for decision (if required) and they provide oversight of matters that are important but fall outside the definition of strategic and/or significant matters that are reserved for the Commission.

There are four subcommittees:

› Enforcement Oversight Committee: Assists the Commission with oversight of the Office of Enforcement and the execution of ASIC’s enforcement strategy

ASIC’s role 19

› Emerging Threats and Harms Committee: Identifies and provides advice on the management of emerging and strategic risks in ASIC’s regulated population or areas it regulates

› Regulatory Policy Committee: Considers submissions recommending new or revised regulatory policy, law reform and novel applications for relief from the laws administered by ASIC

› Regulatory Issues Committee: Considers matters generated by the surveillance and supervisory work undertaken by ASIC’s regulatory teams.

Governance Committees

Governance Committees assist the Commission and the accountable authority in undertaking their governance roles. There are two such committees:

› Commission Risk Committee: (As set out above)

› Audit Committee: Operates independently of management and assists the Chair to discharge his responsibilities for the efficient, effective, economical and ethical use of Commonwealth resources. It also provides independent assurance to the Chair and the Commission on ASIC’s financial and performance reporting, risk oversight and management, and systems of internal control.

Management Committees

The Management Committees are executive-level committees responsible for undertaking and overseeing the day-to-day management of ASIC. There are two such committees:

› Executive Committee: Responsible for the day-to-day operation and management of ASIC, implementing and delivering ASIC’s policies, plans and priorities and leading the implementation of ASIC’s business plans.

› Executive Risk Committee: Responsible for identifying and monitoring significant risks to ASIC, maintaining risk management frameworks and policies, and implementing and overseeing audit/assurance processes and risk mitigation strategies.

ASIC Annual Report 2020-21 20

Regional Commissioners

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

Australian Capital Territory

Laura Higgins

› Commenced as Regional Commissioner in May 2019.

New South Wales

Greg Yanco

› Commenced as Acting Regional Commissioner in December 2019.

Northern Territory

Duncan Poulson

› Commenced as Regional Commissioner in February 2006.

Queensland

Amanda Zeller

› Commenced as Regional Commissioner in May 2019.

South Australia

Melissa Smith

› Commenced as Regional Commissioner in June 2015.

Tasmania

Chris Green

› Commenced as Regional Commissioner in November 2013.

Victoria

Warren Day

› Commenced as Regional Commissioner in October 2008.

Western Australia

Natalie Dürr

› Commenced as Regional Commissioner in July 2017.

ASIC’s role 21

1.3 Government priorities

Economic recovery

ASIC is committed to maintaining financial system resilience and to facilitating post-pandemic economic recovery and growth. Through effective and proportionate regulation, we remove unnecessary frictions and build trust for confident participation in a resilient financial system. ASIC works closely with other regulators on the Council of Financial Regulators (CFR) to monitor, and where necessary respond to, financial stability risks.

Over the past year, ASIC undertook a range of activities to help support the post-pandemic economic recovery. We facilitated equity capital raisings to help listed companies access capital quickly. As the economy started to recover, extra capital has enabled businesses to bring forward investment decisions and bring on new staff, helping stimulate the economy.

ASIC has continued to reduce the risk of harm to consumers through advice on scams and unlicensed conduct. Our deferral of non-time-critical activities has aided businesses in responding to the impact of the pandemic.

We have provided guidance to help banks, superannuation trustees and insolvency practitioners navigate this turbulent period. Ongoing guidance was also provided to insurers as they dealt with the ramifications from the 2019 bushfires and 2020 floods.

Supporting Government legislative reform

ASIC provides advice to the Government on the operational implications of Government policy initiatives and legislative change to support the Government’s law reform agenda. We implement reforms once they are passed by Parliament, including through regulatory guidance.

We identify the opportunities and risks that affect our ability to implement the law as intended by Parliament and we advise on law reform to facilitate and improve the performance of the financial system.

This year, we provided advice and input to the Government to facilitate measures to support business in the COVID-19 pandemic environment, including in relation to virtual meetings and electronic communications.

We also provided input to Treasury on key law reforms proposed by the Government, including legislation giving effect to recommendations from the Royal Commission. This included input in relation to the following reforms:

› financial product design and distribution obligations

› proposed amendments to the insolvency regime, including a simplified liquidation process for small businesses (see Chapter 3 for more detail)

› removing some of the exemptions to the conflicted remuneration rules

ASIC Annual Report 2020-21 22

› the transfer of ASIC’s business registry staff and functions to the Australian Taxation Office (ATO) as part of the Government’s Modernising Business Register (MBR) program

› changes to Australia’s consumer credit framework

› the deferred sales model for add-on insurance

› reforms to improve ASIC’s effectiveness as the conduct regulator for superannuation

› the removal of the funeral expenses policy exemption in the Corporations Act

› enhancement of the unfair contract terms regime, including its application to life insurance

› the Your Future, Your Super reforms

› the application of the anti-hawking reforms to superannuation and insurance products

› strengthening the financial sector breach reporting regime

› ending grandfathered conflicted remuneration in relation to financial advice provided to retail clients and extending the ban on conflicted remuneration to stamping fees paid in relation to listed investment companies and listed investment trusts (excluding real estate investment trusts)

› the proposed Financial Accountability Regime, including working with APRA to ensure that the agencies are ready to implement and jointly administer the regime

› the requirement for litigation funders to hold an Australian financial services (AFS) licence and comply with the managed investment scheme regime.

Implementation of Royal Commission recommendations

We have continued to provide advice and input to support the program of law reform agreed by the Government in its response to the Royal Commission’s recommendations. This includes contributing to Government consultation with stakeholders, focusing on implementation arrangements for new laws as they commence, developing and consulting on supporting legislative instruments, and issuing regulatory guidance to meet industry demand.

We have released a number of information papers, consultation papers and guidance, including:

› RG 274 - regulatory guidance on the product design and distribution obligations, released 11 December 2020

› CP 339 - consultation on guidance and prescribed customer information for the deferred sales model for add-on insurance, released 11 March 2021

› INFO 256 - information about the obligations that apply to fee recipients who provide personal advice to retail clients under an ongoing fee arrangement, released 25 March 2021

› CP 340 - consultation on guidance on the breach reporting obligation that applies from 1 October 2021, released 22 April 2021

› INFO 253 - information on claims handling and settling services for insurance products regulated by ASIC, in light of the removal of the claims handling exemption, released 6 May 2021

ASIC’s role 23

Last financial year, the Government announced that, due to the impact of the COVID-19 pandemic, certain Royal Commission-related legislative matters would be introduced to Parliament later than initially planned. This deferral was intended to allow financial services entities to focus their attention and resources on their COVID-19 pandemic responses and to plan for the post COVID-19 pandemic economic recovery.

To support industry participants to focus on immediate priorities and the needs of their customers during the COVID-19 pandemic, ASIC deferred commencement

of the mortgage broker best interests duty and remuneration reforms to 1 January 2021, and the design and distribution obligations until 5 October 2021, six months after their original commencement dates.

Table 1.3.1 sets out action taken by ASIC in relation to legislative reforms that have already been introduced or are scheduled to be introduced in late 2021.

Table 1.3.2 sets out action taken by ASIC in relation to Royal Commission measures that do not require legislative reform.

Table 1.3.1 Measures requiring legislative reform

For those measures involving law reform, ASIC has issued regulatory guidance or consulted on draft legislative instruments relating to eight recommendations as set out in Table 1.3.1.

Title Commencement Action taken by ASIC

Removal of the claims handling exemption (Recommendation 4.8)

Commenced 1 January 2021 On 6 May 2021, ASIC released INFO 253, providing information for anyone

who provides claims handling and settling services for insurance products regulated by ASIC.

Unfair contract terms in insurance (Recommendation 4.7)

Commenced 5 April 2021

On 20 October 2020, ASIC issued updates to INFO 210 and INFO 211, on unfair contract terms protections for consumers and small businesses. The information sheets now provide information about how the unfair contract terms will apply to insurance contracts

Lack of independence disclosure (Recommendation 2.2)

Commences 1 July 2021

On 25 March 2021, ASIC made a legislative instrument setting the requirements for the disclosure of lack of independence that an AFS licensee or authorised representative must give clients where they would breach s923A of the Corporations Act if they used words such as ‘independence’, ‘impartial’, or ‘unbiased’.

ASIC Annual Report 2020-21 24

Title Commencement Action taken by ASIC

Advice fee reforms (Recommendations 2.1, 2.2., 3.2, 3.3)

Commences 1 July 2021

On 25 March 2021, ASIC made two legislative instruments setting the requirements for the written consent that a fee recipient must obtain from a client before deducting, or arranging to deduct, advice fees from a client account as part of an ongoing fee arrangement and for the written consent that a superannuation trustee must obtain from a member before deducting advice fees from a superannuation account under a non-ongoing fee arrangement.

ASIC also released INFO 256 to answer frequently asked questions about the obligations that apply to fee recipients who provide personal advice to retail clients under an ongoing fee arrangement.

Breach reporting reforms (Recommendations 1.6, 2.8, 2.9 and 7.2 )

Commences 1 October 2021 On 22 April 2021, ASIC released draft guidance on the breach reporting

reforms for consultation.

Reference checking and information sharing protocol for financial advisers and mortgage brokers (Recommendations 1.6 and 2.7)

Commences 1 October 2021 On 19 November 2020, ASIC released Consultation Paper 333, setting out

a proposal for a draft ASIC Protocol which outlines obligations for licensees in relation to undertaking a reference check on an individual seeking to be employed or authorised as a financial adviser or mortgage broker.

ASIC also consulted on a draft information sheet to help licensees understand their reference checking and information-sharing obligations.

The final Protocol and INFO 257 were released on 20 July 2021.

ASIC’s role 25

Title Commencement Action taken by ASIC

No hawking of superannuation or insurance products (Recommendations 3.4 and 4.1)

Commences 5 October 2021 On 21 July 2021, ASIC released Consultation Paper 346, setting

out proposals for updating Regulatory Guide 38 The hawking prohibitions (RG 38) to reflect the new legislative changes.

Deferred sales model for add-on insurance (Recommendation 4.3)

Commences 5 October 2021 On 11 March 2021, ASIC released Consultation Paper 339, setting

out ASIC’s proposed approach to implementation of the deferred sales model for add-on insurance, for stakeholder feedback.

Product design and distribution obligations (non-Royal Commission measure)

Commences 5 October 2021 On 11 December 2020, ASIC released RG 274 Product design and

distribution obligations.

Table 1.3.2 Non-legislative measures

ASIC has either completed or taken action in relation to the following two recommendations of the Royal Commission that do not require legislative reform.

Title Status Action taken by ASIC

Amendments to the Banking Code (Recommendation 1.10)

Ongoing On 7 January 2021, ASIC approved a variation to the Banking Code to refine the definition of ‘small business’.

Life insurance commissions review (Recommendation 2.5)

Ongoing During 2020-21, ASIC substantially completed our review of 2017 life insurance advice and began preparations for our review of 2021 life insurance advice.

ASIC also collected data for the 2020 calendar year from life insurers following COVID-19 pandemic delays.

ASIC Annual Report 2020-21 26

1.4 Financial summary

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

Outcomes

Parliament funds ASIC to achieve the outcome of improved confidence in Australia’s financial markets through promoting informed investors and financial consumers, facilitating fair and efficient markets, and delivering efficient registry systems.

Revenue for the Commonwealth

In 2020-21, ASIC raised $1,513 million for the Commonwealth in fees, charges and supervisory cost recovery levies, an increase of 11% from the 2019-20 year.

Revenue, appropriations and expenditure

In 2020-21, ASIC received approximately $437 million in appropriation revenue from the Government, including $59 million for the Enforcement Special Account (ESA), representing a $34 million or 8% increase compared with 2019-20.

ASIC received approximately $41 million of own-source revenue,1 which is $23 million higher than the previous year. The increase in own-source revenue relates mainly to reimbursement of operating and capital expenditure incurred by ASIC on government programs funded directly by other Australian Government entities.

The increase in total expenses is consistent with the increase in appropriation and own-source revenue, noting that lease liability principal payments are not included in this total.

The reduction in the 2020-21 deficit is primarily driven by the revenue variances mentioned above. Most of the funding received was for capital expenditure.

ASIC’s role 27

Table 1.4.1 Revenue, appropriations and expenditure

2020-21 ($’000s) 2019-20 ($’000s)

Change ($’000s) Percentage change

Revenues from Government (incl. ESA) 437,092 403,261 33,831 8%

Own-source revenue 40,598 18,060 22,538 125%

Total revenue 477,690 421,321 56,369 13%

Total expenses (incl. depreciation and amortisation, net of gains) 492,107 489,507 2,600 1%

Surplus/(Deficit) (14,417) (68,186) 53,769 -79%

Table 1.4.2 ASIC’s use of taxpayers’ money for outcomes approved by Parliament

2020-21 ($’000s) 2019-20 ($’000s)

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

Total expenses (net of gains) 492,107 489,507

Annual change on previous year 0% 14%

Fees and charges (incl. industry funding) raised for the Commonwealth

Total 1,512,563 1,358,462

Annual change on previous year 11% 7%

ASIC Annual Report 2020-21 28

2ASIC’s annual performance statementChair’s statement 30Our purpose 302.1 Performance objectives 302.2 Key results 312.3 ASIC Service Charter results 372.4 Analysis: Implementing our performance obectives 402.5 Registry services and outcomes 682.6 Unclaimed money 72ASIC’s annual performance statement 29

Chair’s statement

I, Joseph Longo, as the accountable authority of ASIC, present the 2020-21 annual performance statement of ASIC, as required under paragraph 39(1)(a) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act). In my opinion, the annual performance statement is based on properly maintained records, accurately reflects the performance of the entity, and complies with subsection 39(2) of the PGPA Act.

Our purpose

Our vision - a fair, strong and efficient financial system for all Australians - reflects our purpose as Australia’s conduct regulator for corporations, markets, financial services and consumer credit and highlights the important role we play on behalf of all Australians.

2.1 Performance objectives

ASIC’s performance reporting in 2020-21 was guided by our Corporate Plan and our 2020-21 Portfolio Budget Statement, which set out our objectives and targets related to investor and consumer trust and confidence, and fair and efficient markets.

In particular, we aim to achieve our key performance outcome, as stated in the Portfolio Budget Statement, of ‘improved confidence in Australia’s financial markets through promoting informed investors and financial consumers, facilitating fair and efficient markets and delivering efficient registry systems’.

We aim to do this by:

› pursuing enforcement outcomes

› undertaking supervision and surveillance

› engaging with consumers and industry stakeholders

› providing guidance, input into law reform, and consumer education.

These regulatory tools are used to achieve our vision of ensuring a fair, strong and efficient financial system for all Australians.

ASIC Annual Report 2020-21 30

2.2 Key results

1 This year, we do not have comparative 2019-20 statistics for measures relating to the time taken to complete investigations. This is because during the 2019-20 financial year, we moved to a new workflow platform and these statistics could not be recorded consistently over the period of the transition from the older platform to the new one. Now that the transition is complete, we are again able to accurately record and report on these statistics.

2 Institutional onsite supervisory activities conducted by close and continuous monitoring were suspended for much of 2020. Therefore, these statistics reflect activities undertaken primarily in the first half of 2021, with only minimal days spent onsite during December 2020. ‘Onsite’ supervisory exercises include those undertaken using virtual and hybrid approaches to engagement.

3 This includes over 30 surveillances involving an onsite presence.

Table 2.2.1 sets out our key results for 2020-21 across our supervision, surveillance, enforcement, guidance and education work.

The number of supervisory, surveillance and enforcement actions we undertake, the value of fines imposed or people convicted, and the length of their sentences vary

from year to year. The variations depend on factors such as the severity of breaches of the law and the complexity of the investigations we undertake. It also reflects the impact of the COVID-19 pandemic, which meant that close and continuous monitoring onsite supervisory work was not possible for a large portion of 2020.

Table 2.2.1 Key results1

Outcome

Total

2020-21

Total

2019-20

Institutional supervision2

Onsite supervisory exercises commenced 1 5

Findings letters issued 2 6

Number of days onsite 59 98

Number of representatives met during onsite

supervisory exercises 197 357

Surveillance

Surveillances completed3 Over 1,080 Over 1,250

Instances of potentially misleading or deceptive promotional material withdrawn or amended 59 48

Interim stop orders and final stop orders 13 22

ASIC’s annual performance statement 31

Outcome

Total

2020-21

Total

2019-20

Enforcement4

Investigations

Investigations commenced5 110 134

Criminal actions

Criminal litigation completed 29 35

Criminal litigation completed successfully (as a percentage) 100% 90%

New criminal litigation commenced 53 416

Average time to complete an investigation (in months) 28 -

Average time to a criminal court decision (in months) 12 -

Average total time to complete an investigation and reach a court decision (in months) 40 -

Criminal outcomes

Number of people/companies convicted7 29 30

Custodial sentences (including fully suspended) 10 22

Non-custodial sentences/Fines 19 8

Total dollar value of fines $151,100 $731,650

Total dollar value of reparation orders $1.8m 0

Civil action

Civil litigation completed 46 37

Civil litigation completed successfully (as a percentage) 93% 97%

4 ASIC moved to a new regulatory workflow platform in 2019-20. Due to differences in the way enforcement activities were recorded in the legacy system compared to the new platform, statistics relating to the time taken to complete criminal and civil actions were not reported last year. The time taken to complete investigations and litigation action has been included for 2020-21.

5 Investigations for these purposes meet the definition in section 13 of the ASIC Act and section 247 of the National Credit Act. 6 Last year, we reported that 38 new criminal litigation actions were commenced. This number has been corrected to include a further three criminal actions that were omitted due to delays in record keeping. 7 This includes six successful criminal actions where either a good behaviour bond or a fine was imposed without

a conviction recorded.

ASIC Annual Report 2020-21 32

Outcome

Total

2020-21

Total

2019-20

New civil litigation commenced 83 50

Average time to complete an investigation (in months) 13 -

Average time to a civil court decision (in months) 13 -

Average total time to complete an investigation and reach a court decision (in months) 26 -

Civil outcomes

Total dollar value of civil penalties $189.4m $24.9m

Administrative actions and outcomes8

Action taken against auditors and liquidators 49 62

People disqualified or removed from directing companies 9 49 51

People/Companies removed, restricted or banned from providing financial services 49 79

People/Companies removed, restricted or banned from providing credit services 46 29

Court enforceable undertakings

Court enforceable undertakings accepted 3 0

Compensation or remediation agreed in court enforceable undertakings10 $9.1m $0

Infringement notices11

Total number of infringement notices issued 3 4

Total dollar value of infringement notices $392,000 $671,000

8 This includes all disqualifications, suspensions, cancellations and bannings resulting from surveillance and enforcement activities. 9 This includes four disqualifications arising from civil proceedings, where the court ordered the defendants be disqualified from directing companies. 10 Compensation or remediation programs monitored by ASIC are not reflected in this statistic. Amounts in

compensation or remediation were agreed in court enforceable undertakings accepted by ASIC. 11 These notices were issued for infringements related to the market integrity rules and continuous disclosure. 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 33

Outcome

Total

2020-21

Total

2019-20

Summary prosecutions

Summary prosecutions for strict liability offences 224 248

Total value of fines and costs $669,906 $793,670

Applications for relief from the Corporations Act

Relief applications12

Relief applications received 948 1,308

Relief applications approved 755 919

Relief applications refused or withdrawn 238 217

Relief applications in progress 168 172

Licensing and professional registration activities

Administrative decisions

Licensing and registration applications received 2,075 1,500

Licensing and registration applications approved 1,159 1,090

Licensing and registration applications refused or withdrawn 410 403

Licensing and registration applications in progress 1,146 653

AFS licences, including limited AFS licences (new and variations)

Applications approved 776 741

Applications refused/withdrawn 270 248

Licences cancelled/suspended 308 333

Applications in progress13 873 484

12 From July 2021, relief applications are lodged and received through the ASIC Regulatory Portal. Due to the differences in the way lodgements were recorded in the legacy system compared to the new platform, statistics relating to relief applications for 2020-21 are not comparable to previous years. The statistics reflect lodgements received and the overall outcome. In previous years, the statistics reflected applications made according to the applicable legislative provision. 13 The increased volume compared to 2019-20 related to applications for claims handling and settling services,

and debt management activities, as participants needed to lodge applications before 30 June 2021 in order to have the benefit of transitional relief.

ASIC Annual Report 2020-21 34

Outcome

Total

2020-21

Total

2019-20

Australian credit licences (new and variations)

Applications approved 219 233

Applications refused/withdrawn 114 117

Licences cancelled/suspended 278 390

Applications in progress 260 158

Registered auditors - registered company auditors, authorised audit company and SMSF auditors

Applications approved 164 116

Applications refused/withdrawn 26 38

Licences cancelled/suspended 546 521

Applications in progress 13 11

Registered liquidators14

Liquidators registered by ASIC 31 17

Registration committees convened during the year 37 21

Outcome of registration committees convened during the year

Applications for registration approved by committee 27 14

Applications for registration refused by committee 8 1

Committee matters in progress - registration applications yet to be determined 2 615

14 Our methodology for presenting the activity of the registration committee has changed this year. Accordingly, the comparative outcomes for 2019-20 shown above differ from those reported in ASIC’s annual report for 2019-20.

15 Of the six committee matters in progress at 30 June 2020, one application was refused during 2020-21 and five applications were approved during 2020-21. These outcomes are not included in the table of outcomes for committees convened during 2020-21.

ASIC’s annual performance statement 35

Outcome

Total

2020-21

Total

2019-20

Consultation and guidance

Consultation papers published 14 15

Industry reports published 28 44

New or revised regulatory guides published 36 29

New or revised information sheets 50 31

Legislative instruments made, amended and repealed 54 50

Education

Users visiting ASIC’s Moneysmart website16 11.0m 10.4m

Average number of users to the Moneysmart website per month 1.0m 979,957

Number of users who have used a Moneysmart online tool 4.6m 3.4m

Average number of users using a Moneysmart tool per month 440,764 325,027

16 The number of people visiting the MoneySmart website includes users from around the world. Of the 11.0m users, 10.0m (91%) were from Australia using an Australian IP address.

ASIC Annual Report 2020-21 36

2.3 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 2.3.1 sets out our performance against the key measures outlined in the Service Charter for the 2020-21 financial year.

Table 2.3.1 ASIC Service Charter performance 2020-21

Service Measure Target Result

When you contact us

General telephone queries We aim to answer telephone queries on the spot

80% 90%

General email queries We aim to reply to email queries within three business days 90% 98%

Give reasonable assistance

Searching company, business name or other data online

We aim to ensure that our online search service is available between 8.30 am and 7.00 pm AEST Monday to Friday, excluding public holidays

99.5% 100%

Lodging company, business name or other data online

We aim to ensure that you can lodge registration forms and other information online between 8.30 am and 7.00 pm AEST Monday to Friday, excluding public holidays

99.5% 100%

When you do business with us

Registering a company or business name online

We aim to register the company or business name within one business day of receiving a complete application

90% 100%

Registering a company via paper application We aim to register the company within two business days of

receiving a complete application

90% 95%

ASIC’s annual performance statement 37

Service Measure Target Result

Registering a business name via paper application

For paper applications lodged by mail - complete applications for business name registrations within seven business days

90% 100%

Updating company, business name or other ASIC register information online

For applications lodged online - enter critical information and status changes to company or business name registers within one business day

90% 100%

Updating company, business name or other ASIC register information via paper application

For paper applications lodged by mail - enter critical information and status changes to company or business name registers within five business days

90% 94%

Registering as an auditor We aim to decide whether to register an auditor within 28 days of

receiving a complete application

80% 92%

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 We aim to decide whether to grant or vary an AFS licence within

150 days

70% Granted: 74% Varied: 75%

We aim to decide whether to grant or vary an AFS licence within 240 days

90% Granted: 91% Varied: 88%

Applying for or varying a credit licence We aim to decide whether to grant or vary a credit licence within

150 days

70% Granted: 95% Varied: 95%

We aim to decide whether to grant or vary a credit licence within 240 days

90% Granted: 98% Varied: 97%

ASIC Annual Report 2020-21 38

Service Measure Target Result

Applying for relief17 We aim to give an in-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%

We aim to give an in-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% 85%

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

About ASIC officers, services or actions We aim to acknowledge receipt of complaints within three working

days of receipt. We aim to resolve a complaint within 28 days

70% Resolved

within 28 days: 99%

17 The 28-day and 90-day Service Charter targets for in-principle decisions on relief applications were impacted due to ASIC’s transition to a new platform. Instances where all necessary information had not yet been received and novel applications could not be identified are excluded from the calculation of the Service Charter result, as they would have been in the legacy system. These issues are currently being addressed.

ASIC’s annual performance statement 39

2.4 Analysis: Implementing our performance objectives

This year our work aligned with the priorities outlined in the Corporate Plan published in August 2020.

These priorities are summarised on pages 35-37.

In June 2020, we also published the ASIC Interim Corporate Plan 2020-21: Strategic priorities responding to the impact of the COVID-19 pandemic (ASIC’s Interim Corporate Plan), outlining five strategic priorities to address the impact of the COVID-19 pandemic. These priorities were incorporated into the Corporate Plan. They have been a central focus over the last year and will remain a focus for us in the near term. They are summarised on page 35.

Measuring our performance We use qualitative and quantitative measures to evaluate and review our performance, as detailed in our Corporate Plan. We measure both:

› regulatory outcomes, which include the direct results from using our suite of regulatory tools

› market outcomes, which reflect the impact of our regulatory work on the markets and sectors we regulate, including on investors and consumers.

We are currently enhancing the quantitative measures we use to report on efficiency and effectiveness. In particular, we are enhancing measures of:

› efficiency by adopting a framework for the evaluation of the time, cost and quality of key regulatory processes

› effectiveness by continuing an impact assessment pilot to improve our assessment of specific regulatory interventions.

Our regulatory tools include:

› enforcement

› supervision

› surveillance

› licensing

› engagement

› guidance

› education

› input into law reform.

For most of the issues in our remit, we employ a combination of our regulatory tools to achieve outcomes for consumers and investors.

In reporting on our work, we combine quantitative and qualitative indicators to provide a narrative about our approach. Our regular reports about the volume and results of our activities include our six-monthly enforcement updates, our monthly market integrity updates and regular reports about corporate insolvency and corporate finance.

This chapter sets out key results against our priorities and how we have used our regulatory toolkit to achieve those results.

ASIC Annual Report 2020-21 40

ASIC Corporate Plan priorities

Priorities to address the COVID-19 pandemic

Protect consumers from harm at a time of heightened vulnerability

We have focused on taking action against predatory lending, disrupting the mis-selling of harmful products and acting against scams.

Key results and examples are set out on pages 38, 42 and 55, and on pages 64-67.

Maintain financial system resilience and stability

We have responded promptly to instances of market dislocation and disorder as well as many other practices and use continuous monitoring and enforcement where required.

Key results and examples are set out in Chapter 2 (pages 44-47) and Chapter 3 (Sections 3.5 and 3.6).

Support Australian businesses to respond to the effects of the COVID-19 pandemic

We have provided relief on a temporary basis to facilitate the operations of businesses at a time of potential financial stress, and we have focused on processing expedited individual relief applications in an efficient manner to support the operational activities of regulated entities.

Key results and examples are set out in Chapter 2 (Table 2.2.1 and page 53) and Chapter 3 (Section 3.7).

Continue to identify, disrupt and take enforcement action against the most harmful conduct

During the COVID-19 pandemic, we have paid particular attention to reports of scams and misleading conduct, including by cracking down on unlicensed conduct. We have focused our enforcement activities on the most egregious misconduct and conduct that harms vulnerable consumers.

Key results and examples are set out in Chapter 2 (pages 38-44).

Continue to build our organisational capacity in challenging times

We have moved quickly to provide our staff with the means to conduct investigations and litigation effectively in the COVID-19 pandemic environment, which include the establishment of secure ways to conduct confidential examinations and interviews remotely.

We are working to improve the way we measure and assess our performance and illustrate the impacts and outcomes of our work. In particular, we will examine, and be informed by, the lessons learnt during this period to further improve our crisis response plans for the future.

Key results and examples are set out in Chapter 1 (Section 1.2) and Chapter 2 (pages 37-38).

ASIC’s annual performance statement 41

Priorities beyond the COVID-19 pandemic

Promoting confident participation in the financial system to support long-term economic recovery

We have focused on supporting the long-term recovery of the Australian economy. This includes fostering positive behaviours of fairness, strong governance controls, and robust disclosure and reporting practices, as well as encouraging healthy competition and appropriate and timely consumer compensation.

Key results and examples are set out in Chapter 2 (pages 49-53) and Chapter 3 (Sections 3.3 and 3.7).

Deterring poor behaviour and misconduct through our enforcement approach and driving cultural change using all of our regulatory tools

We have focused on efficient and effective enforcement action, particularly cases that have a high deterrence value and those responding to egregious misconduct - for example, misconduct impacting vulnerable consumers.

Key results and examples are set out in Chapter 2 (pages 38-44).

Improving entities’ management of key risks to prevent and mitigate harms to consumers and promote a healthy financial system and economic growth

We have supported measures to improve the financial skills, knowledge and efficacy of consumers and entities and to provide them with information and tools to help them make informed financial decisions.

Key results and examples are set out in Chapter 2 (pages 49-55).

Addressing consumer harm as a result of elevated debt levels and hardship, with a focus on predatory lending

We have continued to increase the use of rapid and disruptive enforcement action to prevent predatory lending and punish breaches of the law. We have also focused on situations where consumer segments are particularly vulnerable or susceptible to predatory behaviour.

Key results and examples are set out in Chapter 2 (Table 2.2.1) and pages 64-67.

Reducing poor product design and restricting mis-selling

We have focused on monitoring the design and sale of financial products, the potential use of unfair contact terms and distribution practices that may lead to poor outcomes for consumers and may breach the law.

Key results and examples are set out in Chapter 2 (pages 40-44) and Chapter 3 (Section 3.2).

ASIC Annual Report 2020-21 42

Reducing misconduct by company directors and professional service providers

We continued to ensure that individual accountability is given appropriate attention in our investigations in relation to company directors and officers.

Key results and examples are set out in Chapter 2 (Table 2.2.1) and Chapter 3 (Section 3.7).

Delivering as a conduct regulator for superannuation

We continued to work on establishing ASIC as the primary regulator of conduct in superannuation, consistent with the Government’s response to the Royal Commission recommendations.

We took action to deter misconduct, supported relevant legislative reforms, and continued our supervision and surveillance of superannuation trustees, focusing on whether trustees act in the best interests of consumers and treat them fairly.

Key results and examples are set out in Chapter 3 (Section 3.4).

Strengthening our capabilities to support our vision

Data and analytics

We have continued to build on our data and analytics capabilities during 2020-21 to better support our regulatory work. A number of material developments in the last year have allowed ASIC to better exploit the value of our data and drive improvement in ASIC operations. Some examples include:

› developing and initiating the long term ASIC Data Strategy 2021-2026

› implementing our Data Lake platform to allow storage and processing of data at the scale required, and provide our data professionals with access to the latest analytic tools

› building our data catalogue through automated scanning of our systems

› execution of multiple data initiatives leveraging tools and methodologies involving natural language processing, automation and self-serve dashboards, as well as the exploration of artificial intelligence and machine learning.

In the future, recurrent data collections and data sharing will be a feature of ASIC’s data and analytic capability uplift. Once completed these collections will maximise the availability and use of data across Government, minimise industry burden and the need for ad hoc collection, and better focus our regulatory attention.

ASIC’s annual performance statement 43

Recurrent data collection initiatives in development include:

› internal dispute resolution - collection of internal customer complaints data from ASIC-regulated financial services organisations

› managed funds - collection of granular fund-level descriptive and performance data on managed funds

› mortgages - collection of granular account-level descriptive and performance data on mortgages

› working with APRA on APRA’s Superannuation Data Transformation and the Financial Accountability Regime data collections

› enhancement for data-sharing initiatives between the ATO and ASIC to help identify illegal phoenix activity.

Regulatory Transformation Program

Our Regulatory Transformation Program continued to deliver improvements for our stakeholders and regulatory work.

From August 2020, all fundraising documents and corporate finance lodgements were able to be lodged via the ASIC Regulatory Portal, and a new Offer Notice Board was launched to list all fundraising offers. Applications for relief were moved from an email inbox to structured smartforms on the portal, helping make the application process more efficient.

Transactions in the Regulatory Portal are structured to make it easier for stakeholders to understand what information they need to provide ASIC. Paper forms have been replaced with smartforms that only ask questions relevant to each transaction type. These smartforms are prefilled with details

already held by ASIC, with quick links to relevant regulatory guides. There are over 62,000 individual users on the portal and over 45,000 organisations represented.

The digitisation of transactions and workflows enables ASIC to track each case more easily from initial breach or misconduct reports through to enforcement action. We now have a comprehensive view of our stakeholders that combines information such as licence applications, fundraising documentation, company directors, complaints and investigations. This enhanced visibility supports better decision making and provides a better understanding of the sectors we regulate.

Our regulatory tools

Enforcement

Enforcement action is one of the key regulatory tools available to us to help achieve a fair, strong and efficient financial system for all Australians. Our enforcement actions focus on areas of greatest harm in order to take an active and targeted approach to enforcement.

Our Office of Enforcement was established in July 2019. Its role is to increase the focus on priority matters, implement centralised decision-making processes, ensure adequate and flexible resourcing, and achieve greater consistency in our enforcement approach.

ASIC Annual Report 2020-21 44

Enforcement priorities

As a priority, we target cases of high deterrence value and those involving egregious harm or misconduct, particularly towards vulnerable consumers. In addition to Royal Commission referrals and case studies, ASIC’s Office of Enforcement prioritises:

› misconduct related to superannuation and insurance

› cases that engage our new powers or provisions that now carry penalties or higher penalties

› illegal phoenix activity

› auditor misconduct

› new types of misconduct, including misconduct carried out online or using emerging technologies.

ASIC will also always prioritise taking action on:

› significant market misconduct

› misconduct that is serious either by its nature or extent of harm, or that involves a large market participant or licensed entity

› misconduct that involves a high risk of significant consumer harm, particularly involving vulnerable consumers

› misconduct by individuals, particularly criminal conduct, or governance failures at board or executive level.

Enforcement priorities in response to the COVID-19 pandemic

In response to the impact of the COVID-19 pandemic on the financial system and the potential for harm that this has created, we have continued to pursue matters to address the following issues:

› conduct that seeks to exploit the pandemic environment, including predatory lending, mis-selling and poor claims handling

› opportunistic conduct, including scams

› failures to disclose materially negative information

› opportunistic and misleading market announcements

› egregious governance failures within corporations, schemes and superannuation funds.

Guided by these priorities, ASIC conducted investigations and sought urgent orders to protect vulnerable consumers. This included obtaining:

› injunctions to restrain companies in the Mayfair 101 Group from promoting debenture products

› interim orders restraining New South Wales-based PW Kitt Co Pty Ltd and its sole director, Larry John Dawson, from disposing of assets

› interim orders and injunctions against Debt Wipeout and associated individuals for unlicensed financial services

› freezing orders against Perth-based Monica Kaur and associated property developers providing unlicensed financial advice services and involved in, promoting and operating an unregistered managed investment scheme

ASIC’s annual performance statement 45

› orders restraining Matthew Alan Beresford from carrying on a financial services business and suspending the websites of Maxwell Financial Services and Asset Capital Holdings.

Criminal convictions

In 2020-21, as a result of our investigations, 29 people were convicted of criminal offences, with 10 people receiving custodial sentences (including those fully suspended).

Civil actions

In 2020-21, we completed 46 court actions, covering issues such as unlicensed consumer leasing; fees for no service breaches; overcharging interest; misleading and deceptive conduct; unconscionable conduct; continuous disclosure contraventions; failure to provide financial services efficiently, honestly and fairly; and failure to comply with the best interests duty and related obligations under the Corporations Act.

Of these cases, 93% were successful. The total value of penalties for the cases was $189.4 million.

Protective actions

We banned, removed or restricted 49 people or companies from providing financial services, and 46 people or companies from providing credit services.

We disqualified or removed 49 people from directing companies.

Corrective actions

We took action where credit licensees, superannuation trustees or responsible entities made misleading statements to consumers or investors. There were 59 instances of potentially misleading or deceptive promotional material withdrawn or amended in 2020-21.

Infringement notices

In 2020-21, we issued three infringement notices and received a total of $392,000 in payments pursuant to these infringement notices. We issued infringement notices against:

› Regional Express Holdings Limited

› Macquarie Securities (Australia) Limited

› Life Trading Pty Ltd.

Two of these were issued by the Markets Disciplinary Panel, specifying a total of $326,000 in penalties for alleged breaches of the market integrity rules.

One of those infringement notices also required the market participant to enter into a court enforceable undertaking to appoint an independent expert to review and report on whether the participant has appropriate supervisory policies and procedures to ensure compliance with the market integrity rules.

Helping protect small business

Where necessary, we take action against companies, directors and other officeholders who fail in their duties. By doing so, ASIC works to create a level playing field. This year, ASIC recorded 313 small business-related outcomes.

ASIC Annual Report 2020-21 46

Table 2.4.1 Small business enforcement outcomes by misconduct and remedy type

Misconduct type Criminal Administrative

Total

(misconduct)

Action against persons or companies 235 78 313

Of the actions summarised in Table 2.4.1:

› 210 convictions relate to external administrator programs

› 14 convictions relate to companies that failed to lodge annual financial reports with ASIC

› 11 relate to criminal convictions prosecuted by the Commonwealth Director of Public Prosecutions of which three received custodial sentences and two related to illegal phoenix activity

› 44 persons were disqualified from managing corporations of which four related to illegal phoenix activity

› 34 Australian credit licences were cancelled or suspended.

As at 1 July 2021, ASIC had 142 small business-related criminal cases underway against persons or companies.

ASIC also works to combat illegal phoenix activity. This year, of the 78 administrative actions in Table 2.4.1, four involved disqualification of directors where there were clear signs of illegal phoenix activity. In addition to these administrative outcomes, ASIC achieved two criminal convictions for matters that related to directors engaging in illegal phoenix activity. ASIC is committed to using its regulatory tools of engagement, surveillance and enforcement to identify, disrupt and take action against those who engage in illegal phoenix activity.

ASIC’s annual performance statement 47

Enforcement examples

Westpac subsidiaries: Personal financial advice about superannuation

On 3 February 2021, a unanimous High Court confirmed that Westpac Bank subsidiaries, Westpac Securities Administration Limited and BT Funds Management Limited (the Westpac subsidiaries), breached financial services laws.

These breaches related to telephone sales campaigns conducted by the Westpac subsidiaries where consumers were told that they were being provided with general financial advice. In the calls, the Westpac subsidiaries recommended that consumers roll out of their other superannuation funds into Westpac-related

superannuation accounts.

The court agreed with ASIC that the context and detailed discussions in the calls meant that the Westpac subsidiaries were actually providing personal advice. Neither Westpac subsidiary was licensed to provide personal financial product advice.

The court held that if a sales campaign is constructed so that a reasonable person might expect the caller to have considered the particular financial situation of the consumer, then it will fall within the personal advice provisions.

ASIC brought this enforcement action because of a concern that Westpac relied on a financial product sales model that blurred the line between general and personal advice.

ASIC argued, and the court agreed, that consumers’ decisions regarding superannuation accounts are ‘significant financial decision[s]’ and, as the advice was personal financial advice, it needed to comply with the requirement that it be in the best interests of the consumer. The court held that Westpac provided advice that was not in the best interests of consumers. In fact, this conduct had the potential for significant harm to consumers.

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Mayfair made ‘misleading or deceptive’ statements and ‘created a false and misleading impression’ of its debenture products

On 23 March 2021, the Federal Court found that Mayfair Wealth Partners Pty Ltd and its associated companies engaged in misleading or deceptive conduct, and made false or misleading representations in advertisements for its debenture products.

Mayfair was previously promoting two debenture products to wholesale investors by using sponsored link internet advertising through Google AdWords and Bing Ads, so that the websites for Mayfair’s debenture products appeared as sponsored links when consumers searched online for ‘bank term deposit’ or ‘term deposit’.

Justice Anderson found that Mayfair engaged in misleading or deceptive conduct, and made false or misleading representations, by representing that:

› Mayfair’s debenture products were comparable to, and of similar risk profile to, bank term deposits

› the principal investment would be repaid in full on maturity

› Mayfair’s debenture products were specifically designed for investors seeking certainty and confidence in their investments and therefore carried no risk of default.

The court also found that Mayfair and M101 Nominees engaged in further misleading or deceptive conduct and made false or misleading representations by representing that the M Core Fixed Income Notes were fully secured, when they were not.

This action was taken as part of ASIC’s ‘True to Label’ project targeting investment managers and financial product issuers who have lured unsophisticated investors into high risk products via misleading marketing. This matter demonstrates that ASIC will take action not only where investments are marketed as safer, lower risk or

more liquid when they are not, but also when search engines or online platforms are used in a misleading or deceptive way to entice investors to purchase products that they are not searching for.

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ASIC enforcement action against major financial institutions for significant customer harm caused by poor systems, processes and monitoring

The Royal Commission identified a class of conduct whereby customers were charged fees for services that were not provided to them (known as ‘fees for no service’ or FFNS) or customers were not receiving the promised benefits from financial services and products. The conduct has been the subject of ongoing enforcement action and investigation by ASIC.

What has been central to many of these instances of misconduct has been a failure of systems design and implementation, poor monitoring of those systems and processes, and delay in identifying, fixing and remediating customers for these system failures. As at 30 June 2021, six of Australia’s largest banking and financial services institutions had paid, or offered to pay, a total of $1.86 billion

in compensation to customers who suffered loss or detriment because of FFNS misconduct or non-compliant advice.

ASIC has brought the following enforcement actions arising from these kinds of systems and process failures:

› The Commonwealth Bank of Australia (CBA) was ordered to pay a $5 million penalty after the court found that CBA had breached the ASIC Act and the Corporations Act for failing to provide promised benefits to customers of their AgriAdvantage Plus Package.

› Two NAB superannuation trustee companies (NULIS Nominees (Australia) Limited and MLC Nominees Pty Ltd) were ordered by the Federal Court to pay a $57.5 million penalty for FFNS breaches. This is one of the largest total penalties ever imposed in a civil action filed by ASIC and reflects the egregious nature of FFNS misconduct.

› Australia and New Zealand Banking Group Limited (ANZ) was ordered to pay $10 million in penalties after being found to have engaged in unconscionable conduct and breached its obligations as a financial services licensee over the charging of certain fees to personal and business customers in relation to

periodic payments.

› CBA was ordered to pay a $7 million penalty after the Federal Court had previously declared that CBA made false or misleading representations and engaged in misleading and deceptive conduct, which led to a rate of interest being charged on business overdraft accounts that was substantially higher than

what its customers had been advised.

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Winding up of unregistered managed investment scheme and operating a financial services business without an AFS licence involving significant investor funds

In December 2020, the Federal Court found that Chris Marco, AMS Holdings (WA) Pty Ltd (AMS) and AMS as trustee of the AMS Holdings Trust contravened the Corporations Act by operating an unregistered managed investment scheme (UMIS) and carrying on a financial services business without holding an AFS licence. The court ordered the winding up of the UMIS operated by Mr Marco and AMS and

appointed McGrath Nicol as liquidators and as receivers and managers over all the defendants’ property. It further ordered that Mr Marco be permanently restrained from carrying on a financial services business without an AFS licence and restrained from operating an UMIS.

The civil action was commenced following ASIC inquiries which identified that Mr Marco had accepted over $200,000,000 from more than 130 investors over a 10 year period and the deficiency in net assets of the scheme was in the hundreds of millions of dollars.

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Significant financial penalties imposed for harmful conduct targeting vulnerable consumers in the retail over-the-counter market

As part of ASIC’s enforcement priority to address misconduct that involves a high risk of significant consumer harm, particularly to vulnerable consumers, ASIC has achieved significant outcomes in two enforcement actions taken against retail over-the-counter (OTC) derivative providers.

$75 million penalty ordered against AGM Markets Pty Ltd and its authorised representatives

In October 2020, the Federal Court ordered that AGM Markets Pty Ltd and two of its authorised representatives, OT Markets Pty Ltd and Ozifin Tech Pty Ltd, pay a total of $75 million in penalties for systemic unconscionable conduct while providing OTC derivative products to retail investors.

Justice Beach also ordered that refunds be paid to approximately 10,000 former clients. The court heard that account managers engaged on behalf of OT Markets Pty Ltd were told to ‘kill your customers’, a reference to encouraging their clients - often vulnerable investors whose trust the account managers had sought to win - to make deposits and trades.

$20 million penalty ordered against Forex Capital Trading Pty Ltd

On 29 April 2021, the Federal Court ordered Forex Capital Trading Pty Ltd (Forex CT) to pay a $20 million penalty for engaging in systemic unconscionable conduct, paying conflicted remuneration to its team leaders and account managers, and failing to act in the best interests of its clients. The court also ordered that its sole director, Shlomo Yoshai, pay a $400,000 penalty and be disqualified from managing corporations for eight years for breaching his duties as a director and aiding Forex CT’s unconscionable conduct.

Previous to the court’s decision, ASIC had cancelled Forex CT’s AFS licence, banned Mr Yoshai from providing financial services for 10 years, and similarly banned two former Forex CT team leaders and three former account managers from providing financial services for periods ranging from three to six years.

These enforcement outcomes demonstrate that OTC providers must have proper systems in place to ensure that they, and their representatives, comply with the law when dealing with customers.

ASIC Annual Report 2020-21 52

Former CFO guilty of market manipulation and fraud offences

In May 2021, Zhonghan Wu (also known as John Wu), the former chief financial officer of Traditional Therapy Clinics Limited (TTC), was sentenced in the District Court (NSW) to an intensive corrections order for one year and 10 months, which included a condition that he perform 200 hours of community service.

Mr Wu was also sentenced to a community corrections order for two years and six months after pleading guilty to fraud offences.

ASIC’s investigation found that between 8 September 2015 and 30 November 2015, Mr Wu carried out, and attempted to carry out, multiple share transactions in TTC shares using four different trading accounts. The trading had the effect of creating an artificial price for TTC shares on the Australian Securities Exchange (ASX). When

trades in one trading account were rejected for suspicious trading, Mr Wu would use another trading account to continue trading in TTC shares.

Mr Wu’s trading occurred immediately after TTC’s listing on ASX, following an initial public offering (IPO) in August 2015 that raised approximately $15 million through the issuance of 30 million TTC shares at $0.50 a share. Mr Wu carried out the transactions in order to maintain the TTC share price above the IPO issue price of $0.50 per share.

In addition to the market manipulation offence, Mr Wu was also found guilty of fraud. In 2012 and 2015, Mr Wu obtained loans from CBA for mortgages to purchase various properties. In support of his loan applications, Mr Wu provided false and misleading documents to CBA. The loan applications resulted in Mr Wu receiving funds totalling $360,000.

This result aligns with ASIC’s enforcement priority to take action over serious market misconduct and to hold gatekeepers to account.

The matter was prosecuted by the Commonwealth Director of Public Prosecutions after a referral from ASIC.

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Inter-agency collaboration on financial crime

ASIC collaborates with other Australian enforcement and regulatory agencies on serious and organised crime, including through the Phoenix Taskforce, the Serious Financial Crime Taskforce (SFCT) and the Fintel Alliance. This year we released 123 intelligence products to partner agencies and received 287 intelligence reports.

› Phoenix Taskforce: Together with other federal, state and territory agencies, ASIC is a member of the ATO-led Phoenix Taskforce. The Phoenix Taskforce’s whole-of-government strategy is to reduce the incidence and impact of illegal phoenix activity.

ASIC’s work as part of the Phoenix Taskforce for 2020-21 included publishing information about illegal phoenix activity; working with the ATO to implement the Data Fusion Joint Analytics, which fuses data from both agencies and applies advanced analytics to identify illegal phoenix behaviours for early intervention and disruption; and 42 Phoenix Surveillance Campaign visits, involving ATO and ASIC officers educating directors about illegal phoenix activity and discussing current compliance obligations.

› Serious Financial Crimes Taskforce: The SFCT is a multi-agency initiative targeting offences related to serious fraud, money laundering and defrauding the Commonwealth.

In 2020-21, we continued our contributions to the priorities of the SFCT relating to international tax evasion, illegal phoenix activity, cybercrime affecting the Australian taxation and superannuation systems and serious financial crime affecting the ATO-administered measures of the Commonwealth Coronavirus Economic Response Package.

› Fintel Alliance: The Fintel Alliance is a public-private partnership between federal and state government intelligence and law enforcement agencies, private sector businesses, and the Australian Transaction Reports and Analysis Centre.

During the reporting period, ASIC continued contributions to Fintel Alliance priorities addressing networked and complex financial crime.

ASIC Annual Report 2020-21 54

Supervision and surveillance

Institutional supervision

Institutional supervision, conducted by ASIC’s close and continuous monitoring team, focuses on those financial institutions that have the greatest potential impact on consumers, due to market share or other factors. This focused supervision seeks to proactively minimise misconduct and consumer harm through the uplift of organisation wide factors, including governance, accountability, systems and culture. The Big 4 Banks (CBA, WBC, NAB and ANZ) and AMP have been subject to institutional supervision since late 2018, with Suncorp joining the cohort in 2020-21.

During the first half of 2020-21, onsite review programs were temporarily suspended due to the COVID-19 pandemic. The focus changed to leveraging our ongoing engagements with the institutions to understand and oversee their response to issues arising from the pandemic, particularly the impact on vulnerable consumers.

As Australia started to adjust to pandemic conditions, we recommenced our deep dive supervisory reviews, adopting a hybrid approach to supervision and leveraging engagement using virtual technologies combined with onsite engagement, where feasible. This adapted approach has enabled us to be responsive as the COVID-19 pandemic continues while ensuring that this important work continues. During the latter part of 2020-21, we initiated our reviews of the internal audit functions of the focus institutions (this work will

continue in 2021-22) and initiated our engagement with Suncorp by conducting a comprehensive review of its incidents and issues management and internal dispute resolution systems and practices.

Throughout 2020-21, we continued to monitor actions taken and outcomes achieved by the institutions in response to reviews conducted in prior years.

For more information on the outcomes observed during 2020-21 in response to the previous review of internal dispute resolution, see page 88.

Governance supervision

ASIC’s Governance team is focused on improving customer and investor outcomes by uplifting the governance practices of, and implementing governance related reforms affecting, a broad spectrum of entities that ASIC regulates.

In 2020-21, our key focus areas have been:

› driving ASIC’s preparation to implement and jointly administer with APRA the proposed Financial Accountability Regime, a multi-year project that aims to improve transparency and strengthen accountability and governance in relation to both prudential and conduct-related matters

ASIC’s annual performance statement 55

› reviewing whistleblower policies of public companies, large proprietary companies and superannuation trustees to understand how entities are responding to the recent whistleblower reforms and to engage with entities to improve policy standards

› reviewing corporate governance statements from ASX-listed companies to understand the quality of disclosure about governance practices and adherence to the ASX Corporate Governance Council Principles and Recommendations

› engaging with firms on the findings from our review of board oversight and discretion in executive variable pay schemes and the revision of Information Sheet 245 Board oversight and discretion in executive variable pay schemes. A case study reporting on the outcomes of this work is included below.

During the ongoing COVID-19 pandemic, we responded to changes in market conditions by reviewing and/ or providing guidance on matters such as the conduct of virtual and hybrid member meetings, director share trading, operational resilience, and the impact on retail shareholders of board decisions on dividends.

ASIC Annual Report 2020-21 56

Board oversight and discretion in executive variable pay schemes

Our work on board oversight and discretion in the executive variable pay schemes of 21 large ASX-listed companies sought to deter corporate misconduct and prevent consumer and investor harm by improving the governance of executive variable pay schemes. Feedback was provided directly to the reviewed companies and the overall findings and guidance were initially published in Information Sheet 245 Board oversight and discretion in executive variable pay schemes (INFO 245) in June 2020 to provide immediate guidance in light of the COVID-19

pandemic environment.

Between June and December 2020, we engaged with 20 of the 21 companies about the practices they had changed or adopted to address our feedback. We found that many companies had made substantial changes to their remuneration governance since our review. In some instances, the review itself and the questions asked prompted early action, for example:

› To improve the active, timely and consistent exercise of discretion, eight companies developed and implemented tools, such as modifiers, guidelines and decision trees, to guide the exercise of discretion in response to risk and conduct issues and nine companies developed formal ‘look-back’ processes to inform the remuneration committee’s oversight of deferred pay.

› To ensure adequately informed exercise of discretion, 12 companies indicated that they would introduce, or uplift, written and verbal contributions of independent control functions and the use of external advisers. Six companies also committed to including specific agenda items on cross-committee report-

backs to maintain information symmetry across committee members.

› To effectively manage conflicts , six companies implemented a practice of management exiting the boardroom during determinations of the group pool, group performance or individual pay outcomes and four companies introduced a separate pool to pay CEO remuneration as a mechanism to limit conflicts.

› To increase the transparency of variable pay outcomes and the exercise of discretion, 14 companies committed to including details of key discussion points on executive pay outcomes in the minutes.

In March 2021, we reissued INFO 245, as enduring guidance beyond the pandemic. INFO 245 highlights our overall findings and better practices to the market and has been widely leveraged as a reference tool for boards. It has been cited in various publications and industry events.

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Sector-based and issue-based surveillance

In 2020-21, we completed:

› over 350 surveillances in the deposittaking and credit, financial advice, insurance, investment management and superannuation sectors to ensure that financial services providers complied with their conduct obligations

› over 730 surveillances in the corporations, market infrastructure and market intermediaries sectors.

Through our surveillance, we identified and addressed over 460 cases of failures, or potential failures, to comply with regulatory obligations.

Public outcomes of our supervision and surveillance work

ASIC publishes the results of our supervision, review and surveillance work.

Our reports advance good consumer outcomes and change behaviour by driving improved practices across a sector or market and recommending changes in industry practice.

In 2020-21, we released 26 supervision, surveillance or review reports, including on issues such as:

› our surveillance of debt capital raising practices and selected transactions (REP 668 Allocations in debt capital market transactions)

› the buy now pay later industry, the experiences of customers and regulatory developments (REP 672 Buy now pay later: An industry update)

› the experiences of superannuation fund members who were not using a financial adviser and directly contacted their fund to make inquiries about, or make changes to, their insurance arrangements (REP 673 Consumer engagement in insurance in super)

› metrics for measuring the value for money that members receive from default insurance offered through superannuation (REP 675 Default insurance in superannuation: Member value for money)

› ASIC’s review of school banking programs in Australian primary schools (REP 676 Review of school banking programs)

› the results and findings of ASIC’s second round of regulatory technology (regtech) initiatives and the regtech events held during the 2019-20 financial year (REP 685 ASIC’s regtech initiatives 2019-20).

Misconduct reports from the public

Our analysis of reports of misconduct received from the public is critical in informing our regulatory work.

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.

Since the initial COVID-19 pandemic lockdown in March 2020, ASIC has seen consistently high levels of reports relating to scam behaviour. This has resulted in ASIC providing regular alerts, warnings and reminders to the public to be vigilant in protecting their money and identity.

For more information on misconduct and breach reports, see pages 112-115.

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Licensing

ASIC assesses applications for AFS licences and credit licences. We also maintain a number of professional registers for registered companies, self-managed superannuation funds (SMSFs), auditors, company auditors and liquidators. We use a risk based approach to assessment, devoting most resources to complex and higher risk applications to ensure that only suitable persons and organisations are licensed or registered.

In 2020-21, ASIC finalised 1,965 applications in relation to AFS licences and credit licences, including applications for licences, cancellations and suspensions. We approved 776 AFS licences and 219 credit licences. We cancelled or suspended 308 AFS licences and 278 credit licences, the majority of which related to licensees voluntarily applying for licence suspension or cancellation.

A total of 384 AFS licence and credit licence applications were withdrawn or refused. Applications were often

withdrawn after we completed our assessment and informed applicants that they were unlikely to meet the statutory requirements to obtain a new or varied licence. We refused to accept 144 applications for lodgement, often due to material deficiencies in the information provided.

We assessed 736 applications relating to auditor registrations, cancellations or suspensions (company auditor, authorised audit company and SMSF auditor). Of these, 164 were approved, 25 were withdrawn, 1 was refused and 546 were cancelled or suspended.

Liquidator applications are lodged with ASIC, which must refer the application to a committee that will decide whether the applicant should be registered. ASIC must register an applicant if the committee has decided that the applicant should be registered and the applicant produces evidence in writing that they have taken out adequate and appropriate professional indemnity and fidelity insurance.

Additional guidance on fit and proper person test

On 18 February 2020, the Financial Sector Reform (Hayne Royal Commission Response—Stronger Regulators (2019 Measures)) Act 2020 amended the Corporations Act and the National Credit Act to improve the regulatory tools available to ASIC. This included aligning the probity tests to be applied by ASIC

when determining whether to grant a new or varied AFS licence or credit licence. ASIC must consider a ‘fit and proper person’ test for controllers and officers of all AFS licence and credit licence applications.

In January 2021, to assist applicants further, ASIC updated Information Sheet 240 AFS licence applications: Providing information for fit and proper people and certain authorisations and Information Sheet 244 Credit licence applications: Providing information for fit and proper people to advise that, in appropriate cases, ASIC will

accept alternative methods of establishing that relevant persons are fit and proper.

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ASIC’s inquiries lead to application being withdrawn

This financial year, ASIC received an application for a new Australian financial services licence. The applicant nominated a single responsible manager who had been an adviser at a prior licensee. ASIC had concerns about the quality of financial advice provided by the nominee while at the prior licensee, as well as the licensee’s

monitoring and supervision of its representatives.

During the assessment, ASIC considered audit review files that had been completed for the prior licensee. These audit reviews demonstrated repeated oversights by the nominated responsible manager, including the failure to disclose conflicts of interest, the failure to provide the relevant disclosure documents to clients, deficiencies in maintaining documentation, and the failure to act in the best interests of, and to provide appropriate advice to clients.

A number of these failings by the nominated responsible manager were also identified in a compliance report provided to ASIC by an external compliance consultant.

When ASIC asked the applicant about the concerns identified, the applicant withdrew its application. This is one of many cases where ASIC, in performing its gatekeeper function, ensures that only applicants that are able to satisfy ASIC that they have sufficient skills and knowledge are granted a licence.

Engagement

Regional action

Our Regional Commissioners and regional offices focus on addressing the diverse needs of our community and improving outcomes for consumers and businesses in each Australian state and territory. The Regional Commissioners report to the Commission regularly on activities, services and stakeholder liaison in their state or territory.

Due to the uncertainty and restrictions caused by the COVID-19 pandemic, many of our normal stakeholder activities in 2020-21 were restricted. However, our performance against our Service Charter this year shows that ASIC has provided high levels of service Australiawide.

See pages 33-35 for more information on our Service Charter results.

See pages 103-105 for more information on our regional action.

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Indigenous outreach

The Indigenous Outreach Program (IOP) works across ASIC to provide specialist advice, insight and support across the agency to ensure that the needs of Indigenous consumers and investors are addressed effectively and appropriately. The IOP also leads ASIC’s engagement with industry on outcomes for Indigenous consumers.

The IOP undertakes outreach and strategic engagement activities as part of its role, enabling a timely awareness of financial services issues impacting on Indigenous consumers and investors. The team manages a helpline and email address to enable Indigenous consumers and stakeholders working with Indigenous consumers to access the IOP directly for assistance.

ASIC’s Indigenous roadmap

In 2020-21 the IOP continued with stakeholder and community engagements to hear and learn from the values, priorities and aspirations of Aboriginal and Torres Strait Islander Australians when engaging with the financial system.

With Professor Robynne Quiggin of the University of Technology Sydney, the IOP concluded consultations in late 2020 with more than 170 individual service providers from across the country. In early 2021, the IOP engaged with approximately 100 diverse community members through eight virtual stakeholder consultations.

The IOP and Professor Quiggin will use these learnings to identify actions, opportunities for collaboration, and tools to help us work towards more appropriate financial products and services, a better experience of the financial system, and

overall improved well-being for Aboriginal and Torres Strait Islander Australians. This work will continue into 2021-22 and will continue to draw on co-design principles - shaped by Indigenous stories, lived experiences and aspirations.

Scams awareness campaign

Scams Awareness week in August 2020 marked the beginning of a six week campaign to promote awareness of scams that have impacted Aboriginal and Torres Strait Islander Australians. The IOP partnered with representatives of the Queensland Office of Fair Trading to develop an online campaign under the National Indigenous Consumer Strategy. The campaign highlighted the six most common types of scams, including investment and phishing scams, and offered tips on how people might recognise scams and protect themselves and their communities. The messages were promoted through a number of channels, including media, social media, websites and newsletters, reaching more than 450,000 people nationally - exceeding the campaign’s goal by fivefold.

International engagement

ASIC engages closely with peer regulators and agencies overseas to develop international regulatory policy, enhance cooperation, and positively influence the operation and regulation of global financial markets.

ASIC’s commitment to strong cooperation and collaboration with our overseas and domestic counterparts continued this year as we focused on joint initiatives and sharing information on market

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developments, regulatory approaches and consumer protection measures as part of the global COVID-19 pandemic response.

ASIC’s continued strategic participation in multilateral forums and bilateral channels contributes to the way we address market vulnerabilities and consumer harms and how we support a domestic recovery in an interconnected global financial system.

ASIC participates in a range of international forums:

› ASIC is a member of the board of the International Organization of Securities Commissions (IOSCO) and is represented on its policy committees and taskforces, including those examining issues around financial stability, sustainable finance, asset management, cryptoassets, technology, market fragmentation, enforcement, emerging risks and standards implementation.

› ASIC is co-chair of the IOSCO Retail Market Conduct Task Force.

› ASIC participates in IOSCO Asia-Pacific Regional Committee (APRC) meetings and cochairs the APRC Working Group on Enhancing Supervisory Cooperation. ASIC is chair of the Market Conduct Working Group of the International Association of Insurance Supervisors.

› ASIC serves on the board of the International Forum of Independent Audit Regulators.

› ASIC vice chairs the International Financial Consumer Protection Organisation and participates in G20/ Organisation for Economic Cooperation and Development Financial Consumer Protection Taskforce initiatives.

› ASIC is a member of the newly formed CFR International Coordination Group, which meets regularly to coordinate a cohesive approach to major international regulatory risks and issues.

› ASIC is a member of the Global Financial Innovation Network which is committed to supporting financial innovation and providing a more efficient way for innovative financial technology (fintech) and regtech firms to interact with regulators.

› ASIC is negotiating several memoranda of understanding (MOUs) with bilateral counterparts in New Zealand, India, Hong Kong and the United States. These agreements will strengthen cooperation and underpin market access arrangements for example, substituted compliance arrangements.

International cooperation requests

This year, we made 304 international cooperation requests (down from 497 requests in 2019-20) and received 513 requests (down from 528 requests in 2019-20) in relation to activities such as surveillance, supervision, enforcement, research and licensing.

This included 130 requests for assistance in enforcement matters, of which 37 requests sought ASIC’s assistance to compel material from third parties under the Mutual Assistance in Business Regulation Act 1992.

Innovation Hub

ASIC’s Innovation Hub helps innovative Australian businesses comply with regulatory requirements and provides a platform for international engagement on fintech and regtech ideas. Through

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the Innovation Hub, we provide informal assistance to fintech businesses on their regulatory obligations, Australia’s overarching regulatory framework and, as appropriate, options relating to relief powers such as the Australian Government’s enhanced regulatory sandbox (ERS).

ASIC, and its Innovation Hub, continue to pursue collaborative opportunities with other regulators, Government agencies, and industry associations. We adjusted our engagement approach to accommodate the impact of the COVID-19 pandemic environment, hosting our regularly scheduled events and industry engagements virtually.

In 2020-21, the Innovation Hub continued to host its quarterly Digital Finance Advisory Panel meetings and Quarterly Regtech Liaison Forum events, bringing together industry leaders and regulatory representatives to help inform ASIC and stakeholders on key fintech related and regtech related developments, issues and opportunities.

ASIC is one of 11 coordination group members of the Global Financial Innovation Network (GFIN). The GFIN has over 60 regulator members and is committed to supporting financial innovation in the interests of consumers by creating a framework for cooperation between regulators to share experiences and approaches to innovation. In 2020-21, ASIC was involved in the GFIN’s Cross-Border Testing initiative. We provided informal assistance and guidance to fintechs and regtechs that applied to us under the program.

ASIC is a member of the steering committee for the IOSCO Fintech Network, established in mid-2018. ASIC

is a member of many of the network’s workstreams and in 2020-21 we contributed to IOSCO’s work in distributed ledger technology, artificial intelligence and ethics, regtech, decentralised finance and approaches to innovation.

Informal assistance and guidance

In 2020-21, the Innovation Hub met with 56 innovative businesses, all of which received relevant informal assistance to better understand how their business models could navigate Australia’s regulatory framework. Since March 2015, ASIC has provided informal assistance to over 607 innovative businesses.

During this financial year, ASIC granted five new AFS licences or credit licences to fintech businesses. Fintech businesses that receive informal assistance from ASIC before submitting their licence application were approved materially faster than those not having sought assistance.

Enhanced regulatory sandbox

The ERS commenced operation on 1 September 2020. It allows natural persons and businesses to test certain innovative financial services or credit activities without first obtaining an AFS licence or credit licence.

The ERS supersedes the previous regulatory sandbox administered by ASIC, allowing testing of a broader range of financial services and credit activities for a longer duration (up to 24 months) than the superseded sandbox.

ASIC published Information Sheet 248 Enhanced regulatory sandbox (INFO 248) on 25 August 2020. INFO 248 explains the eligibility of businesses to test

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within the ERS and provides guidance around the application process. We hosted two webinars outlining the ERS with some practical guidance for potential applicants.

Six entities have been accepted to test in the ERS in the period from its commencement on 1 September 2020 to 30 June 2021.

ASIC and regtech

The Government announced on 7 August 2018 that ASIC would receive $6 million of funding over two financial years, 2018-19 and 2019-20, to promote Australia as a world leader in the development and adoption of regtech solutions for the financial services industry.

ASIC applied the funding to a series of regtech initiatives in 2020, including:

› Supervisory technology initiatives: ASIC undertook five internal regtech initiatives testing the potential of regtech for enhancing supervisory effectiveness and efficiency. The learnings from these trials were shared publicly with the regtech stakeholder community.

› Remote services and supervision webinar: This webinar was a discussion forum between industry, regulators and guests highlighting regtech’s potential to support the provision and supervision of financial services while many staff members work remotely.

› Good lending practices demonstration and webinar: This was a public problem-solving event with a curated synthetic data set in which selected regtech providers demonstrated how artificial intelligence and machine learning can be used to support a firm’s compliance with

responsible lending obligations. The regtech solutions were showcased at a public webinar, which was followed by an industry panel discussion.

ASIC published Report 685 ASIC’s regtech initiatives 2019-20 on 20 January 2021, summarising the results and findings of the second round of initiatives.

On 15 April 2021, the Department of Industry, Science, Energy and Resources (DISER) announced the challenges under the latest round of the Business Research and Innovation Initiative (BRII) focusing on regtech. ASIC was successful in having a challenge accepted by DISER under this round of BRII. Under the BRII project, the Commonwealth provides grant funding to small to medium sized regtech businesses to develop innovative solutions over two years to the regulatory problem set out in the challenge.

ASIC’s BRII challenge seeks innovative solutions to help identify and assess poor market disclosure by listed companies.

Small business engagement

ASIC assists, engages and helps protect small businesses to ensure a strong and healthy economy for all Australians.

Supporting Australian businesses in responding to the effects of the COVID-19 pandemic has been a focus for ASIC. We have provided support to business during COVID-19 pandemic lockdowns by publishing relevant resources on topics including companies facing financial difficulties and getting trusted business advice, small business insurance advice and advice about small business loan deferrals. As lockdown restrictions eased, ASIC recommenced its engagement with businesses.

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Guidance

Through regulatory guides, consultation papers and information sheets, ASIC provides guidance to industry on how we will administer the law.

We do this to enhance industry participants’ understanding of their legal obligations and how we administer the law. Our feedback reports provide transparency about ASIC consultation. In 2020-21, we published 28 consultation papers, 32 new or revised regulatory guides and 51 new or revised information sheets.

For a complete list of the publications issued this year, see our website at www.asic.gov.au/regulatory-resources/.

Education

Through the provision of consumer education, ASIC seeks to improve consumers’ financial skills, knowledge and efficacy and provide them with information and tools to help them make informed financial decisions.

This work includes:

› consumer education and information, primarily delivered through the Moneysmart website and stakeholder programs such as Moneysmart for teachers

› collaborating with others to understand and measure the impact of consumer education on financial decision-making

› embedding consumer insights across the organisation, including supporting ASIC’s supervisory teams to strengthen their consumer-facing work.

Some key projects completed this year include:

› Young People and Money Survey: the first wave of ASIC’s Young People and Money Survey asked 1,500+ young Australians (aged 15-21) about their experiences, attitudes and behaviours across a range of money-related topics. The results of this work will inform ASIC’s communication activities and more broadly, will influence programs and initiatives for young Australians.

› Youth expert working group: In August 2020, ASIC established an expert group on the financial wellbeing of young people to identify and explore key issues impacting the financial lives of young Australians. Dr Phil Lambert led this work, including convening four working groups to explore how young people engage with money. The working groups focused on agendas relating to preschool aged children through to adolescents and also considered the role of institutions interacting with young people making financial decisions. Findings from the working groups will be released next year.

› School banking programs review: In December 2020, ASIC released Report 676 Review of School Banking Programs. The review sought to identify why banks, schools and students engage with school banking programs, understand whether banks assess the impacts of their programs on students’ savings habits, and analyse the long-term impact of targeting marketing towards children. Through the review, ASIC found that school banking programs claim to help children develop long-term savings habits; however, providers were unable to demonstrate that these programs

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in and of themselves improve savings behaviour. Since releasing the report, three states and territories have announced the cessation of school banking programs and increased their focus on understanding and delivering effective financial education in schools.

ASIC’s Moneysmart

Moneysmart helps Australians take control of their financial lives with free calculators, tips and guidance.

Supporting Australians during the pandemic

This year, the Moneysmart COVID-19 Information Hub continued to help Australians understand where to seek additional support when experiencing hardship and managing changes to their financial circumstances. As at 30 June 2021, the Hub had received 532,635 page views:

› The COVID-19 pandemic ‘Accessing your super’ webpage had received 132,594 visits and 26% of visitors to the page used the Super Withdrawal Estimator to see the impact of early access on their retirement savings.

› Views of content on ‘Urgent help with money’ reached 240,510 page views, an increase of 145% from the previous year.

Use of the Moneysmart Mortgage Calculator increased from the previous year by 29% to 1,212,289 users. There were also increases in visitation to information on loans and investing. As at 30 June 2021:

› Page views on ‘No or low interest loans’ had increased from the previous year by 33% to 89,713 views, and page views on ‘Payday loans’ had increased for the same period by 88% to 99,357 views.

› Page views on ‘Investing’ content had increased from the previous year by 7% to 2,536,831 views.

Supporting better financial outcomes for young people

Economic, social and educational settings for young people have shifted dramatically in the pandemic environment and money is a topic of high engagement and concern. Pages in the ‘Student life and money’ content section with the highest visitation by young people as at 30 June 2021 included ‘Moving out of home’ (41,746 page views) and ‘Studying’ (15,523 page views).

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Disrupting financial scams during the COVID -19 pandemic

A financial scam involves a victim parting with their money on the promise of a questionable financial opportunity. During the COVID -19 pandemic, ASIC became aware of greater numbers of scammers seeking to take advantage of people. Reports of misconduct to ASIC over January-February 2021 were up by more than 200% compared to the previous year.

ASIC’s work focuses on disrupting the scam 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 of a rise in crypto-asset (or cryptocurrency) scams. These scams encourage investors to sign up to ‘crypto-asset trading’ online and deposit funds into a trading account, either via a crypto wallet or bank account.

When the consumer asks to withdraw their funds, bitcoin scammers either cease all contact or demand further payment before funds can be released.

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2.5 Registry services and outcomes

To realise our vision of a fair, strong and efficient financial system for all Australians, we aim to provide efficient and accessible business registers that make it easier to do business.

In April 2021, ASIC registry staff and functions moved to the ATO through a machinery of government (MoG) change. The Commissioner of Taxation was appointed as Registrar to assist ASIC in the performance of its registry functions.

This significant change to ASIC’s registry function was an important step in the progressive rollout of the Government’s MBR program. ASIC will continue to report on registry performance until the Registrar assumes primary responsibility for registry functions under law.

ASIC’s registers

ASIC’s performance reporting in 2020-21 was guided by our Corporate Plan which sets out our objectives and targets related to providing efficient registry services, including the registers of companies, business names and a range of professional registers.

The ASIC registers are the official source of information for business names, companies and financial professionals registered to operate in Australia. They are a critical part of Australia’s economic infrastructure.

The registry aims to:

› ensure information on the registers is up to date, accurate and available to those using the information, enabling business and consumer stakeholders to make informed decisions

› make it easier for businesses to engage with ASIC and comply with the law, and to enhance commercial certainty

› provide services that are online and accessible to all Australians

› continuously improve registry services to support efficient registration.

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Table 2.5.1 ASIC’s registers

Outcome

Total

2020-21

Total

2019-20

Total companies registered 2.92m 2.78m

New companies registered 279,853 222,048

Total business names registered 2.4m 2.3m

New business names registered 460,409 387,827

Calls and online inquiries responded to by our Customer Contact Centre 599,377 631,669

Registry lodgements 3.13m 2.96m

Percentage of registry lodgements online 94% 93.2%

Number of searches of ASIC registers 219.2m 243.7m

Performance overview

ASIC received just over three million lodgements during the 2020-21 financial year, with 94% processed online without manual intervention. The most common lodgement made was ‘Change to company details’ (Form 484), with over a million received. We also answered 599,000 inquiries through our Customer Contact Centre.

Business registration

ASIC’s registry helped facilitate the registration of 739,000 new businesses, comprising 279,000 companies and 460,000 business names.

Throughout 2020-21, the registry promoted the use of the Australian Government Business Registration Service available through www.business.gov.au.

In total, 99.97% of applications to register a company or business name are now made online.

The cost of registering a business name is $37 for one year and $88 for three years.

Increased use of online channels

A total of 94% of the three million lodgements received were submitted online, while the volume of lodgements submitted by mail decreased by 6.3%. Similarly, telephone calls coming into our Customer Contact Centre decreased by 12%, while inquiries submitted through our website increased by 7.8%.

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Analysis of key registry outcomes

Key outcomes achieved by ASIC’s registry in 2020-21 are set out below.

Modernising business registers

Over the course of the year, ASIC continued supporting Treasury and the ATO with the MBR program.

In the 2018-19 Budget, the Government announced its commitment to the modernisation of 31 ASIC registers, including the companies register, the Business Names Register and the ABR, on a new whole-of-government platform administered by the Australian Business Registry Services within the ATO.

The MBR program will:

› progressively roll out between 2021 and 2024

› bring together the 31 in-scope ASIC registers and the ABR

› introduce the director identification number initiative

The following milestones were achieved during the 2020-21 financial year:

› the Government committed to an investment of $419.9 million to enable the full implementation of the MBR program through the Digital Business Plan within the 2020 Federal Budget

› the Commissioner of Taxation was appointed as Registrar on 4 April 2021

› in a MoG change, 221 ASIC registry staff transitioned to the ATO on 15 April 2021 to support the functions of the Registrar.

The Registrar’s role is to lead and implement the MBR program and perform statutory registry functions and exercise registry powers as a delegate of ASIC. As the MBR program progresses, the Registrar will assume primary responsibility for those functions under law.

The ATO has taken over the lease of the Traralgon premises where ASIC is retaining a presence of around 90 staff members.

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International collaboration

The Executive Director of ASIC Registry, Rosanne Bell, continued as President of the international Corporate Registers Forum (CRF) during 2020-21.

The CRF is an association of corporate registries from more than 60 jurisdictions. The aim of the CRF is to provide members with the opportunity to review the latest developments in corporate business registers internationally and to exchange experiences and information on the present and future operation of corporate business registration systems. The registry’s involvement with the CRF is an important network to share ideas and best practice, and to discuss emerging registry issues.

In May 2021, the CRF entered into an MOU with partner organisations the European Business Registers Association and the International Association of Commercial Administrators. The MOU recognises the desire of each member to share knowledge, provide mutual assistance and participate in collaborative activities.

Natural disaster relief

ASIC has a longstanding history of supporting those impacted by natural disasters. This year we supported victims of bushfires and floods which impacted many communities and businesses across Australia. We realise that circumstances such as natural disasters may make it difficult for businesses to pay fees or meet their lodgement obligations.

Impact of the COVID-19 pandemic

The COVID-19 pandemic presented many challenges for businesses across Australia. During the pandemic, ASIC registry services continued to be available to the public and regulated population, and all key service targets were achieved.

ASIC supported impacted businesses through initiatives such as fee waivers.

ASIC supported Services Australia to continue its important work during the pandemic by sharing space in the Traralgon office for five months.

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2.6 Unclaimed money

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.

We fulfil this responsibility by maintaining 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 make claims. We process claims within 28 days of receiving all necessary claim documentation.

In 2020-21, ASIC received $299.6 million in unclaimed money. This was more than the $202.8 million we received in 2019-20.

We paid out a total of $88.4 million in claims in 2020-21, compared with $58.9 million the previous year.

We paid claimants interest (2020-21: $2.9 million of the $88.4 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, 1.9% for 2018-19, 1.33% for 2019-20 and 2.19% for 2020-21.

Table 2.6.1 Amount paid to owners of unclaimed money

Claims by type

2020-21 ($)

2019-20 ($) Principal Interest Total

Company 28,109,684 1,146,336 29,256,020 26,202,895

Banking 51,011,372 1,576,319 52,587,691 25,485,668

Life insurance 4,753,338 206,402 4,959,740 5,978,954

Deregistered company trust money 1,586,529 N/A 1,586,529 1,265,365

Total 85,460,923 2,929,057 88,389,980 58,932,882

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3ASIC’s achievements by sectorIndustry funding 743.1 Deposit taking and credit 753.2 Insurance 813.3 Financial advice 853.4 Investment management, superannuation and related services 883.5 Market infrastructure 923.6 Market intermediaries 953.7 Corporate 993.8 Large financial institutions 109ASIC’s annual performance statement 73

To help industry participants understand the regulatory effort ASIC expended in each sector we regulate, this chapter highlights the activities and outcomes achieved in each sector this financial year.

Industry funding

ASIC industry funding means that those who create the need for regulation bear the costs of that regulation. Under the model, entities pay a share of the costs to regulate their subsector through industry levies, based on a range of business activity metrics, and cost recovery fees for service.

There are seven industry funding sectors (deposit taking and credit; insurance; financial advice; investment management, superannuation and related services; market infrastructure and intermediaries; corporate; and large financial institutions) and 52 subsectors.

More information, including copies of the latest Cost Recovery Implementation Statement, is available on our website.

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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.

We use the full suite of our regulatory tools to promote fairness and professionalism in this sector, in order to bring about sound consumer outcomes. ASIC’s work in this sector during 2020-21 focused on responding to the impact of COVID-19 on consumers, and in particular how lenders have responded to consumers experiencing financial difficulties due to the pandemic, misleading advertising and debt collection.

The impact of the COVID-19 pandemic: payment deferrals

In response to the COVID-19 pandemic, ASIC began to monitor how lenders were responding to consumers experiencing financial difficulties due to the pandemic. Our monitoring work included regularly meeting with a range of lenders and consumer advocates.

Lenders reacted quickly to the pandemic, deferring repayments on more than 500,000 home loans. To encourage the delivery of appropriate and fair outcomes for consumers at the expiry of deferrals, ASIC published expectations for lenders in August 2020, which included that:

› lenders should make reasonable efforts to contact consumers before their repayment deferral expires

› if a consumer cannot return to meeting repayments, lenders should gather personalised information about the consumer’s circumstances to better enable them to offer assistance that genuinely meets the needs of each consumer.

We became aware that some consumers whose repayment deferrals were expiring were not responding to their lender, despite their lender trying to contact them. This was of concern to us and to lenders because if a consumer was unable to resume repayments on their home loan and did not engage with their lender, their financial situation could quickly worsen. To help address this concern, we ran targeted communications through our Moneysmart social media throughout September 2020, encouraging consumers to engage with their lender or seek the free assistance of the National Debt Helpline.

This work was assisted by our monitoring activities, where some lenders were able to share information about their customers on repayment deferrals, to allow ASIC to better target our messages.

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Misleading advertising

Recognising the risk that misleading financial services advertising may present to vulnerable consumers during the COVID-19 pandemic, ASIC established a cross-agency working party focused on enhancing surveillance, monitoring and enforcement responses to misleading advertising.

The working party found an overall high level of compliance; the majority of financial services advertising during the COVID-19 pandemic were consistent with the law. However, ASIC still saw ongoing issues in certain sectors, including fund managers providing inadequate or inaccurate disclosures, and exaggerated or misleading past returns on markets-related products.

Over the course of 12 months the working party successfully executed the following initiatives to address these issues:

› developed and trained surveillance and enforcement teams to use various tools to monitor advertisements within their portfolios, with a particular focus on digital platforms

› reviewed over 67,000 advertisements, with 122 of these referred to surveillance and enforcement teams for further action

› began a six-week trial using artificial intelligence and machine learning to monitor financial services advertising. During the trial, we scanned almost 1.7 million webpages and identified 1,960 potential risk cases. In a subsequent two-week analysis, we scanned 1,000 Google ads and identified over 100 advertisements which were referred to ASIC teams for further review

› liaised with other local and international financial services regulators and major digital platforms to understand misleading advertising perspectives and challenges within Australia and across international jurisdictions

› challenged all ASIC staff to identify and report misleading advertising through the working party’s Eyes and Ears campaign.

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Protecting consumers from predatory lending

A number of associated entities, including Cigno Pty Ltd (Cigno) and BHF Solutions Pty Ltd (BHF Solutions), have operated unlicenced lending models that provide small amount loans to large numbers of consumers and charge substantial fees on those loans, that in some cases have added up to almost 1000% of the loan amount.

The operators of these lending models claim to be exempt from the National Consumer Credit Protection Act and the National Credit Code, and therefore consumers were not afforded any of the statutory consumer protections contained in the legislation, including responsible lending and disclosure requirements and cost caps.

ASIC’s multi-pronged approach to dealing with these lending models demonstrates that we will use various regulatory tools when appropriate to address harm, and will act quickly and decisively even in a complex and changing environment.

While some of the actions outlined below occurred outside of the reporting period for this annual report, we have included this example because ASIC has made a sustained effort over a long period of time to address this conduct due to concerns about the vulnerability of the consumers involved.

Short term credit - product intervention order

On 12 September 2019 ASIC used its new product intervention power in relation to the short-term lending model to protect consumers from predatory lending. The order, which operated for 18 months, ensured that short term credit providers and their associates could not charge fees in total which exceeded a particular limit

provided for in the National Credit Code. Cigno, an affected entity, unsuccessfully sought judicial review of the order both in the Federal Court and then in the full Federal Court, which on 29 June 2021, upheld the order. The Court favoured a broad construction of the power allowing ASIC to consider and factor in consumer detriment that arises from the surrounding circumstances of how a product is made available, such as through complex lending structures like the short term

lending model.

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Continuing credit contracts - proposed product intervention order and court action

In September 2019, Cigno and BHF Solutions began offering a similar product using continuing (rather than short term) credit contracts. To address the potential significant detriment arising from this model, ASIC publicly consulted on a proposed continuing credit product intervention order in July and November 2020, which also sought to limit overall fees charged in relation to the product.

After ASIC identified a potential issue with the product intervention powers, in June 2021 the Federal Government made amendments to the product intervention powers to clarify ASIC’s jurisdiction in relation to fees and charges of financial and credit products.

In September 2020, ASIC filed proceedings in the Federal Court against Cigno and BHF Solutions, to test whether they were in breach of the National Consumer Credit Protection Act when using this new model by engaging in credit activities without holding a credit licence. On 23 June 2021, the Federal Court dismissed ASIC’s application. ASIC has appealed this decision because of a concern that it

will effectively limit the application of the credit legislation, potentially denying vulnerable consumers the protections afforded by the National Credit Act and the National Credit Code.

ASIC continues its work in this space to protect consumers from predatory lending models.

Debt management firms

Another key focus for ASIC this year, particularly in relation to vulnerable consumers, has been the debt-management sector, including services known as ‘credit repair’.

As part of a package of reforms announced by the Treasurer on 25 September 2020, debt management firms must now hold a credit licence when they are paid to represent consumers in disputes with financial firms. This reform took effect on 1 July 2021.

The reform requires debt management firms to meet the ongoing obligations imposed on credit licensees. These obligations include a requirement to meet the ‘fit and proper person’ test, and to undertake their activities ‘efficiently, honestly and fairly’.

Debt management firms must now be members of the Australian Financial Complaints Authority (AFCA), enabling consumers to have AFCA consider their complaints without cost and in a timely way.

ASIC is continuing to work closely with Treasury to implement these changes.

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Debt collection company convicted of engaging in unlicensed credit activities

Black Collections Pty Ltd (Black Collections) pleaded guilty and was convicted of engaging in unlicensed credit activities and holding out that it held a licence that would authorise it to collect on consumer debts when it did not. The company operated as a debt collection agency in Double Bay, New South Wales.

An ASIC investigation found that between about 5 October 2016 and about 12 March 2018, Black Collections collected consumer credit debts without holding a credit licence.

Black Collections was convicted and fined $8,800 for engaging in unlicensed credit activity and $4,400 for holding out that it held a licence that would authorise it to collect on consumer debts, when it did not.

Buy now pay later arrangements

The buy now pay later sector is an area of ongoing focus for ASIC. In November 2020, ASIC published a new report on the buy now pay later industry, which has grown substantially since our initial review in 2018. Report 672 Buy now pay later: An industry update charts the growth and popularity of these arrangements.

The review considered aggregated data from six buy now pay later providers and four major financial institutions. ASIC also commissioned consumer research to understand consumer behaviour and experiences with buy now pay later arrangements.

Our review found that the number of buy now pay later transactions increased from 16.8 million in the 2017-18 financial year to 32.0 million in the financial year 2018-19, representing an increase of 90%.

Our research also shows that one in five consumers are missing payments. In the 2018-19 financial year, missed payment fee revenue for all buy now pay later providers in the review totalled over $43 million, a growth of 38% compared to the previous financial year.

There are regulatory changes coming that will impact the industry, with the design and distribution obligations coming into effect in October 2021 and the industry developing a code of conduct.

We will continue to monitor buy now pay later products and the response by the sector to the COVID-19 pandemic. We will also continue to closely monitor the use of small amount and alternative credit products, especially by vulnerable consumers.

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Important obligations of Australian credit licensees

Australian credit licensees have important obligations. In December 2020 Jia Ge was convicted of giving misleading information in five home loan applications. He was sentenced to eight months imprisonment and directed to be released upon giving security of $500 and to be of good behaviour for two years. Because of the conviction, Mr Ge is also automatically disqualified from managing corporations for five years.

Mr Ge previously held an Australian credit licence, was a former mortgage broker and former director of Dollars R US Pty Ltd ACN 165 438 595 (Deregistered) (Dollars R Us). Between February and May 2017, Dollars R Us was engaged by four customers to help secure loans to purchase properties. The scheme involved each of the applicants paying money to a company related to Mr Ge, who would then transfer

the money back to the customers to give a false appearance of employment and a regular salary. Home loan applications prepared and lodged by Mr Ge falsely claimed that the customers were employed by Mr Ge’s related company and were receiving salaries.

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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’s work in insurance focused on responding to the impact of the COVID-19 pandemic on consumers and businesses, implementing the remaining reforms arising from the Royal Commission, and assisting consumers affected by natural disasters.

Life and general insurers’ responses to consumers experiencing financial hardship

We reviewed the responses of major life insurers and general insurers to consumers experiencing financial hardship or vulnerability during the COVID-19 pandemic. We focused on ensuring that insurers were treating consumers fairly and doing everything possible to support them in times of need.

We also swiftly engaged with life insurers and general insurers - covering around 85% of the life insurance and 70% of the retail home and car insurance markets respectively - to ensure that insurers were doing everything possible to support consumers who were experiencing financial hardship or vulnerability, both to maintain their insurance cover and to be able to make a claim. Where we

found unfair outcomes for consumers, we prompted insurers to change their practices, including offering a range of support options, proactively identifying and contacting consumers and extending claim lodgement timeframes.

Our review identified a number of areas where insurers could make improvements to support consumers during both challenging and stable economic cycles. On 22 April 2021, we wrote to Australian life and general insurers about the improvements they should make to ensure a more complete and robust hardship framework and to provide enduring supports for consumers experiencing heightened financial hardship or vulnerability from other events, including natural disasters such as floods and bushfires.

Travel insurance

An important area of focus for ASIC during the onset of the COVID-19 pandemic was travel insurance. We engaged with travel insurers - covering around 90% of the travel insurance market - to ensure that they were responding appropriately to policyholders affected by the COVID-19 pandemic travel restrictions.

Where policyholders could not use their travel insurance due to the travel restrictions, we prompted insurers to provide them with premium refunds for unused cover.

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$10 million of consumer remediation: Allianz travel insurance

ASIC secured $10 million in remediation from Allianz Australia Insurance Limited (Allianz) and AWP Australia Pty Ltd trading as Allianz Global Assistance (AWP) for travel insurance potentially mis-sold to around 31,500 consumers through Allianz’s own website and those of its distribution partners, including Expedia.

The refunds are for several forms of misconduct accepted by Allianz and AWP. The misconduct involved:

› the sale of policies to consumers who were not eligible to make a claim

› partially paid travel insurance claims

› the sale of policies on Expedia websites for premiums that were higher than those for the policies sold on a standalone basis.

ASIC took action to ensure that customers are remediated in full. To address these conduct issues, Allianz and AWP have:

› removed the potentially misleading or deceptive statements from their websites and those of their partners

› remediated travel insurance customers whose claims were partially paid

› refunded premiums, with interest, to customers who had purchased travel insurance from Allianz’s own website or those of its partners.

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Unfair contract terms in insurance contracts

From 5 April 2021, unfair contract term protections have applied to standard form consumer and small business insurance policies.

ASIC undertook targeted supervisory work to identify potentially unfair contract terms in home, motor vehicle, pet, travel and life insurance contracts, to set expectations and to encourage industry to remove or qualify unfair terms. We held roundtables with industry, updated existing information sheets on unfair contract term protections for consumers and small businesses, and proactively engaged with insurers, industry, consumer advocate groups and peer regulators.

ASIC’s supervisory work has resulted in important changes to insurance contracts, which we expect will improve consumer outcomes and minimise significant imbalances in the parties’ rights and obligations under a contract. Examples of changes to insurance contract terms as a result of our work include:

› changing an insurer’s unilateral discretion under an insurance policy

› reducing barriers to lodge a legitimate claim

› extending timeframes that might be difficult for an insured person to meet

› reducing the need to comply with preconditions

› providing enhanced transparency and clarity for consumers.

ASIC will use the range of regulatory tools, including enforcement action where appropriate, where we see consumer harms and unfair contract terms in standard form consumer and small business insurance contracts.

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ASIC’s response to natural disasters

ASIC has responded quickly to recent natural disasters affecting people around Australia. Our focus has been on providing timely and important information to affected consumers to help them lodge insurance claims, and working with insurers to improve claims handling practices.

To help consumers affected by natural disasters, we:

› distributed information through Moneysmart.gov.au

› provided public updates through targeted media interviews

› provided tailored information to members of Parliament whose electorates have been affected by natural disasters.

Moneysmart’s ‘Dealing with natural disasters’ information had over 17,000 unique page views between March 2020 and April 2021.

We also helped to protect consumers from harm at a time of heightened vulnerability by issuing public warnings about ‘disaster chasers’, who can scam consumers affected by a natural disaster by interfering in the claims process.

ASIC’s work on improving hardship responses by insurers will help those affected by natural disasters to recover and get back on track financially.

In December 2020, ASIC wrote to insurers setting out our recommendations for their claims handling practices in preparation for the 2020-21 natural disaster event season. We recommended that insurers should consider the following key actions to help consumers who have lodged a natural disaster claim:

› centralise oversight of the claim with a dedicated claims manager after the claim has been lodged and until it is resolved

› proactively and effectively communicate with consumers about the claims process, how their claim will be assessed, and how their claim is progressing

› consider whether their insurance products are designed to meet the needs of consumers who live in parts of Australia that are prone to natural disasters, and whether the way these products are being distributed results in appropriate products being sold to those consumers.

These recommendations were informed by the findings of consumer research commissioned by ASIC, and based on our view of what is needed to help ensure that insurers meet the duty of utmost good faith and the design and distribution obligations, which commence in October 2021.

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3.3 Financial advice

The financial advice sector includes AFS licensees and their representatives that provide personal advice to retail clients on financial products, general advice, and personal advice to wholesale clients.

In 2020-21, ASIC focused on helping financial advice businesses respond to the impact of the COVID-19 pandemic through the provision of temporary relief, and on improving consumers’ access to good-quality, affordable personal financial advice.

COVID-19 pandemic relief for financial advice businesses

As the COVID-19 pandemic escalated, we took immediate steps to help financial advice businesses respond to its impact, including through providing temporary relief to help the industry provide consumers with affordable and timely advice during the pandemic. Our temporary relief allowed the use of a Record of Advice (ROA) instead of a Statement of Advice in more circumstances, including when advisers were providing advice on the early release of superannuation schemes.

The temporary relief was extended on 23 September 2020 for an additional six months.

On 15 April 2021, we again extended aspects of the relief that allow greater use of ROAs following feedback from industry that some financial advice practices found this measure helpful.

ASIC has also released COVID-19 pandemic-related frequently asked questions (FAQs) on its website for financial advisers. These FAQs provide a practical explanation of how the temporary relief measures work and other practical tips to help advisers with issues arising as a result of the COVID-19 pandemic.

Access to quality financial advice

To address concerns that consumers may find it difficult to access good quality and affordable personal advice, ASIC is undertaking a project to look at the impediments industry participants face in meeting consumers’ advice needs. We are particularly focused on identifying what steps industry and/or ASIC can take to overcome these impediments.

On 17 November 2020, we published Consultation Paper 332 Promoting access to affordable advice for consumers (CP 332) to seek industry feedback about the impediments they face in providing good-quality and affordable advice.

We received 466 submissions to CP 332. This was a record result and demonstrated the significant interest that the consultation generated. In April 2021, following our analysis of responses to CP 332, we held roundtables with three separate groups: advisers, licensees and advice compliance managers and industry associations. The purpose of the roundtables was to further explore issues raised in submissions to CP 332 and to discuss solutions to these issues.

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Adviser bannings: superannuation advice

ASIC takes administrative action, such as banning individual advisers, to protect investors and consumers and to deter misconduct. This year, bans imposed included two relating to misleading communications about MySuper funds.

Under the Government’s Stronger Super reforms, a member’s accrued default amounts of superannuation were to be transferred to a MySuper fund by 1 July 2017, unless a member opted out of the transfer. The following two advisers issued or authorised misleading communications related to this.

Andrew Carl Hills: In April 2021, ASIC banned Mr Hills, a former authorised representative of Aon Hewitt Financial Advice Limited, from providing financial services for four years. ASIC found that Mr Hills allowed or authorised misleading and inaccurate letters about superannuation to be issued to some Aon Master Trust members.

After receiving the letters, hundreds of members did not fully transition to MySuper. Instead, their accrued default amounts remained in Aon Master Trust’s ‘choice’ superannuation product, which was generally more expensive than the MySuper product, partly because the administration fees for the choice superannuation product would continue to include commissions payable to each member’s financial adviser.

Christopher Chan: In April 2021, ASIC banned Mr Chan, a former authorised representative of Australian Unity Personal Financial Services Limited, from providing financial services, controlling a financial services business, or performing any function as an officer of a financial services business for five years. ASIC found

that Mr Chan sent misleading and deceptive emails about superannuation to some clients in 2016.

ASIC’s review of Mr Chan’s emails found that he advised clients to opt out of MySuper, claiming that the MySuper product had higher fees than the fee on their existing superannuation balances. However, this information was not correct for every client. After Mr Chan sent the emails to clients, some members did not fully transition to MySuper and continued paying higher fees as a result and continued to pay commissions out of their accounts to their financial adviser.

Financial advisers must not engage in misleading conduct in connection with financial products or services. Financial advisers must also prioritise their clients’ interests when providing personal advice.

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Stockbroker financial advice review

Retail clients play an integral role in equity capital markets, enabling companies to raise capital and maintain a broad shareholder base. This participation is facilitated by stockbrokers who commonly provide financial advice, allowing retail clients to make informed decisions across the primary and secondary markets.

In the previous financial year we conducted surveillance activities, including an onsite component, to review the compliance and supervision arrangements that stockbrokers have in place to meet their advice obligations. This year, we engaged with the stockbrokers to remediate deficiencies and improve practices. Key areas requiring improvements included:

› adviser supervision and monitoring

› record keeping

› classification of financial product advice

› statements of advice.

We have communicated our observations to industry, highlighting common areas for improvement and better practices as appropriate. Future surveillance work will be targeted to those areas requiring improvement to drive better industry standards. Where we identify serious compliance failures or misconduct, we will take regulatory action.

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3.4 Investment management, superannuation and related services

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 2020-21 our work in this sector focused on responding to the impact of the COVID-19 pandemic on consumers and businesses, insurance in superannuation and strengthening ASIC’s role as a conduct regulator for superannuation.

Investment Management

Managing investor liquidity risk

As the COVID-19 pandemic impacted markets throughout 2020, ASIC was concerned that retail funds invested in illiquid assets may face increasing member redemption requests that could not be satisfied by quick sales of assets at their book value. We were concerned that this may lead to the long-term freezing of member distributions and redemptions or asset ‘fire sales’, either of which may have triggered wider ‘runs’ on funds or rapid asset price declines.

In March and April 2020, ASIC reminded retail fund responsible entities of their obligations to manage member liquidity by monitoring investor redemption and application levels, to actively review fund redemption terms against the liquidity of assets, and to ensure that fund disclosure and marketing accurately represent the reliability of redemptions and distributions.

In June 2020, we began a review of a selection of retail funds invested in relatively illiquid assets to understand the nature and significance of any investor liquidity challenges that funds faced due to the pandemic. Our review covered 14 retail funds across three different strategies with an aggregate of $1.7 billion in assets under management and approximately 8,500 investors.

We reviewed fund information to examine the liquidity of fund assets, the flow of investor applications and redemptions, the adequacy of responsible entities’ liquidity risk management frameworks, and the adequacy of their disclosure around investor liquidity risk and redemption rights generally.

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We found that during the first half of 2020, there was a significant deterioration in cash received from investor applications in comparison to cash paid out in investor redemptions. However, this did not impact the regularity of distributions paid or of redemption opportunities and there was no material decrease in the liquidity of fund assets. Most of the responsible entities had introduced enhanced liquidity monitoring in March 2020, then eased back on this over the following quarter.

Overall, ASIC found that the liquidity frameworks of responsible entities were adequate and that liquidity risks and redemption rights were appropriately disclosed to investors.

Valuations of illiquid assets

The valuation of illiquid assets is important for members of registered managed investment schemes particularly during periods of economic disruption and financial volatility such as experienced during the COVID-19 pandemic. ASIC undertook a review of the current regulatory settings for valuations of illiquid assets held in registered schemes to identify whether these settings are adequate to protect members’ interests during periods of market volatility such as that experienced during the COVID-19 pandemic, and to make recommendations on future actions.

The review compared ASIC’s current regulatory guidance with that of other Australian and international supervisory bodies, incorporated the information derived from consultations with the valuers of illiquid assets on their practices and involved a review of the illiquid asset valuation practices of 10 responsible entities with a total of $21 billion invested in illiquid assets during the COVID-19 pandemic.

Overall, we found that regulatory settings were adequate and the governance frameworks, procedures and processes used by the responsible entities in the review were generally adequate in how they responded to the uncertainties arising out of the COVID-19 pandemic.

We did identify inconsistencies between valuation policies, compliance plan measures and information disclosed to investors in Product Disclosure Statements in a small number of funds. The responsible entities involved have addressed, or are in the process of addressing, these issues. Later in 2021, we will provide feedback on our findings to the firms involved and to the sector generally.

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Superannuation

Superannuation trustees’ support of members during the COVID-19 pandemic

During 2020, ASIC undertook a surveillance of public communications about issues and legislative measures related to the COVID-19 pandemic to quickly identify and prevent consumer harm arising from poor, inaccurate or potentially misleading statements.

Between March and July 2020, ASIC reviewed 51 websites of 50 superannuation trustees that at the time of the review were collectively responsible for approximately 94% of the $1.87 trillion in assets under management in the APRA-regulated superannuation industry.

Most of the websites ASIC reviewed had a dedicated COVID-19 pandemic webpage that was prominent and easy to access from the homepage. While most websites contained accurate information about legislative and economic changes, many lacked detail about how members’ insurance through their superannuation might be affected if they chose to access

their superannuation early, or if their employment status changed because of the COVID-19 pandemic. Several websites had inaccurate or incomplete information about insurance eligibility in superannuation if an early release of superannuation payment resulted in a low account balance. There was limited information about scams on fund websites.

We also identified projection tools on 14 websites that could have discouraged members from applying for the early release of superannuation because the tools used assumptions that exaggerated the long-term impact of withdrawal.

In light of the unique circumstances of the COVID-19 pandemic crisis, ASIC’s priority was to ensure that trustees acted promptly to improve communications to members. We contacted 26 trustees and one third-party provider about our concerns and sought prompt changes. All of the problematic communications were removed or amended quickly. Six of the projection tools were proactively changed by trustees, without direct contact by ASIC, after ASIC published COVID-19 FAQ (1E).

Better outcomes for consumers receiving automatic insurance cover through their superannuation

Most Australians hold life insurance through their superannuation fund. Insurance is attached to almost 10 million superannuation accounts. Approximately 86% of these are on the default settings, meaning that members with these accounts have been provided life insurance automatically by their fund.

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(continued)

The way that superannuation trustees provide default insurance to their members has been a key focus for ASIC throughout 2020-21. Our work included Report 675 Default insurance in superannuation: Member value for money (REP 675), in which we examined the value for money that superannuation members receive from default insurance and identified steps for trustees to take to improve insurance

provided to their members. We also published Report 673 Consumer engagement in insurance in super, which was prepared by Susan Bell Research and explores the experiences of superannuation fund members seeking to make changes to their insurance arrangements through directly contacting their funds.

A particular focus of our work was on the erosion of superannuation benefits caused by members paying too much for their insurance as a result of being inaccurately categorised into a higher-risk occupational category. Most funds group occupations into categories such as ‘blue collar’ and ‘white collar’ to reflect different levels of risk and the cost of insurance cover associated with different occupations. Because trustees often have limited data on their members’ occupations, many members end up in the category their trustee has designated as the default.

ASIC reviewed the practices of 21 trustees who we identified as using a high-risk occupational category as their default but who were more likely to have a membership with a white-collar or broad-based mix of occupations. Trustees often select the highest risk category as their default to ensure that all members are covered regardless of their occupation. In the MySuper products we looked at, the price of default insurance for the highest risk category was, on average, approximately double that of the lowest risk category.

We found that some trustees had poor disclosure practices, including 15 that were using generic labels such as ‘standard’ or ‘general’ for the most expensive occupational category. This can contribute to members not appreciating that they may be able to move to less expensive insurance based on their occupation. Further, in many cases, the process for members to update their occupational category was not readily apparent or accessible.

ASIC engaged with the trustees to seek improvements. Most have updated their disclosures to include clearer information about their default categories, Many have also taken steps to encourage more members to check whether they are in an appropriate occupational category - for example, by calling or emailing members

to invite them to update their occupation details with the fund. Three trustees have committed to changing their generic label to make it more meaningful (e.g. from ‘standard’ to ‘blue collar’), two of which have already implemented this change.

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3.5 Market infrastructure

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

ASIC’s work in this sector during 2020-21 continued to focus on providers’ compliance with their obligations under the financial services laws to help ensure good consumer and investor outcomes and maintain trust and integrity in Australia’s financial markets.

Ensuring market resilience

ASIC has continued its focus on ensuring market resilience this year by monitoring the equity market’s capacity to continue to operate during periods of high volatility and large trading volumes.

The ASX Limited’s equities market trading platform (ASX Trade) suffered an outage for most of the day on 16 November 2020, following a system upgrade over the preceding weekend. ASIC is assessing the impact of the ASX Trade outage and subsequent issues experienced with ASX’s Centre Point dark-pool trade matching service, order cancellations and other delays that occurred during the week of 16 November 2020. As part of this work we have engaged with market operators, market participants, investors and other stakeholders on the impact of the incident.

ASIC is also revisiting the recommendations made in Report 509 Review of the ASX equity market outage on 19 September 2016 to determine whether any changes are needed to regulatory settings for market participants and/or market operators.

Over-the-counter derivative trade reporting rules

We are implementing internationally standardised reporting requirements for OTC derivatives trade information to align with other major jurisdictions. This change is expected to decrease complexity and compliance costs for Australian entities, especially for those operating across borders.

Improved data quality and consistent data across jurisdictions are also expected to improve the utility of OTC derivatives data for regulatory purposes, including surveillance, monitoring market conduct, policy and strategic decision making, and monitoring systemic risk to ensure financial system stability.

In November 2020, we released Consultation Paper 334 Proposed changes to simplify the Derivative Transaction Rules (Reporting). This is the first of two consultations on proposed significant changes to implement the standards. We published initial proposals and considerations shortly after US and European consultations to provide transparency to industry and encourage engagement.

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The project is ongoing, with a second consultation paper and final rules expected in 2022.

Financial Market Infrastructure reforms

In 2019, the Council of Financial Regulators (CFR) consulted on a range of measures to enhance the regulation of financial market infrastructure. The enhancements aim to promote the strong and innovative development of the financial system and to ensure that financial regulators have sufficient powers to intervene to manage a crisis and pre-emptively identify and manage risks. ASIC worked together with fellow CFR agencies to develop the proposed reform package for consultation and to engage with stakeholder feedback. In 2020, the CFR provided its advice to the Government recommending a package of reforms.

In June 2021, the Government announced that it intends to introduce a regulatory reform package consistent with the CFR’s recommendations. This includes:

› introducing a crisis management regime for licensed clearing and settlement (CS) facilities, supported by a $5 billion standing appropriation available to the Reserve Bank of Australia (RBA) to ensure the continued operation of a CS facility

› enhancing the supervisory and licensing powers of ASIC and the RBA in respect of financial market infrastructures

› streamlining and clarifying certain regulatory powers.

ASIC will continue to work with the CFR to implement the recommendations.

LIBOR transition

ASIC has continued to promote an orderly transition from LIBOR (London Interbank Offered Rate) to alternative reference rates. During the year, we spoke publicly on the need to prepare for LIBOR transition and published several communications to provide guidance and clarification for the industry, including setting the expectation that market participants should not reference LIBOR in new contracts beyond 31 December 2021.

Recognising a distinct difference in readiness between various segments of the industry, ASIC issued targeted communications for buy-side firms and corporations to encourage all firms to examine their LIBOR exposure and take necessary steps to ensure an orderly transition.

In November 2020, ASIC published Information Sheet 252 Managing conduct risk during LIBOR transition (INFO 252) with practical guidance that Australian entities can adopt to manage conduct risk during LIBOR transition.

ASIC and APRA held joint supervisory engagements with key financial institutions to ensure that they are continuing with their LIBOR transition plans and keeping pace with the timelines and milestones provided by each of the risk-free-rates global working groups.

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Clearing and settlement

CHESS replacement

ASX is undertaking a multi year transformation program to replace its clearing and settlement system (CHESS) with a system based on distributed ledger technology.

Together with other Council of Financial Regulators (CFR) agencies and the Australian Competition and Consumer Commission (ACCC), we are supervising ASX’s governance of the project, stakeholder engagement, and the management of key risks, including system development and testing, participant readiness, and

pricing and data access.

In October 2020, ASIC and the Reserve Bank of Australia (RBA) made public our expectations of ASX that it replaces CHESS as soon as this can be safely achieved by ASX and CHESS users. We expect ASX to provide independent assurances to the regulators before migrating to the new system. The new system is expected to achieve a significant uplift in intraday and end-of-day processing performance.

At a minimum, the new system must deliver the same resilience, performance, recoverability, availability and security that CHESS meets today, while also delivering the benefits of contemporary technology, including significant uplift in processing capacity.

ASIC, with the CFR and the ACCC, will continue to closely monitor and engage with ASX and other key stakeholders as the program enters key industry-wide testing and readiness phases.

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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 2020-21 included a focus on market integrity and enhancing our monitoring of fixed income, currencies and commodities (FICC) markets.

ASIC continued to engage with market intermediaries during the pandemic to understand the effectiveness of their business continuity and supervision arrangements. We published better practices and observations on the conduct of intermediaries during the pandemic. ASIC also focused on a number of strategic priorities, including high-deterrence enforcement action, improving governance and accountability, and protecting vulnerable consumers.

Product intervention orders: Binary options and contracts for difference

ASIC used its product intervention power to reduce the risk of significant detriment to retail clients resulting from contracts for difference (CFDs) and binary options.

On 23 October 2020, we made a product intervention order imposing conditions on the issue and distribution of CFDs to retail clients. The order took effect on 29 March 2021. It reduces CFD leverage available

to retail clients to a maximum ratio of 30:1 and targets product features and sales practices that amplify retail clients’ CFD losses, such as providing inducements to become a client or to trade. The order strengthens protections for retail clients after ASIC found that CFDs have resulted in, and are likely to result in, significant detriment to retail clients.

ASIC reviews in 2017, 2019 and 2020 found that most retail clients lose money trading CFDs. During a volatile five-week period in March and April 2020, the retail clients of a sample of 13 CFD issuers made a net loss of more than $774 million. During this period, more than 15,000 retail client CFD trading accounts fell into negative balance owing $10.9 million to CFD issuers. Some debts were forgiven.

On 1 April 2021, we made a product intervention order banning the issue and distribution of binary options to retail clients from 3 May 2021. The ban follows ASIC findings that approximately 80% of retail clients lost money trading binary options and that binary options are likely to result in cumulative losses to retail clients over time because of their product characteristics.

The product intervention orders remain in force for 18 months and bring Australian practice into line with consumer protections in force in comparable markets overseas.

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Fixed income, currencies and commodities onsite reviews

FICC markets are global and directly link to the real economy. ASIC’s FICC strategy addresses threats to these markets that may cause harm to the real economy and consumers. We have intensified our focus on FICC markets through proactive onsite surveillances this year, with thematic reviews targeting:

› sales and trading practices at three fixed income businesses, including governance and supervision, risk management, and compliance controls that support these businesses

› conflicts of interest arrangements employed by two wholesale FICC markets businesses.

Each review involved onsite inspections over several days, questioning key staff, demonstrations of key systems and controls and reviewing an extensive range of supporting documentation. It is critical that compliance, risk, supervisory and governance arrangements including all three lines of defence remain adequately resourced and competent to effectively manage risk and ensure compliance with relevant regulatory obligations.

Where we identified weaknesses or areas for improvement, we recommended remedial actions be implemented to uplift conflicts management arrangements in wholesale FICC markets businesses, and that better practices and controls be embedded in fixed income businesses, including:

› embedding policies and training that are specifically developed and applied to the operating environment and business practices of the financial markets business units

› implementing more robust controls for conflicts management and to mitigate the risk of information leakage

› ensuring that governance frameworks clearly set out accountability and decision-making responsibilities for considering conduct-related issues

› prioritising the implementation of technology solutions to enhance transaction and communication monitoring and surveillance capabilities.

Capital framework market integrity rules

We routinely review monthly and annual financial information submitted by market participants as required under the ASIC market integrity rules. Obtaining an accurate understanding of a market participant’s financial position is an important component of ensuring the financial stability of our stakeholders, helping to better protect investors and counterparties.

In 2020, we identified differences in classification between the annual return and the financial report of certain assets and liabilities of a market participant. The differences we found included the treatment of some items which did not comply with requirements under the Australian Accounting Standards. However, the participant remained in compliance with minimum capital requirements at all times.

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The market participant was required to submit amended annual return and monthly returns reflecting the correct asset and liability balances. These adjustments and re-submissions were required in order to comply with the criteria for classifying current assets and current liabilities in Australian Accounting Standard AASB 101 Presentation of financial statements and derecognition criteria of financial assets in Australian Accounting Standard AASB 9 Financial instruments.

In June 2021, ASIC made new market integrity rules for capital, providing important protections for investors and the integrity of the market, while simplifying the capital framework for market participants. These new rules better align our standards with comparable international capital frameworks and the financial requirements of the Australian financial services licensing regime.

Activist short selling

ASIC analysed activist short selling in Australian and overseas securities markets. In May 2021, we published Information Sheet 255 Activist short selling campaigns in Australia (INFO 255), outlining ASIC’s expectations to promote market integrity during these campaigns. INFO 255:

› describes the impact of activist short selling on markets

› provides an overview of the Australian regulatory framework relevant to these campaigns

› recommends better practices for activist short sellers and authors of short reports, market operators, target entities and market participants

› lists some of the actions that ASIC may take in response to these campaigns.

Short reports can provide new research and analysis and test the veracity of information released by a target entity. Some activist short sellers have exposed flawed business models, questionable business or accounting practices, insolvency and fraud in targeted entities. However, activist short sellers can also unduly distort the price of a target entity’s securities.

To protect the integrity of Australia’s securities markets and address any information asymmetry, INFO 255 outlines better practices for activist short sellers, target entities, market operators and market participants. These include, for activist short sellers, releasing short reports outside normal trading hours, drawing on reliable information, and avoiding overly emotive language. Target entities should seek a temporary trading halt to provide time to digest and comprehensively respond to the claims of activist short sellers.

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Upgrade to ASIC’s market surveillance platform to enhance data analytics functionality to identify market misconduct

In 2020-21, ASIC upgraded its Markets Assessment and Intelligence (MAI) system and enhanced its data analysis capabilities.

MAI is a key business system which supports ASIC’s mandated responsibilities to supervise trading on Australian licensed financial markets. This upgrade delivered more scalable and secure data storage, by replacing outdated Adobe Flash with HTML5. The new system leverages AWS cloud capabilities to flexibly scale market surveillance capacity. This future-proofs ASIC to process ever growing volumes of data sets, cover broader market activities and improve performance.

ASIC also engaged with other Government agencies and various data providers to compile more comprehensive data sets to strengthen our supervisory efforts and ensure the integrity of Australian financial markets.

This series of activities set a strong foundation for ASIC’s expansion of monitoring capabilities into the fixed income, commodities and currency markets, while maintaining our strength in real-time surveillance of listed securities and derivatives markets.

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3.7 Corporate

The corporate sector includes auditors and liquidators, which are subject to separate fees and levies. The corporate subsectors include corporations (listed corporations, unlisted public companies, large proprietary companies, and small proprietary companies), auditors of disclosing entities, registered company auditors, and registered liquidators.

In 2020-21, our work in this sector focused on establishing the Corporate Governance Consultative Panel and supporting the healthy operation of capital markets by promoting best practice corporate culture and conduct and ensuring that investors are treated fairly in corporate transactions. We also responded to the impact of the COVID-19 pandemic on businesses and consumers, including by facilitating virtual meetings and extending temporary relief for capital raising.

Facilitating fundraising

The COVID-19 pandemic continued to cause ongoing uncertainties for companies seeking to raise capital. We ensured that our capital markets continued to function efficiently and fairly through a range of measures, including:

› Extending temporary capital raising relief: After consultation with a range of capital market participants, we extended our temporary relief helping listed companies raise capital quickly using ‘low doc’ offers to 31 December 2020. We also worked closely with ASX, which extended its temporary waiver to 30 November 2020. This allowed companies to raise an increased amount of capital without shareholder approval subject to certain conditions.

› Introducing new permanent relief: Since August 2020, issuers can rely on legislative relief to facilitate voluntary escrow arrangements and pre-prospectus advertising in connection with IPOs without the need to apply for individual relief.

Corporate Governance Consultative Panel

We established the Corporate Governance Consultative Panel in 2020 to enable ASIC to gain a deeper understanding of developments and emerging issues in corporate governance practices.

Members of this Panel include listed company directors, industry association representatives, institutional investors and academics.

The Panel met twice in 2020-21 to discuss the impact of the COVID-19 pandemic; environmental, social and governance issues; cyber resilience; and insolvency reforms.

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Guidance and relief for financial reports and audits under COVID-19 pandemic conditions

ASIC has assisted companies, directors and auditors in meeting their reporting and audit obligations having regard to the impact of the COVID-19 pandemic. This includes:

› liaison: regular contact with large and small audit firms, accounting bodies, the Australian Institute of Company Directors, standard setters, other regulators internationally, the Group of 100 and others to monitor emerging reporting and audit issues, resource pressures and other relevant developments

› focus areas: outlining reporting and audit focus areas, including asset values, liabilities, solvency, and going concern, as well as disclosures on uncertainties, key assumptions, underlying drivers of results, strategies, risks and future prospects

› extended reporting deadlines: providing an additional one month for listed and unlisted entities to lodge audited financial reports for balance dates up to 7 January 2021 and balance dates between 23 June 2021 and 7 July 2021

› timing of annual general meetings: adopting a ‘no action’ position where annual general meetings of public companies for year-ends up to 7 July 2021 are held seven months, rather than five months, after year end and virtual meetings are held for year-ends to 31 March 2021

› guidance: providing FAQs on our website to address common questions on the reporting and audit obligations of companies, directors and auditors given the impacts from the pandemic

› reviews of reports and audits: focussing our financial reporting surveillances and audit inspections to promote informed markets about the impacts of the pandemic on entities through audited financial reports

› regulatory activities: some changes to our regulatory activities to ease the burden on companies, directors and auditors who may be under pressure due to remote work and other impacts of the pandemic

› presentations: a number of webinars and podcasts on COVID-19 pandemic impacts and guidance.

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Response to the COVID-19 pandemic: Financial reports

The COVID-19 pandemic created unprecedented challenges for preparers of financial reports and their auditors. ASIC proactively identified potential issues and released FAQs with information on how to address those issues for both preparers and auditors.

Critical areas included asset values (including impairment), going concern and solvency, Government support (both received and the impact of withdrawal), the risk of extended lockdowns, and, for financial institutions, expected credit losses. ASIC encouraged entities to consider both internal and external factors.

The FAQs also provided information to directors on the matters which needed to be addressed in documents accompanying the financial report. For example, the operating and financial review was to focus on risks specific to the entity and industry and disclose strategies to mitigate those risks.

Financial reports selected for review as part of ASIC’s annual surveillance program specifically included entities we assessed as likely to have been either adversely or favourably affected by the pandemic. To ensure that stakeholders were properly informed about an entity’s performance, we considered whether the positive or negative impacts of the COVID-19 pandemic were adequately disclosed and

whether the entity may have misled users and obscured its performance by reporting on a pre-pandemic and post-pandemic basis.

Management was encouraged to be neither overly optimistic nor pessimistic in its assumptions about the future and in addressing other estimation uncertainties affecting the carrying amounts of assets and liabilities. Key assumptions needed to be disclosed and the reasons for management’s decisions properly documented.

Acknowledging the difficulties created by employees working remotely, entities were offered an additional month in which to lodge their financial report. ASIC also had ongoing discussions with auditors about their ability to conduct an audit.

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Holding auditors to account

Auditors play a vital role in underpinning investor trust and confidence in the quality of financial reports, which provide important information for investors and others who make decisions based on those reports. Audit quality is even more important in the context of COVID-19 pandemic conditions. There can be more difficult judgements about asset values, liabilities, solvency, going concern and disclosures, as well as challenges from any remote work arrangements.

ASIC is taking a broader, more intensive supervisory and enforcement approach to our work program on audit. This includes increasing transparency by publishing the level of adverse findings for large audit firms, publishing the largest six firm annual inspection reports, and progressing work on assessing the severity of our findings as well as broader measures and indicators of audit quality. We are reviewing firm culture in relation to audit quality, and how the largest six firms attract and retain the right talent for quality audits.

This year, we continued our review of the financial statements of listed and other public interest entities and the audit files of a number of these entities.

Our inspection findings showed that more can be done to improve audit quality. See Report 677 Audit inspection report: 1 July 2019 to 30 June 2020 and our supplementary report containing a broader group of audit quality measures and indicators, Report 678 Audit quality measures, indicators and other information 2019-20. These, together with the largest six firm inspection reports, were released on 22 December 2020.

In November 2020, the Parliamentary Joint Committee released its final report on the regulation of auditing in Australia. We will provide input to any proposed legislative or standard changes and publish required policy and guidance following the Government’s response to the report recommendations.

Providing certainty to the market during the COVID-19 pandemic: virtual meetings of members

In March 2021, ASIC published a temporary no-action position to facilitate the convening and holding of member meetings using virtual technology. The no-action position applies to meetings held between 21 March 2021 and 31 October 2021, or any earlier date for which measures are passed by Parliament relating to the use of virtual technology in member meetings. It also allows entities with balance dates up to 7 April 2021 an additional two months to hold their annual general meetings.

ASIC’s no-action position was designed to give certainty to the market given that the ongoing COVID-19 pandemic still created uncertainty around gatherings and travel. It followed on from the expiry of Corporations (Coronavirus Economic Response) Determination (No 3) 2020 on 21 March 2021, which had permitted the convening and holding of virtual meetings during the pandemic.

The no-action position maintained the status quo while Parliament considered legislation introduced by the Government in relation to the use of virtual technology to hold member meetings. This legislation was passed in August 2021.

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Providing certainty to the market during the COVID-19 pandemic: virtual meetings for companies in external administration

The temporary modifications to the operation of the Corporations Act made by the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 confirmed that meetings of members and creditors for companies in external administration could be held using virtual technology.

ASIC provided input to Treasury on reforms to implement permanent changes to allow the use of virtual technology to conduct meetings for companies in external administration.

On 15 December 2020, the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 received royal assent. Schedule 4 of this Act, dealing with virtual meetings and electronic communications, commenced on 16 December 2020.

ASIC notified registered liquidators about the passing of these reforms on 21 December 2020.

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Implementing insolvency law reform

On 24 September 2020, the Government announced reforms to Australia’s insolvency framework to help more small businesses restructure and survive the economic impact of the COVID-19 pandemic. These reforms were aimed at incorporated businesses with liabilities of less than $1 million. Key elements of the reforms included introducing a new:

› restructuring process that allowed eligible small businesses to remain in control during the restructuring process

› class of registered liquidator for individuals who wished to be registered only to act as a restructuring practitioner under the new restructuring process

› simplified liquidation process for eligible small businesses

Legislation passed both Houses of Parliament in December 2020 and commenced on 1 January 2021. To support these reforms, ASIC:

› developed 20 new forms or documents and updated existing forms where necessary

› enhanced IT systems to enable electronic lodgement of these new and amended forms

› updated the application process to allow individuals to apply to be registered as a liquidator only to act as a restructuring practitioner under the new restructuring process, including issuing guidance to assist the person prepare their application

› published on our website information about the new restructuring and simplified liquidation processes.

The Government’s temporary COVID- 19 pandemic measures to assist companies continue to operate during the pandemic included temporary safe harbour relief for directors from personal liability for insolvent trading for debts incurred in the ordinary course of business. This temporary measure ceased on 31 December 2020.

The reforms extended this temporary measure for a short period to protect directors during the period from when they resolved to appoint a restructuring practitioner to when the appointment could be made.

ASIC published information to assist directors of eligible companies understand the temporary relief measure and what they had to do to access the temporary safe harbour relief introduced by these reforms, including enhancing IT systems to enable directors to make the necessary notifications.

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Court applications: registered liquidators

ASIC deals with court applications under Chapter 5 of the Corporations Act that must be served on ASIC, including:

› novel applications for relief due to the COVID-19 pandemic

› applications under Chapter 5 or Schedule 2 where ASIC is named as a party

› registered liquidator replacement and/ or retirement applications

› an application for an inquiry into the conduct of a registered liquidator under section 45-1 or section 90-15 of Schedule 2

› applications under Chapter 5 or Schedule 2 where the court has specifically requested ASIC’s assistance or has ordered ASIC to respond in writing to the application

During the financial year ended 30 June 2021 the Registered Liquidators legal team considered 296 court applications, and 17 applications for authorisation as an eligible applicant.

Financial reporting surveillance

Quality financial reports provide important information for investors and other stakeholders in making decisions about the allocation of scarce resources.

In 2020-21, we proactively reviewed 254 financial reports of listed entities and other public interest entities for years ended 30 June 2020 and later. We issued media releases about five entities that recognised material changes to reported

net assets and profits totalling more than $200 million following our inquiries on financial reports. In recent years, material changes have been made to 4% of financial reports following our review.

We issued media releases concerning material financial reporting changes following our inquiries of Nitro Software Limited, Kresta Holdings Limited, Elixinol Global Limited, LawFinance Limited and Ainsworth Game Technology Limited.

We continue to publicly highlight focus areas for directors, preparers and auditors ahead of each reporting season so that these areas can be addressed before financial reports are issued and the market is properly informed.

Audit inspections

Auditors play a vital role in underpinning investor trust and confidence in the quality of financial reports.

In 2020-21, we proactively reviewed 45 audit files relating to audits of listed entity and other public interest entity financial reports.

Our inspection findings show that more needs to be done to improve audit quality (see Report 677 Audit inspection report 1 July 2019 to 30 June 2020 issued in December 2020). Auditors have primary responsibility for audit quality, supported by audit committees and others in the financial reporting ecosystem.

ASIC’s annual performance statement 105

While audit firm action plans remain important in improving audit quality, ASIC has adopted new regulatory initiatives including:

› a focus on enforcement actions for auditor conduct matters

› reviewing the culture within the largest six audit firms focused on audit quality, and firm talent for quality audits

› increased transparency by publishing the level of adverse findings for each of the largest six audit firms.

We published a supplementary report with a broader group of audit quality measures and indicators (Report 678 Audit quality measures, indicators and other information 2019-20).

Better data

ASIC publishes statistical data on corporate insolvency in Australia from 1999. Our Series 1 (Companies entering external administration for the first time) and Series 2 (All formal insolvency appointments) statistics have historically been published on our website on a monthly basis more than one month in arrears.

In April 2020, to provide more timely data in response to the COVID-19 pandemic, we started publishing statistics of companies entering external administration on a weekly basis. The new Series 1B compared the current period (both weekly and monthly) to the same period in the prior year.

We provided more timely information to assist market participants in monitoring the impact of Government measures introduced to support the economy in response to the COVID-19 pandemic, specifically around corporate insolvency.

We quickly identified that rather than the expected increase in formal appointments from the economic impact of the COVID-19 pandemic there was in fact a material decline in formal appointments which coincided with measures introduced by the Government. This decline was sustained throughout 2020-21.

During the course of the 2020-21 financial year, the published statistics were enhanced to provide additional data at both the state and industry levels to help identify areas or industries suffering stress.

ASIC will continue to seek to enhance the data it publishes to provide more accurate and timely information.

ASIC Annual Report 2020-21 106

Directors disqualified from managing corporations

ASIC takes action to prevent directors with a history of failed companies from continuing to manage corporations.

In September 2020 ASIC disqualified Michael David Steele from managing corporations for the maximum period of five years. Mr Steele was an officer of two companies that were placed into external administration owing investors more than $4.5 million.

ASIC found that Mr Steele failed to lodge documents with the ATO, failed to invest money as promised, and transferred investor funds into his personal accounts for personal expenses. Mr Steele had also been convicted in 2018 and 2019 of failing to assist the liquidators.

Illegal phoenix activity and directors’ duties

Addressing illegal phoenix activity continues to be a focus for ASIC. Ensuring that directors comply with their duties is a key element.

In December 2020, Andre Kunz, former director of Total Hoarding Supplies Pty Ltd ACN 107 987 271 (Deregistered) (THS) and Sybab Pty Ltd ACN 144 935 311 (Deregistered) (Sybab), was convicted of breaching his duties as a director after engaging in illegal phoenix activity. Mr Kunz was sentenced to a community corrections order for two years, and 200 hours of community service work and was ordered to pay a fine of $2,000. Because of the conviction, he is automatically disqualified from managing corporations for five years.

The ASIC investigation found that Mr Kunz dishonestly transferred over $2 million of assets belonging to THS to Sybab, a company of which he was also a director. The consideration for the asset transfer was a 20-year loan with Sybab, with no repayment to be made before the end of the loan period. THS was subsequently

unable to continue to trade and generate cash flow to be able to meet its liabilities leading to the company’s insolvency. At the time of the asset transfer, THS was being pursued by the Bendigo and Adelaide Bank for outstanding loans of over $1.6 million.

The investigation was aided by a report from the liquidators of THS, which ASIC funded through the Assetless Administration Fund.

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Registered liquidator misconduct

We take a holistic and scalable approach to the regulation of registered liquidators. When ASIC considers reports of misconduct against registered liquidators we take into account factors such as the information differential between the consumer and the liquidator, and whether the underlying behaviour of the registered liquidator meets the high standards expected by the community and at law.

We received a report of misconduct from a small community based organisation regarding an insolvent company and deposit funds not being repaid to it by the registered liquidator. ASIC determined that this was not a commercial dispute relating to a pre-appointment transaction; rather, the liquidator appeared to have received the deposit after their appointment to the insolvent company and had not delivered the ordered equipment.

ASIC inquired of the liquidator on what basis the funds were being retained, triggering the immediate repayment of the money to the organisation, which was then able to continue its fundraising activities to support its local community.

SMSF auditors’ activities and outcomes

ASIC works with the ATO as co-regulators of approved SMSF auditors. ASIC is responsible for the registration of SMSF auditors. The ATO monitors SMSF auditor conduct and refers auditors to ASIC where it considers that their conduct is causing harm to consumers. ASIC can disqualify, suspend or impose additional conditions on the registration of an SMSF auditor.

During 2020-21, the ATO referred 32 approved SMSF auditors to ASIC for action. ASIC initiated another eight SMSF auditor surveillance cases based on other sources, including four that had breached conditions previously imposed on their registrations and four because of concerns that the auditors were not fit and

proper persons.

Actions taken by ASIC included one disqualification, one ASIC initiated registration cancellation, and the imposition of additional conditions on a registration. ASIC also accepted the voluntary cancellation of 12 auditors as negotiated outcomes from our investigation of matters referred by the ATO.

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3.8 Large financial institutions

Supervision of large financial institutions

ASIC conducts intensive supervision of Australia’s largest and most complex institutions that have the greatest potential to impact consumers; CBA, WBC, NAB, ANZ, AMP and Suncorp.

As set out in Chapter 2, the focus in 2020-21 was on:

› monitoring how the institutions responded to the pandemic (particularly issues confronting vulnerable consumers)

› including Suncorp in the cohort with a comprehensive review of two of the key systems that enable the early detection and prevention of customer harms (the incidents management and internal dispute resolution systems)

› the initiation of reviews of the institutions’ internal audit functions

› continued monitoring of actions taken and outcomes achieved by institutions in response to reviews conducted in prior years, including internal dispute resolution and breach reporting in the context of incident management.

ASIC’s annual performance statement 109

Management of customer complaints and internal dispute resolution

Our work reviewing the internal dispute resolution practices of CBA, WBC, NAB, ANZ and AMP sought to uplift the way customer complaints are managed and responded to with a view to preventing poor outcomes from recurring in the future. Our key findings included:

› poor and fragmented complaint management systems and data did not support robust and consistent resolution and response to complaints and limited opportunities for analysis and improvement

› weak processes and practices resulted in the under-recording of complaints, longer resolution times and inconsistent identification of systemic issues

› poor accountability limited end-to-end oversight of customer complaints

› a lack of strategic focus on addressing the systemic issues arising out of customer complaints.

The institutions responded positively to our findings and put forward action plans to rectify the issues identified. During 2020-21, we engaged regularly with them to track progress against their actions plans and to test for improved customer outcomes through the monitoring of key performance metrics. We observed positive changes across a range of metrics, indicating that outcomes for customers have improved. For example, in the year following our reviews (as compared to the year prior):

› complaints to AFCA relating to the reviewed institutions made up a smaller proportion of the total complaints to AFCA, suggesting a relative improvement in internal complaints management processes of the reviewed institutions compared to the non-reviewed population

› on average, the institutions were the subject of a smaller proportion of complaints to AFCA after the customer had already lodged their complaint directly to the institution, suggesting that the institutions’ internal responses to complaints have been more effective and satisfactory to customers

› on average, a smaller proportion of complaints about the institutions made to AFCA required escalation and resolution through AFCA’s case management process, suggesting that more customers have had their complaints dealt with in a more efficient manner with less external intervention by AFCA required.

ASIC Annual Report 2020-21 110

4ASIC’s people4.1 Workforce planning 1124.2 Diversity and inclusion at ASIC 115 ASIC’s people 111

4.1 Workforce planning

Employment at ASIC

All employees are employed by the Chair of ASIC under section 120 of the ASIC Act. The Chair also determines their terms and conditions of engagement. Most of ASIC’s employees (96.7%) are covered by the ASIC Agreement 2019-22. ASIC will negotiate a new enterprise agreement in 2022.

Working at ASIC

ASIC measures engagement through the employee engagement survey, Your Voice, which was launched in April 2021. The survey had an 83% participation rate and delivered a strong employee engagement score of 78%.

The results highlighted the importance of teamwork at ASIC, with supportive, friendly and approachable team members being most commonly mentioned as reasons for working at ASIC. Wellbeing was identified as a major contributor to employee engagement and our results in this area have improved significantly since the previous survey in 2019. ‘Going the extra mile’ and a ‘commitment to ASIC’s goals’ also featured strongly.

Wellbeing across ASIC has been a strong focus during the pandemic. We conducted seven Support and Wellbeing surveys to identify the challenges faced by employees and the impact of these challenges on engagement and

productivity. These surveys were actively supported and allowed us to adapt quickly to the changing environment.

As team members transitioned back into the office after initial lockdowns, we refreshed our flexible working policy to support a culture where working flexibly aligns with ASIC’s values, is considered part of our new ways of working, and is applied consistently across ASIC.

As part of a broader workforce planning strategy, we refreshed ASIC’s capability framework to identify our capability strengths and gaps, as well as our critical roles, and to plan more effectively for leadership succession. This framework aligns with ASIC’s strategic priorities and was developed with our current and future (two-to-three year) capability requirements in mind. It has the flexibility to be updated as capability requirements change and enables us to target talent acquisition and development resources where capability gaps exist.

We further examined pay equity during this period, comparing indicators, such as, gender, group/function, career level, and tenure. Our findings indicate that we have reduced the gender pay gap since 2019, and at some leadership levels, have closed this gap. Overall, where pay gaps did exist, we found that these gaps favoured neither gender. We have already established several interventions to further reduce pay gaps and will continue to work on these and other initiatives in the coming year.

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Team members continued to be adaptive and work effectively despite new work arrangements. Once able to transition into the office after lockdowns, we refreshed our flexible working policy to support a culture where working flexibly aligns with ASIC’s values, is considered part of our new ways of working, and is applied consistently across ASIC.

Recruitment

We continue to invest in our workforce and recruit based on merit. We value sharp, analytical minds that challenge and improve the way things are done. We recruit people from a wide variety of disciplines, including law, finance, economics, statistics and analytics, business and accounting, mathematics, arts and social science, and information technology and computer science.

Staff benefits

In addition to professional development opportunities, benefits provided to our employees this year included:

› up to 15.4% superannuation contribution

› the potential to receive an annual performance bonus at the ASIC 4 to executive level

› individual and team recognition and awards

› study assistance.

Graduate and postgraduate program

We have a well-recognised national 18-month graduate program, providing professional development in both business and interpersonal skills, as well as rotation opportunities through different teams. Our multi-staged recruitment process enables us to attract diverse candidates.

In 2020-21, we:

› received over 2,500 graduate applications

› employed 11 graduates and three postgraduates

› were ranked #3 in the Australian Government category by the Australian Association of Graduate Employers.

In 2021, we welcomed our second postgraduate cohort. This 24-month program recognises the cohort’s previous experience and offers rotations and other professional development opportunities.

Mentoring

We provide our people with opportunities to participate in a range of mentoring programs. In 2020-21, these included the following:

› ASIC mentoring program: This year, the program supported the professional development of 143 mentees and 105 mentors across ASIC.

› Women in Banking and Finance: Conducted externally, this program supported six women team members, preparing them for senior leadership roles.

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› Women in Law Enforcement Strategy: Conducted externally, this 10-month program seeks to address the under-representation of women in law enforcement agencies, particularly at senior levels. This year, five team members participated as mentees and two senior executives as mentors.

› Positive Action towards Career Engagement (PACE) mentoring program: Conducted externally, this four-month program offered through the Australian Network on Disability connects students and jobseekers with disability to mentors from the business community. It provides mentors with the opportunity to develop their leadership skills and disability confidence, while mentees gain vital workplace experience, develop skills and expand their networks. This year, five team members participated as mentors.

Learning

We develop team member capabilities through formal and on-the-job learning activities. These activities are aligned to the capabilities identified in our organisational capability framework and our professional and technical capability frameworks, which focus on building and maintaining capability in regulatory practice, enforcement, law, data analytics, accounting and auditing. During 2020-21, we delivered 614 learning activities with a record 46,690 completions.

ASIC continues to sponsor, guide, develop and deliver capability building activities by working in partnership with our Professional and Technical Learning Networks, Communities of Practice and Learning Champions.

Work health and safety

ASIC’s early intervention approach to managing injuries and illnesses continues to provide excellent results. The ASIC Comcare premium is low, with our premium rate 0.12%, last year’s rate 0.15%, and the overall scheme average rate 0.79%. One notifiable incident reportable to Comcare was identified with no ongoing action required.

The COVID-19 pandemic continues to have a significant impact on work health and safety, and we have seen a large increase in risk assessments from 18 last year to 330 this year.

We remain committed to training and supporting our Health and Safety Representatives, First Aid Officers and Harassment Contact Officers.

Our focus on psychological safety means that we continue to provide programs to support people leaders and team members to create a psychologically safe workplace through a series of webinars and e-learn modules.

For ‘R U OK Day?’ in September 2020, guest speaker Andrew Carnegie, psychologist, spoke on ‘Being ok and beyond - practical tips to better health and wellbeing’ which was well received. Our Employee Assistance Provider is well utilised at approximately 8% and our external wellbeing check-in support service FBG Group has been a valuable addition.

ASIC’s flu vaccination program began in April 2021, offering a pharmacy voucher system only, with 634 vaccinations provided.

ASIC Annual Report 2020-21 114

4.2 Diversity and inclusion at ASIC

ASIC is committed to workplace diversity and fostering an inclusive environment where our people, stakeholders and communities are valued and treated with fairness and respect.

Diversity and inclusion remained a priority in 2020-21 and our commitment to this is a key pillar of our culture. This year, we:

› published our Multicultural Action and Rainbow Action plans

› developed an Aboriginal and Torres Strait Islander Employment Strategy and an Indigenous Cultural Safety Strategy

› maintained a gender balanced leadership team at the Senior Executive Service (SES) level, with women comprising 59% of senior executives

› increased our Indigenous workforce to 1.63% (from 1.44% last year)

› achieved bronze status in the Australian Workplace Equality Index

› established a new diversity network: Parents and Carers

› adopted an intersectional approach to understanding domestic and family violence.

Women in ASIC

ASIC continues its support for women in leadership and senior positions. This year, we continued to meet our diversity employment goal of 40-40-20 (40% women, 40% men and 20% any gender identity) for leadership roles with Executive Level 1 (54%), Executive Level 2 (49%) and SES (59%) positions.

The Women in ASIC Committee delivered regular Communities of Practice events to discuss topics related to women in leadership and workforce participation. The Committee welcomed Dr Sally Pitkin at our annual international Women’s Day celebration and recognised Alex Purvis, Senior Manager, Superannuation, with the Women in Leadership award.

Equitable gender briefing

The Legal Services Directions 2017 require Commonwealth entities to use all reasonable endeavours to select female barristers with relevant seniority, expertise and experience in the relevant practice area. This aims to increase briefing rates so that senior female barristers account for at least 25% of all briefs, or 25% of the value of all brief fees paid to senior barristers, and junior female barristers account for at least 30% of all briefs, or 30% of the value of all brief fees paid to junior barristers.

In 2020-21, ASIC exceeded all targets for both junior and senior female barristers. ASIC achieved 53% on the value of briefs and 56% on the number of briefs for briefing junior female barristers, where the target is 30%. For senior female barristers where the target is 25%, ASIC achieved 28% on the value of briefs and 26% on the number of briefs. ASIC continues to work to ensure that female barristers, especially those in senior roles, are equitably briefed alongside their male counterparts.

ASIC’s people 115

Rainbow Network

Our Rainbow Network continues to raise awareness about LGBTIQ+ issues in the workplace and provides support to ASIC team members.

This year, the network published the ASIC Rainbow Action Plan 2020-21, developed a newsletter for network members, and supported the attainment of ‘bronze status’ in the Australian Workplace Equality Index. This index is a national benchmark which gauges the overall impact of LGBTQ+ inclusion initiatives on organisational culture.

The network continues to collaborate with our peer regulators through the Rainbow Regulators Network. In 2020-21, we celebrated Wear it Purple Day virtually with these peers.

Reconciliation Action Plan

ASIC’s most recent Reconciliation Action Plan (RAP) was successfully finalised in December 2020. As this was ASIC’s first Stretch RAP 2017-20, our focus was on strategic approaches and embedding our commitments across the three RAP pillars of Respect, Relationships and Opportunities within our organisation. Achievements over this RAP include ASIC’s progress to build strong relationships with around 14 Indigenous businesses, equating to a $4.6 million spend over the entire RAP period. We continue our innovative approach to engage ASIC team members and build an understanding of Aboriginal and Torres Strait Islander histories, cultures and experiences through RAP events. COVID-19 pandemic

restrictions over 2020-21 have meant utilising virtual platforms in engaging ways, including:

› a cooking demonstration focusing on Indigenous food knowledge and traditional spices with the Torres Strait owned business Mabu Mabu, celebrating the NAIDOC theme ‘Always Was, Always Will Be’

› a virtual screening of the documentary In My Blood It Runs with an opportunity to engage in Q&A sessions to celebrate Reconciliation Week’s theme ‘In this Together’.

Having celebrated over 10 years of our Reconciliation journey, ASIC’s next RAP focuses on measurement and evaluation. We engaged EY to work collaboratively with ASIC to develop a framework to measure progress towards clear RAP outcomes through engagement across the organisation. This approach has allowed ASIC to develop clear outcomes and associated targets for our next RAP for ASIC teams to progress towards. Measuring ASIC’s RAP progress, as opposed to tracking outputs, will allow for deeper analysis of progress made towards set outcomes based on ASIC’s unique contribution to Reconciliation, allowing us to target our efforts where they will be most effective. ASIC is currently engaging with Reconciliation Australia to have our next RAP endorsed.

ASIC Annual Report 2020-21 116

Indigenous employment initiatives at ASIC

This year, ASIC launched an Aboriginal and Torres Strait Islander Employment Strategy and an Indigenous Cultural Safety Strategy. Both strategies have supported our Indigenous employment goals, with ASIC reaching its highest employment figure for Indigenous team members of 1.6%.

ASIC continues to participate in initiatives, including:

› the Indigenous Apprenticeship Program

› the Indigenous Graduate Program.

ASIC also launched Indigenous Cultural Safety training which seeks to empower ASIC leaders to promote inclusion of our Indigenous team members and stakeholders through information, allyship, advocacy and support. This training confirms our commitments as outlined in ASIC’s RAP, Diversity and Inclusion Strategy and Indigenous Cultural Safety Strategy.

Multicultural access and equity

This year ASIC’s Multicultural Committee published the ASIC Multicultural Action Plan 2020-22. This plan focuses on our commitment to ensuring that our programs and services meet the needs of all Australians, regardless of their cultural and linguistic background, and strengthening our capacity as a culturally competent organisation.

As part of its plan, the Committee participated in new research with the Diversity Council Australia and the University of Sydney Business School, as detailed in the report Counting Culture: Towards A Standardised Approach to Measuring and Reporting on Workforce Cultural Diversity in Australia. This research has developed a standardised approach for defining, measuring and reporting on workforce cultural diversity in a respectful, accurate, and inclusive way.

The Committee also launched its Leadership Event Series, which explores the career experiences of many culturally diverse leaders.

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Accessibility

ASIC remains committed to accessibility for our stakeholders and an accessible and inclusive workplace for our people.

ASIC’s websites are designed to be read by screen readers, transcripts and captions are available for all video files, and a text equivalent is available for all images. The Digital Assistance team in ASIC’s Contact Centre supports customers who require additional assistance with online transactions.

Our Accessibility Committee continues to provide a workplace for eligible employees to access without exclusion. The Committee is in the second year of its ASIC Accessibility Action Plan 2020-22, launching Welcoming Customers with a Disability and Disability Confidence training and continuing its commitment to the PACE Mentoring program.

The Accessibility Committee also welcomed Dr Ben Gauntlett, Australia’s Disability Discrimination Commissioner, to celebrate International Day of People with Disability.

ASIC in the community

ASIC in the community is a national program that provides all ASIC team members with opportunities to connect with charities that are important to them. Under the program, staff can contribute to charity through volunteering, workplace giving and fundraising campaigns. Due to restrictions from the COVID-19 pandemic, community volunteering was limited for 2020-21.

This year, our workplace giving supporters donated $113,577.20. ASIC team members contributed on average $4,000+ each fortnight via payroll to 40 charities, with 187 employees (around 9%) contributing throughout the year.

The main channel for fundraising at ASIC is the Graduate Fundraising Project, where graduate cohorts raise funds for a charity partner through staff appeals throughout the year.

Since February 2021, the 2021 graduates have raised $2,558 for SmartMeals, a campaign project run by StreetSmart Australia. Established in March 2020 in response to the COVID-19 pandemic, the SmartMeals program utilises the unused capacity of local cafes and restaurants to provide meals for local overstretched homeless and community groups, while also keeping hospitality workers in jobs.

Due to remote working, the 2021 graduate cohort was forced to be creative with fundraising ideas while ensuring that events were engaging for staff members participating. This experience has been both challenging and rewarding, enabling the graduates to interact with staff across ASIC offices, foster their communication skills and develop meaningful connections outside their immediate teams.

ASIC Annual Report 2020-21 118

5Financial Statements

Financial Statements 119

Contents

Independent Auditor’s Report 121

Statement by the Accountable Authority and Chief Financial Officer 123

Statement of Comprehensive Income 124

Statement of Financial Position 125

Statement of Changes in Equity 126

Cash Flow Statement 127

Administered Schedule of Comprehensive Income 128

Administered Schedule of Assets and Liabilities 129

Administered Reconciliation Schedule 130

Administered Cash Flow Statement 131

Notes to and forming part of the financial statements

Overview 132

Note 1. Departmental financial performance 134

1.1 Expenses 134

1.2 Own-source revenue 136

Note 2. Income and expenses administered on behalf of Government 138

2.1 Administered - expenses 138

2.2 Administered - income 140

Note 3. Departmental financial position 141

3.1 Financial assets 141

3.2 Non-financial assets 143

3.3 Payables 147

3.4 Interest-bearing liabilities 147

3.5 Other provisions 148

Note 4. Assets and liabilities administered on behalf of the Government 149

4.1 Administered - financial assets 149 4.2 Administered - payables 150

Note 5. Funding 152

5.1 Appropriations 152

5.2 Special Accounts 156

5.3 Regulatory charging summary 158 5.4 Net cash appropriation arrangements 159

Note 6. People and relationships 159 6.1 Employee provisions 159

6.2 Key management personnel remuneration 161

6.3 Related party disclosures 162

Note 7. Managing uncertainties 162 7.1 Contingent assets and liabilities 162 7.2 Financial instruments 165

7.3 Administered - financial instruments 167

7.4 Fair value measurement 167

Note 8. Other information 168

8.1 Current/non-current distinction for assets and liabilities 168

8.2 Restructuring 170

8.3 Expenditure relating to statutory board and tribunal 171

8.4 Assets of deregistered companies vesting in ASIC 171

8.5 Security deposits from dealers, investment advisers and liquidators 172

8.6 Budgetary reports and explanations of major variances 172

ASIC Annual Report 2020-21 120

INDEPENDENT AUDITOR’S REPORT

To the Treasurer

Opinion

In my opinion, the financial statements of the Australian Securities and Investments Commission (the Entity) for the year ended 30 June 2020:

(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 2020 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 as at 30 June 2020 and for the year then ended:

• Statement by the Accountable Authority and Chief Financial Officer; • Statement of Comprehensive Income; • Statement of Financial Position; • Statement of Changes in Equity; • Cash Flow Statement; • Administered Schedule of Comprehensive Income; • Administered Schedule of Assets and Liabilities; • Administered Reconciliation Schedule; • Administered Cash Flow Statement; and • Notes to and forming part of the financial statements, comprising a summary of significant accounting

policies 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 (including Independence Standards) (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.

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

Independent Auditor’s Report

GPO Box 707, Canberra ACT 2601 38 Sydney Avenue, Forrest ACT 2603 Phone (02) 6203 7300 121

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:

• 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;

• 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;

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Accountable Authority; • 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 • 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 Executive Director Delegate of the Auditor-General

Canberra 1 September 2021

ASIC Annual Report 2020-21 122

Statement by the Accountable Authority and Chief Financial Officer

In our opinion, the attached financial statements for the year end 30 June 2021 comply with subsection 42(2) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), and are based on properly maintained financial records as per subsection 41(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.P. Longo E. L. Hodgson

Chair Chief Financial Officer

1 September 2021 1 September 2021

Financial Statements 123

Statement of Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2021

Notes

2021 $’000

2020 $’000

NET COST OF SERVICES

Expenses

Employee benefits 1.1A 282,840 275,356

Suppliers 1.1B 135,855 149,288

Depreciation and amortisation 3.2 70,513 63,481

Finance costs 1.1C 2,150 1,397

Impairment loss on financial instruments 53 40

Write-down and impairment of other assets 1.1D 704 2

Total expenses 492,115 489,564

LESS:

Own-source revenue

Sale of goods and rendering of services 1,343 1,703

Revenue from other Australian Government entities 1.2A 30,351 5,073

Other revenue 1.2B 8,904 11,284

Total own-source revenue 40,598 18,060

Gains

Reversal of write-downs and impairment 3.1B 8 57

Total gains 8 57

Net Cost of Services 451,509 471,447

Total revenue from Government 1.2C 437,092 403,261

Surplus/(Deficit) (14,417) (68,186)

Total comprehensive income/(loss) (14,417) (68,186)

The above statement should be read in conjunction with the accompanying notes.

ASIC Annual Report 2020-21 124

Statement of Financial Position AS AT 30 JUNE 2021

Notes

2021 $’000

2020 $’000

ASSETS

Financial assets

Cash and cash equivalents 3.1A 46,304 41,151

Trade and other receivables 3.1B 157,936 170,493

Total financial assets 204,240 211,644

Non-financial assets

Buildings 3.2 214,302 236,404

Plant and equipment 3.2 25,896 19,511

Computer software 3.2 83,417 74,007

Prepayments 13,533 17,706

Total non-financial assets 337,148 347,628

Total assets 541,388 559,272

LIABILITIES

Payables

Suppliers 3.3A 29,750 30,798

Other payables 3.3B 34,209 37,217

Total payables 63,959 68,015

Interest-bearing liabilities

Leases 3.4 217,968 242,810

Total interest-bearing liabilities 217,968 242,810

Provisions

Employee provisions 6.1 81,387 83,248

Other provisions 3.5 13,961 12,739

Total provisions 95,348 95,987

Total liabilities 377,275 406,812

Net assets 164,113 152,460

EQUITY

Contributed equity 500,703 474,633

Reserves 22,500 22,500

Accumulated deficit (359,090) (344,673)

Total equity 164,113 152,460

The above statement should be read in conjunction with the accompanying notes.

Financial Statements 125

Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2021

Notes

2021 $’000

2020 $’000

CONTRIBUTED EQUITY Opening balance 474,633 436,058

Transactions with owners Contributions by owners Equity injections - Appropriations 6,904 13,426

Departmental capital budget 20,856 25,149

Restructuring 8.2 (1,690) -

Total transactions with owners 26,070 38,575

Closing balance as at 30 June 500,703 474,633

RETAINED EARNINGS Opening balance (344,673) (295,515)

Adjustment on initial application of AASB 16 - 19,028

Adjusted opening balance (344,673) (276,487)

Comprehensive income Surplus/(Deficit) for the period (14,417) (68,186)

Total comprehensive loss (14,417) (68,186)

Closing balance as at 30 June (359,090) (344,673)

ASSET REVALUATION RESERVE Opening balance 22,500 22,500

Closing balance as at 30 June 22,500 22,500

TOTAL EQUITY Opening balance 152,460 163,043

Adjustment on initial application of AASB 16 - 19,028

Adjusted opening balance 152,460 182,071

Comprehensive income Surplus/(Deficit) for the period (14,417) (68,186)

Total comprehensive loss (14,417) (68,186)

Transactions with owners Contributions by owners Equity injections - Appropriations 6,904 13,426

Departmental capital budget 5.1A 20,856 25,149

Restructuring (1,690) -

Total transactions with owners 26,070 38,575

Closing balance as at 30 June 164,113 152,460

The above statement should be read in conjunction with the accompanying notes.

ASIC Annual Report 2020-21 126

Cash Flow Statement FOR THE YEAR ENDED 30 JUNE 2021

Notes

2021 $’000

2020 $’000

OPERATING ACTIVITIES

Cash received

Appropriations 484,672 426,545

Operating cash received 1,343 1,703

Net GST received 15,002 20,922

Cost recoveries 6,728 8,057

Other cash received 28,100 10,887

Total cash received 535,845 468,114

Cash used

Employees 283,077 262,990

Suppliers 148,863 194,067

Interest payments on lease liabilities 2,134 1,209

Section 74 receipts transferred to OPA 28,768 20,667

Total cash used (462,842) (478,933)

Net cash from/(used by) operating activities 73,003 (10,819)

INVESTING ACTIVITIES

Cash used

Purchase of leasehold improvements, plant and equipment and intangibles 73,044 34,756

Net cash (used by) investing activities (73,044) (34,756)

FINANCING ACTIVITIES

Cash received

Appropriations - contributed equity 29,784 35,967

Total cash received 29,784 35,967

Cash used

Principal payments of lease liabilities 24,590 14,462

Total cash used (24,590) (14,462)

Net cash from/(used by) financing activities 5,194 21,505

Net increase/(decrease) in cash held 5,153 (24,070)

Cash and cash equivalents at the beginning of the reporting period 41,151 65,221

Cash and cash equivalents at the end of the reporting period 3.1A 46,304 41,151

The above statement should be read in conjunction with the accompanying notes.

Financial Statements 127

Administered Schedule of Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2021

Notes

2021 $’000

2020 $’000

NET COST OF SERVICES

Expenses

Grants 2.1A 6,007 6,255

Impairment loss allowance on financial instruments 2.1B 60,436 69,110

Claims for unclaimed monies 2.1C 160,701 127,163

Promotional costs for MoneySmart initiatives 574 565

Total expenses 227,718 203,093

LESS:

Own-source revenue

Taxation revenue

Fees 892,685 814,536

Supervisory cost recovery levies 62,960 59,602

Total taxation revenue 955,645 874,138

Non-taxation revenue

Supervisory cost recovery levies 235,781 263,288

Fees and fines 2.2A 321,137 221,036

Unclaimed monies lodgements 2.2B 295,304 201,896

Total non-taxation revenue 852,222 686,220

Total revenue 1,807,867 1,560,358

Net contribution by services 1,580,149 1,357,265

The above schedule should be read in conjunction with the accompanying notes.

ASIC Annual Report 2020-21 128

Administered Schedule of Assets and Liabilities AS AT 30 JUNE 2021

Notes

2021 $’000

2020 $’000

ASSETS

Financial assets

Cash and cash equivalents 1,524 1,435

Supervisory cost recovery levies receivable 4.1A 314,471 330,543

Fees and fines receivable 4.1B 141,513 138,836

Trade and other receivables 4.1C 10,006 7,901

Total assets administered on behalf of Government 467,514 478,715

LIABILITIES

Payables and provisions

Suppliers and other payables 4.2A 44,526 40,333

Unclaimed monies provisions 4.2B 491,183 417,284

Total liabilities administered on behalf of Government 535,709 457,617

Net assets/(liabilities) 68,195 21,098

The above schedule should be read in conjunction with the accompanying notes.

Financial Statements 129

Administered Reconciliation Schedule FOR THE YEAR ENDED 30 JUNE 2021

2021 $’000

2020 $’000

Opening assets less liabilities as at 1 July 21,098 56,550

Net contribution by services:

Administered income 1,807,867 1,560,358

Administered expenses (227,718) (203,093)

1,580,149 1,357,265

Transfers (to)/from the Australian Government

Appropriation transfers from Official Public Account:

Special (unlimited) and ordinary appropriations

Appropriation Act No. 1 7,777 5,059

Banking Act unclaimed monies 52,551 25,450

Life Insurance Act unclaimed monies 4,960 5,979

Section 77 PGPA Act 32,298 29,630

Total of appropriation transfers from Official Public Account 97,586 66,118

Administered transfers to Official Public Account (1,767,028) (1,458,835)

Closing assets less liabilities as at 30 June (68,195) 21,098

The above schedule should be read in conjunction with the accompanying notes.

ASIC Annual Report 2020-21 130

Administered Cash Flow Statement FOR THE YEAR ENDED 30 JUNE 2021

2021 $’000

2020 $’000

OPERATING ACTIVITIES

Cash received

Corporations Act, National Consumer Credit Protection Act, Business Names Registration (Fees) Act, Superannuation Industry (Supervision) Act and ASIC Supervisory Cost Recovery Levy 1,467,555 1,252,283

Corporation Act unclaimed monies 88,418 58,410

Banking Act unclaimed monies 167,555 121,974

Life Insurance Act unclaimed monies 39,331 21,512

Total cash received 1,762,859 1,454,179

Cash used

Refunds paid to:

Company shareholders 29,254 26,203

Deposit-taking institution account holders 52,588 25,486

Life insurance policy holders 4,960 5,979

Promotion expenses for MoneySmart Initiatives 724 620

Grants 5,780 3,283

Net GST paid 22 315

Total cash used (93,328) (61,886)

Net cash from operating activities 1,669,531 1,392,293

Cash from Official Public Account for:

Appropriations 97,586 66,118

Less: Cash to Official Public Account for:

Corporations Act, National Consumer Credit Protection Act, Business Names Registration (Fees) Act and ASIC Supervisory Cost Recovery Levy fees and charges 1,471,724 1,256,939

Corporations Act unclaimed monies 88,418 58,410

Banking Act unclaimed monies 167,555 121,974

Life Insurance Act unclaimed monies 39,331 21,512

Total cash to Official Public Account (1,767,028) (1,458,835)

Net increase/(decrease) in cash held 89 (424)

Cash and cash equivalents at the beginning of the reporting period 1,435 1,859

Cash and cash equivalents at the end of the reporting period 1,524 1,435

The above schedule should be read in conjunction with the accompanying notes.

Financial Statements 131

Notes to and forming part of the financial statements FOR THE YEAR ENDED 30 JUNE 2021

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. ASIC is a not-for-profit entity and our objectives, outlined in s1(2) of the ASIC Act, include:

› the promotion of confident and informed participation of investors and consumers in the financial system;

› the maintenance, facilitation and improvement in the performance of the financial system and the entities within that system in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy; and

› 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 the Superannuation Industry (Supervision) Act 1993. In addition, ASIC collects revenue under the ASIC Supervisory Cost Recovery Levy Act 2017, and the ASIC Supervisory Cost Recovery Levy Regulations 2017. This revenue is not available to ASIC and is remitted to the Official 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 2020-21 132

ASIC is structured to deliver a single outcome, and the result is in the Statement of Comprehensive Income:

Improved confidence in Australia’s financial markets through promoting informed investors and financial consumers, facilitating fair and efficient markets and delivering efficient registry systems.

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

The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act).

The financial statements and notes have been prepared in accordance with the:

› Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and

› Australian Accounting Standards - Reduced Disclosure Requirement issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been 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 the results or the financial position. The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

New Accounting Standards

All 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 on ASIC’s financial statements.

AASB 1059 Service Concession Arrangements: Grantors became effective on 1 July 2020 but does not apply to ASIC.

Taxation

ASIC is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

Reporting of Administered activities

Administered revenues, expenses, assets, liabilities and cash flows are disclosed in 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.

Events after the reporting period

There were no events occurring after balance date that had a material effect on the Departmental or Administered financial statements.

Financial Statements 133

Note 1. Departmental financial performance

This section analyses the financial performance of ASIC for the year ended 30 June 2021

1.1 Expenses

2021 $’000

2020 $’000

1.1A: Employee benefits

Wages and salaries 215,154 208,968

Superannuation

Defined-benefit schemes 11,260 12,018

Defined-contribution schemes 28,687 25,403

Leave and other entitlements 25,808 28,047

Separation and redundancies1 1,931 920

Total employee benefits 282,840 275,356

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.

Accounting Policy Accounting policies for employee related expenses are detailed in Note 6 People and relationships.

ASIC Annual Report 2020-21 134

2021 $’000

2020 $’000

1.1B: Suppliers

Goods and services supplied or rendered

Legal and forensic costs 46,380 46,352

Office computer and software expenses 32,718 29,372

Consultants and specialist services 23,653 26,083

Property-related outgoings 8,910 9,406

Information costs 4,115 5,337

Other goods and services 3,454 3,775

Bank fees 3,343 2,921

Communications 3,203 2,346

Learning and development 3,149 2,780

Postage and freight 2,526 2,693

Recruitment 1,916 2,079

Security 1,743 1,696

Travel 471 4,318

Total goods and services supplied or rendered 135,581 139,158

Goods supplied 1,145 1,556

Services rendered 134,436 137,602

Total goods and services supplied or rendered 135,581 139,158

Other suppliers

Short-term leases 404 10,160

Workers compensation expense 14 (288)

Fringe benefits tax 1 (144) 258

Total other suppliers 274 10,130

Total suppliers 135,855 149,288

1. The credit in Fringe Benefits Tax expense is from overpayments in 2019 and 2020.

The above lease disclosures should be read in conjunction with Notes 1.1B, 1.1C and 3.4.

Financial Statements 135

Accounting Policy

Short-term leases and leases of low-value assets

ASIC has elected not to recognise the right of use (ROU) assets and lease liabilities for short-term leases of assets that have a lease term of 12 months or less and leases of low-value assets (less than $10,000). ASIC recognises the lease payments associated with these leases as an expense on a straight-line basis over the life of the lease terms.

2021 $’000

2020 $’000

1.1C: Finance costs

Unwinding of restoration provision 16 188

Interest on lease liability 2,134 1,209

Total finance costs 2,150 1,397

1.1D: Write-down and impairment of other assets

Write-off of leasehold improvements 390 -

Write-off of plant & equipment 314 2

Total write-down and impairment of other assets 704 2

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:

› the amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and › the probable economic benefits associated with the transaction will flow to ASIC.

Operating lease revenue

Operating sublease revenue is recognised as revenue on commencement of the lease under the Memorandum of Understanding. The leases terms are on a 12 month rolling basis.

Resources received free of charge

Resources received free of charge are recognised as revenue when, and only when, the fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Resources received free of charge are recorded as either revenue or gains depending on their nature.

ASIC Annual Report 2020-21 136

2021 $’000

2020 $’000

1.2A: Revenue from other Australian Government entities1

Australian Taxation Office (ATO) 2 20,260 5,073

Department of Home Affairs (DHA) 10,091 -

30,351 5,073

1.2B: Other revenue

Cost recoveries3 6,738 8,920

Other2 2,166 2,364

Total other revenues 8,904 11,284

1. Relates to reimbursement of operating and capital expenditure incurred by ASIC on government programs funded directly by other Australian Government entities.

2. Line items and comparatives have been changed to provide greater transparency, due to the material increase in funding from other Australian Government entities.

3. Amounts recovered by ASIC for court costs, investigations, professional fees, legal costs and prosecution disbursements.

1.2C: Revenue from Government

Appropriations:

Departmental appropriations1 377,871 362,066

Departmental special appropriations2 59,221 41,195

Total revenue from Government 437,092 403,261

1. Ordinary annual appropriations, originally $382.014m, have been reduced by $4.143m as part of the Modernising Business Registers program. Refer to Note 8.2.

2. A special account is a limited special appropriation that notionally sets aside an amount that can be expended for a particular purpose. $59.2m of ASIC’s 2020-21 ordinary annual appropriation has been allocated to the Enforcement Special Account, which was established to fund the costs arising from the investigation and litigation of matters of significant public interest.

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.

Financial Statements 137

Note 2. Income and expenses administered on behalf of Government

This section analyses the activities that ASIC does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

2.1 Administered - expenses

2021 $’000

2020 $’000

2.1A: Grants

Rendering of services

Insolvency practitioners 6,007 6,255

Total grants 6,007 6,255

Accounting Policy ASIC administers payments to registered insolvency practitioners to undertake preliminary investigations of suspected breaches of directors’ duties and fraudulent conduct and to report the outcome of their findings to ASIC for further action 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 been satisfied, but payments due have not been made. When the Government enters into an agreement to make these grants and services, but services have not been performed or criteria satisfied, this is considered a commitment.

ASIC Annual Report 2020-21 138

2021 $’000

2020 $’000

2.1B: Impairment loss allowance on financial instruments

Impairment of receivables 54,406 63,920

Waiver of fees and charges owing 6,030 5,190

Total impairment on financial instruments 60,436 69,110

2.1C: Claims for unclaimed monies

Claims - Bank and deposit taking institution account holders 100,705 82,848

Claims - Life Insurance policy holders 20,384 10,997

Claims - Corporations Act 2001 39,612 33,318

Total other expenses 160,701 127,163

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 the extent to which the company’s officers or its representatives contributed to the 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.

Financial Statements 139

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 from fees and fines under the following legislation:

› Corporations (Fees) Act 2001 › Corporations (Review Fees) Act 2003, › National Consumer Credit Protection (Fees) Regulation 2010, › Business Names Registration (Fees) Regulation 2012 and

› Superannuation Industry (Supervision) Act 1993.

Administered fee revenue is recognised on an accruals basis when:

› the client or the client group can be identified in a reliable manner; › an amount of prescribed fee or other statutory charge is payable by the client or client group under legislative provisions; and › 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.

2021 $’000

2020 $’000

Non-taxation revenue

2.2A: Fees and fines

Fines 241,250 149,265

Searches and information brokers fees 64,905 59,725

Fee for service and insolvency practicioners 14,982 12,046

Total fees and fines 321,137 221,036

2.2B: Unclaimed monies lodgements

Corporations Act 2001 unclaimed monies 88,418 58,410

Banking Act 1959 unclaimed monies 167,555 121,974

Life Insurance Act 1995 unclaimed monies 39,331 21,512

Total unclaimed monies 295,304 201,896

ASIC Annual Report 2020-21 140

Accounting Policy ASIC undertakes the collection of certain levies on behalf of the Government. These comprise of:

› the ASIC Supervisory Cost Recovery Levy Act 2017; and › the ASIC Supervisory Cost Recovery Levy Regulations 2017.

ASIC also receives non-taxation revenue from search fees, fines - including late fees, court fines, penalties and 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.

Note 3. Departmental financial position

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

2021 $’000

2020 $’000

3.1A: Cash and cash equivalents

Cash in special accounts 45,174 39,599

Cash at bank 1,130 1,552

Total cash and cash equivalents 46,304 41,151

The closing balance of Cash in special accounts does not include amounts held in trust ($11.724m in 2021 and $8.838m in 2020). See Note 5.2 Special Accounts for more information.

Accounting Policy Cash is recognised at its nominal amount. Cash and cash equivalents includes:

a) cash on hand;

b) cash in special accounts.

Financial Statements 141

2021 $’000

2020 $’000

3.1B: Trade and other receivables

Goods and services receivables:

Goods and services 47,781 40,381

Total goods and services receivables (gross) 47,781 40,381

Less impairment allowance (630) (585)

Total goods and services receivables (net) 47,151 39,796

Appropriations receivables:

Appropriations receivable 105,195 126,031

Total appropriations receivable 105,195 126,031

Other receivables:

GST receivable from the Australian Taxation Office 5,590 4,666

Total other receivables 5,590 4,666

Total trade and other receivables (net) 157,936 170,493

Trade and other receivables are expected to be recovered:

No more than 12 months 157,936 170,493

Credit terms for goods and services were within 20 days (2020: 30 days)

Reconciliation of the movement in the impairment allowance account

As at 1 July 585 602

Amounts recovered and reversed (8) (57)

Increase recognised in net cost of services 53 40

Total as at 30 June 630 585

Accounting Policy

Receivables

Trade receivables and other receivables are classified as ‘loans and receivables’ 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.

ASIC Annual Report 2020-21 142

3.2 Non-financial assets Reconciliation of the opening and closing balances of property, plant & equipment and intangibles

Buildings $’000

Plant & equipment $’000

Computer software $’000 Total

$’000

As at 1 July 2020

Gross book value 324,261 70,148 395,242 789,651

Accumulated depreciation/amortisation and impairment (87,857) (50,637) (321,235) (459,729)

Total as at 1 July 2020 236,404 19,511 74,007 329,922

Additions:

By purchase 17,453 14,503 25,735 57,691

Internally developed - - 16,678 16,678

ROU assets 10,012 - - 10,012

Total additions 27,465 14,503 42,413 84,381

Depreciation and amortisation (4,266) (7,793) (33,003) (45,062)

Depreciation of ROU assets (25,451) - - (25,451)

Total depreciation and amortisation (29,717) (7,793) (33,003) (70,513)

ROU assets - adjustments1 (1,655) - - (1,655)

Disposals

From disposal of entities or operations (including restructuring) (17,805) (11) - (17,816)

Other (390) (314) - (704)

Total as at 30 June 2021 214,302 25,896 83,417 323,615

Total as at 30 June 2021 represented by:

Gross book value 268,496 75,882 437,640 782,018

Accumulated depreciation/amortisation and impairment (54,194) (49,986) (354,223) (458,403)

Total as at 30 June 2021 214,302 25,896 83,417 323,615

Carrying amount of ROU asset 173,373 - - 173,373

1. The ROU asset for 100 Market Street Sydney was measured using an estimate of the net lettable area (NLA). A review undertaken during the 2021 financial year determined that the actual NLA was less than the estimated NLA.

The carrying value of leasehold improvements, plant & equipment and computer software was reviewed at 30 June 2021. No indicators of impairment were found.

Financial Statements 143

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 $5,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

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.

Lease Right of Use (ROU) Assets

Leased ROU assets are capitalised at the commencement date of the lease and comprise of the initial lease liability amount, initial direct costs incurred when entering into the lease less any lease incentives received. These assets are accounted for by Commonwealth lessees as separate asset classes to corresponding assets owned outright, but included in the same column as where the corresponding underlying assets would be presented if they were owned.

On initial adoption of AASB 16 ASIC has adjusted the ROU assets at the date of initial application by the amount of any provision for onerous leases recognised immediately before the date of initial application. Following initial application, an impairment review is undertaken for any right of use lease asset that shows indicators of impairment and an impairment loss is recognised against any right of use lease asset that is impaired. Lease ROU assets continue to be measured at cost after initial recognition in Commonwealth agency, GGS and Whole of Government financial statements.

Revaluations

Following initial recognition at cost, leasehold improvements, plant and equipment (excluding ROU assets) are carried at latest revaluation less accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying 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 2020-21 144

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 previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reversed a 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:

2021 2020

Leasehold improvements Residual lease term Residual lease term

Plant and equipment 2 to 80 years 2 to 80 years

Impairment

All assets were assessed for impairment as at 30 June 2021. Where indications of 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 value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the entity 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 further future economic benefits are expected from its use or disposal.

Financial Statements 145

Accounting Policy (continued)

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 (2020: 2 to 10 years).

All software assets were assessed for indications of impairment as at 30 June 2021.

Significant accounting judgements and estimates

In the process of applying the accounting policies listed in this note, ASIC has made assumptions or estimates in the following areas that have the most significant impact on the amounts recorded in the financial statements:

› The fair value of leasehold improvements and property, plant and equipment (excluding ROU assets) is assessed at market value or current replacement cost as determined by an independent valuer and is subject to management assessment between formal valuations.

ASIC Annual Report 2020-21 146

3.3 Payables

2021 $’000

2020 $’000

3.3A: Suppliers

Trade creditors and accruals 29,750 30,798

Total suppliers 29,750 30,798

Supplier payables are settled per the terms of the purchase order or contract and are expected to be settled within 12 months.

3.3B: Other payables

Prepayments received/unearned income 11,404 15,423

Salaries and bonuses 18,990 16,603

Separations and redundancies 644 1,401

Other1 3,171 3,790

Total other payables 34,209 37,217

1. Includes GST payable of $2.982m (2020: $3.553m)

3.4 Interest-bearing liabilities

Lease liabilities 217,968 242,810

Total leases 217,968 242,810

Total cash outflow for leases for the year ended 30 June 2021 was $26.725m (2020: $15.671m)

Maturity analysis - contractual undiscounted cash flows

Within 1 year 23,181 27,085

Between 1 to 5 years 107,184 107,766

More than 5 years 102,535 118,831

Total leases 232,900 253,682

The above lease disclosures should be read in conjunction with Notes 1.1B, 1.1C and 3.4.

Financial Statements 147

Accounting Policy For all new contracts entered into, ASIC considers whether the contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’.

Once it has been determined that a contract is, or contains a lease, the lease liability is initially measured at the present value of the lease payments unpaid at the commencement date, discounted using the interest rate implicit in the lease, if that rate is readily determinable, or the Department of Finance’s incremental borrowing rate.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification to the lease. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset or profit and loss depending on the nature of the reassessment or modification.

3.5 Other provisions

Provision for restructuring $’000

Provision for restoration costs $’000

Provision for settlement costs $’000

Total Other Provisions $’000

As at 1 July 2020 300 6,419 6,020 12,739

Additions 22 452 2,670 3,144

Amounts reversed - (988) (950) (1,938)

Amortisation of restoration provision discount - 16 - 16

Total as at 30 June 2021 322 5,899 7,740 13,961

Accounting Policy

Restoration costs

ASIC currently has two lease agreements (2020: four) for the leasing of premises which have provisions requiring ASIC to restore the premises to their original condition at the conclusion of the lease. The provision reflects the current best estimate of these future restoration costs discounted to reflect the present value of the future payments.

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.

ASIC Annual Report 2020-21 148

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 of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

4.1 Administered - financial assets

2021 $’000

2020 $’000

4.1A: Supervisory cost recovery levies receivables

Supervisory cost recovery levies receivables - taxation 62,960 59,602

Supervisory cost recovery levies receivables - non-taxation 256,589 274,088

Total supervisory cost recovery levies receivables (gross) 319,549 333,690

Less impairment loss allowance

Supervisory cost recovery levies 5,078 3,147

Total supervisory cost recovery levies receivables (net) 314,471 330,543

4.1B: Other taxation receivables

Fees and fines receivable 219,745 219,965

Total other taxation receivables (gross) 219,745 219,965

Less impairment loss allowance

Fees and fines 78,232 81,129

Total other taxation receivables (net) 141,513 138,836

Taxation receivables are due from entities that are not part of the Australian Government. Credit terms for goods and services were within 30 days (2020: 30 days)

4.1C: Trade and other receivables

Information brokers’ fees 9,532 7,449

GST receivable 474 452

Total trade and other receivables (gross) 10,006 7,901

Financial Statements 149

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 financial instruments and accordingly ASIC has assessed administered receivables for 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

2021 $’000

2020 $’000

4.2A: Suppliers and other payables

Supplier payables 28 178

Refund of fees payable 22,196 19,060

Unallocated monies 10,535 9,917

Grants payable1 4,222 3,995

Other non-current payables2 7,545 7,183

Total payables 44,526 40,333

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 settlement period is expected to be greater than 12 months as these are unidentified payments.

ASIC Annual Report 2020-21 150

2021 $’000

2020 $’000

4.2B: Unclaimed monies provisions

Corporations Act 2001 claims 215,427 205,071

Banking Act 1959 claims 228,710 180,591

Life Insurance Act 1995 claims 47,046 31,622

Total other provisions 491,183 417,284

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 as at 30 June, 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 experienced since 2002 and the outstanding lodgements. The estimate reflects the volatility of unclaimed monies lodgements and claims from year to year, which is impacted by factors including economic events, legislative change, media exposure and the behaviour of claimants, each of which has differed significantly from year to year and over time. The estimated future flow of refunds over time has been discounted to 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 expectations for inflation in the medium to longer term, noting legislated interest rates are linked to movements in the CPI.

Financial Statements 151

Note 5. Funding

This section identifies ASIC’s funding structure.

5.1 Appropriations

5.1A: Annual appropriations (‘recoverable GST exclusive’)

Annual appropriations for 2021

Annual

appropriation $’000

Adjustments to appropriation1,2 $’000

Total

appropriation $’000

Appropriation applied in 2021 (current and prior years)

$’000 Variance3 $’000

Departmental

Ordinary annual services 441,235 24,625 465,860 528,118 (62,258)

Capital Budget4 20,856 - 20,856 20,749 107

Other Services

Equity Injections 6,904 - 6,904 9,035 (2,131)

Total Departmental 468,995 24,625 493,620 557,902 (64,282)

Administered

Ordinary annual services 9,708 - 9,708 7,674 2,034

Total Administered 9,708 - 9,708 7,674 2,034

1. Section 74 receipts ($28.768m).

2. Section 75 Machinery of Government transfer ($4.143m).

3. The variance in Departmental expenses is due to the payment of prior year accrued expenses in the current year.

4. Departmental Capital Budgets are appropriated through Appropriation Acts (No.1,3,5). They form part of ordinary annual services and are not separately identified in the Appropriation Acts.

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.

ASIC Annual Report 2020-21 152

Annual appropriations for 2020

Annual

appropriation $’000

Adjustments to appropriation1 $’000

Total

appropriation $’000

Appropriation applied in 2020 (current and prior years)

$’000 Variance2 $’000

Departmental

Ordinary annual services 403,261 20,667 423,928 515,165 (91,237)

Capital Budget3 25,149 - 25,149 26,569 (1,420)

Other Services

Equity Injections 13,426 - 13,426 9,398 4,028

Total Departmental 441,836 20,667 462,503 551,132 (88,629)

Administered

Ordinary annual services 10,261 - 10,261 5,194 5,067

Total Administered 10,261 - 10,261 5,194 5,067

1 Section 74 receipts.

2 The variance in Departmental expenses is due to the payment of prior year accrued expenses in the current year and approximately $20m of expenditure funded from the opening balance of the Enforcement Special Account.

3 Departmental Capital Budgets are appropriated through Appropriation Acts (No.1,3,5). They form part of ordinary annual services and are not separately identified in the Appropriation Acts.

Financial Statements 153

2021 $’000

2020 $’000

5.1B: Unspent annual appropriations (‘recoverable GST exclusive’)

Departmental

Appropriation Act (No. 1) DCB 2017-2018 1 - 3,604

Appropriation Act (No. 1) DCB 2018-2019 2 4,409 4,409

Appropriation Act (No. 2) 2018-2019 - 21

Appropriation Act (No. 4) 2018-2019 - 3

Appropriation Act (No. 1) 2019-2020 3 - 115,311

Appropriation Act (No. 1) DCB 2019-2020 - 329

Appropriation Act (No. 3) 2019-2020 - 1,042

Appropriation Act (No. 4) 2019-2020 1,891 6,468

Appropriation Act (No. 1) 2020-2021 96,891 -

Appropriation Act (No. 1) DCB 2020-21 436 -

Appropriation Act (No. 2) 2020-2021 1,433 -

Supply Act (No. 2) 2020-2021 1,037 -

Appropriation Act (No. 3) 2020-2021 228 -

Enforcement Special Account 45,174 39,599

Total departmental 151,499 170,786

Unspent departmental appropriations include cash balances of $1.130m (2020: $1.552m).

1. Includes $3.604m quarantined under section 51 of the PGPA Act. The balance is not available beyond 30 June 2020, following the repeal of Appropriation Act (No.1) 2017-2018 on 1 July 2020.

2. This amount is not available beyond 30 June 2021, following the repeal of Appropriation Act (No.1) 2018-2019 on 1 July 2021

3. $5.048m has been transferred to the ATO under section 75 of the PGPA Act. Refer to Note 8.2 Restructuring for further details.

Administered

Appropriation Act (No. 1) 2017-2018 1 - 284

Appropriation Act (No. 1) 2018-2019 2 2,933 3,239

Appropriation Act (No. 1) 2019-2020 4,312 6,202

Supply Act (No. 1) 2019-2020 1,087 3,836

Appropriation Act (No. 1) 2020-2021 3,916 -

Supply Act (No. 1) 2020-2021 2,907 -

Total administered 15,155 13,561

Unspent administered appropriations include cash balances of $0.320m (2020: $0.598m).

1. This amount is not available beyond 30 June 2020, following the repeal of Appropriation Act (No.1) 2017-2018 on 1 July 2020.

2. This amount is not available beyond 30 June 2021, following the repeal of Appropriation Act (No.1) 2018-2019 on 1 July 2021.

ASIC Annual Report 2020-21 154

5.1C: Special appropriations (‘recoverable GST exclusive’)

Appropriation applied

Authority Type Purpose

2021 $’000 2020 $’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. 52,551 25,450

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. 4,960 5,979

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.

4,020 4,750

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.

28,278 24,880

Total 89,809 61,059

Financial Statements 155

5.2 Special Accounts

Enforcement Special Account1

ASIC Trust and Other Moneys Special Account 20182

2021 $’000

2020 $’000

2021 $’000

2020 $’000

Balance brought forward from previous period 39,599 62,954 8,838 12,196

Increases

Appropriation for the reporting period 59,221 41,195 - -

Other increases 5,964 7,549 3,682 9,884

Available for payments 104,784 111,698 12,520 22,080

Decreases

Departmental

Cash payments from the Special Account (59,610) (72,099) - -

Total departmental (59,610) (72,099) - -

Administered

Cash payments from the Special Account - - (796) (13,242)

Total administered - - (796) (13,242)

Balance carried forward to the next period 45,174 39,599 11,724 8,838

Balance represented by:

Cash held in entity bank accounts - - 11,724 8,838

Cash held in the Official Public Account 45,174 39,599 - -

45,174 39,599 11,724 8,838

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 23 August 2016 to fund the costs of ASIC arising from the investigation and litigation of matters of significant 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 30 June 2018,

(a) to perform duties or exercise powers for and on behalf of the Commonwealth in relation to money and other property vested in or held on behalf of the Commonwealth as a trustee, including:

(i) by making payments in relation to deregistered companies and property vested in the Commonwealth under Part 5A.1 of the Corporations Act;

(ii) by making payments in relation to liabilities imposed on property vested in the Commonwealth under Part 5A.1 of the Corporations Act; or

(iii) by making payments in relation to expenses incurred by or on behalf as the Commonwealth as a trustee.

ASIC Annual Report 2020-21 156

(b) to perform functions or exercise powers in relation to money or other property held on behalf of or for the benefit of a person other than the Commonwealth, including:

(i) in relation to money or other property held temporarily by ASIC as a consequence 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;

(ii) by making payments to or for the benefit of a person for whose benefit the money was held by ASIC;

(iii) making payments of amounts required or contemplated to be paid by ASIC in the course of an investigation;

(iv) making payments to give effect to court orders, enforceable undertakings, settlements, transfers of assets, or other disbursements of monies held by ASIC on behalf of a person other than the Commonwealth; or

(v) making payments in relation to expenses incurred in relation to holding and realising third party assets, or locating and identifying any person for whose benefit an amount is held.

(c) to perform functions and to exercise powers in relation to security bonds and security deposits lodged by registered liquidators, licensed securities dealers, licensed investment advisers and financial services licensees, including security bonds and security deposits lodged under section 912B of the Corporations Act, and regulations 7.6.02AAA and 7.6.02AA of the Corporations Regulations, including by:

(i) discharging, returning or releasing a security bond or security deposit lodged with ASIC in whole or in part; or

(ii) making payments from security bonds or security deposits to compensate a person other than the Commonwealth who has suffered a pecuniary loss.

(d) to repay an amount where a court order, Act or other law requires or permits the repayment of an amount received under clause 7; or

(e) to reduce the balance of the special account (and, therefore, the available appropriation for the special account) without making a real or notional payment.

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 2021, the account had a nil balance and there were no transactions debited or credited to it during the current or prior reporting period.

The closing balance of the ASIC Trust and Other Moneys Special Account 2018 includes amounts held in trust: $8.838m in 2020 and $11.724m in 2021.

Financial Statements 157

5.3 Regulatory charging summary

2021 $’000

2020 $’000

Amounts applied

Departmental

Appropriation applied 321,829 337,843

Total amounts applied 321,829 337,843

Expenses

Departmental 321,829 337,843

Total expenses 321,829 337,843

External Revenue

Administered

Fees for services 14,596 11,274

ASIC Supervisory Cost Recovery Levy 307,223 326,569

Total external revenue 321,829 337,843

Regulatory charging activities

On 20 April 2016, the Australian Government announced it would introduce an industry funding model for ASIC. Under the industry funding model ASIC’s regulatory costs will be partially recovered 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 provide a specific service to individual entities.

ASIC’s costs associated with regulatory activities will be recovered from industry as outlined in ASIC’s Cost Recovery Implementation Statement. Activities include:

› supervision and surveillance; › enforcement; › stakeholder engagement; › education;

› guidance; and › policy advice.

The cost recovery implementation statement for the above activities is available at:

https://asic.gov.au/media/5uyj11nb/cris-asic-industry-funding-model-2020-21-for-feedback-published-23-july-2021.pdf

ASIC Annual Report 2020-21 158

5.4 Net cash appropriation arrangements

2021 $’000

2020 $’000

Total comprehensive (loss) - as per the Statement of Comprehensive Income (14,417) (68,186)

Plus: depreciation/amortisation expenses previously funded through appropriations

(departmental capital budget funding and/or equity injections) 45,062 47,431

Plus: depreciation ROU assets 25,451 16,050

Less: lease principal repayments 24,590 14,462

Net cash operating surplus/(deficit) 31,506 (19,167)

Note 6. People and relationships

This section describes a range of employment and post-employment benefits provided to our people and our relationships with other key people.

6.1 Employee provisions

2021 $’000

2020 $’000

Annual leave entitlement 28,068 25,950

Long service leave entitlement 52,230 54,923

Restructuring provision 1,089 1,358

Redundancy provision - 1,017

Total employee provisions 81,387 83,248

Financial Statements 159

Accounting Policy Liabilities for ‘short-term employee benefits’ (as defined in AASB 119 Employee Benefits) and termination benefits expected within 12 months of the end of the reporting period are measured at their nominal amounts.

Other long term employee benefits are measured as net total of the present value of the defined benefit obligations at the end of the reporting period minus the fair value at the reporting period of plan assets (if any) out of which the obligations are to be settled directly.

Leave

The liability for employee benefits includes provision for annual leave and long service 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 are undertaken at least every five years. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

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.

The CSS and PSS are defined-benefit schemes of the Australian Government. The PSSap is a defined-contribution scheme.

The liability for defined benefits is recognised in the financial statements of the 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.

ASIC makes employer contributions to its employees’ defined-benefit superannuation schemes at rates determined by an actuary to be sufficient to meet the current cost to the Government, and ASIC accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June represents outstanding contributions.

Separation and redundancy

Provision is made for separation and redundancy benefit payments. ASIC recognises a 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.

ASIC Annual Report 2020-21 160

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

In the process of applying the accounting policies listed in this note, ASIC has made assumptions or estimates in the following areas that have the most significant impact on the amounts recorded in the financial statements:

› 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, the Minister for Superannuation, Financial Services and the Digital Economy and ASIC Executive Directors. Key management personnel remuneration is reported in the table below:

2021 $’000

2020 $’000

Short-term employee benefits 6,558 8,300

Post-employment benefits 642 845

Other long-term benefits 55 183

Termination benefits 89 -

Total key management personnel remuneration expenses1 7,344 9,328

The total number of key management personnel who are included in the above table is 19 (2020: 21). During the 2020-21 financial year ASIC was repaid $118,557 from one former KMP. ASIC also received $69,292 from a former KMP under 16A(2) of the Remuneration Tribunal Act 1973. During the 2020-21 financial year ASIC identified eight overpayments to two former and one current KMP totalling $3,651.53. These payments were recoverable payments under 16A(2) of the Remuneration Tribunal Act 1973 and have been repaid to the Commonwealth.

1. The above key management personnel remuneration excludes the remuneration and other benefits of the Portfolio Minister. The Portfolio Minister’s remuneration and other benefits are set by the Remuneration Tribunal and are not paid by ASIC.

Financial Statements 161

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 payment of workers compensation and insurance premiums, sub-leasing of office space and payment of superannuation contributions. These are not considered individually significant to warrant separate disclosure as related party transactions.

Note 7. Managing uncertainties

This section describes how ASIC manages financial risks within its operating environment.

7.1 Contingent assets and liabilities

2021 $’000

2020 $’000

7.1: Departmental contingent assets and liabilities

Continent assets

Balance from previous period 5,526 9,638

New contingent assets 8,175 3,722

Re-measurement 1,055 1,663

Assets realised (1,582) (7,949)

Assets relinquished (1,635) (1,548)

Total contingent assets 11,539 5,526

Continent liabilities

New contingent liabilities (1,200) -

Total contingent liabilities (1,200) -

Net contingent assets/(liabilities) 10,339 5,526

ASIC Annual Report 2020-21 162

Quantifiable contingencies (ASIC Departmental)

The above table contains 23 matters (2020:19 matters) where a contingent asset is disclosed in respect of cases where 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 $11.539m (2020: $5.526m), which is disclosed as a contingent asset because realisation of this debt is not virtually certain.

The above table contains 1 matter (2020: 0 matters) where a contingent liability is disclosed in respect of a case where ASIC has had costs awarded against it, however agreement with respect to the quantum payable by ASIC has not been reached. ASIC has estimated this matter represent a payable of $1.200m (2020: $0m), which is disclosed as a contingent liability because realisation of this payable 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.

Civil litigation brought, or threatened to be brought, against ASIC as a defendant

There are, at the date of this report, six matters (2020: four matters) of this type where proceedings are current. In these matters, 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:

› successfully defend the actions instituted; and › not be required to pay any damages.

Conversely, ASIC, like any other party to civil litigation, may be entitled to recover costs arising out of such litigation if it is successful. In addition to the matters specifically referred to in 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 where no contingency has been quantified because the costs awarded for or against ASIC are estimated to be less than $20,000 each.

Financial Statements 163

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 unlikely.

Significant accounting judgements and estimates

No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities within the next reporting period.

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, 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 unlikely. 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.

2021 $’000

2020 $’000

Banking Act 1959 588,337 523,334

Life Insurance Act 1995 104,570 85,739

Corporations Act 2001 423,687 379,573

Unquantifiable administered contingencies There are no unquantifiable administered contingent liabilities.

Accounting Policy Administered contingent liabilities represent a repayment estimate of unclaimed monies that are considered unlikely to be paid. There are no administered contingent assets as at 30 June 2021 (2020: nil).

ASIC Annual Report 2020-21 164

7.2 Financial instruments

Notes

2021 $’000

2020 $’000

7.2A: Categories of financial instruments

Financial assets at amortised cost

Cash and cash equivalents 3.1A 46,304 41,151

Trade receivables 3.1B 47,151 39,796

Total financial assets at amortised cost 93,455 80,947

Financial liabilities at amortised cost

Trade creditors 3.3A 29,750 30,798

Total financial liabilities at amortised cost 29,750 30,798

Accounting Policy

Financial assets

In accordance with AASB 9 Financial Instruments, ASIC classifies its financial assets in the following categories:

› Cash and cash equivalents are measured at nominal amounts.

› Trade receivables are measured at amortised cost.

The classification depends on both ASIC’s business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. 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 derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date.

Financial assets at amortised cost

Financial assets included in this category need to meet two criteria:

1. the financial asset is held in order to collect the contractual cash flows; and

2. the cash flows are solely payments of principal and interest on the principal outstanding amount.

Financial Statements 165

Accounting Policy (continued)

Amortised cost is determined using the effective interest method.

Effective interest method

Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

Impairment of financial assets

Financial assets are assessed for impairment at the end of each reporting period based on the simplified approach.

The simplified approach for trade debtors is used. This approach always measures the 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 gross carrying amount of the financial asset.

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

No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of financial assets and liabilities within the next reporting period.

2021 $’000

2020 $’000

7.2B: Impairment loss on financial instruments

Financial assets at amortised cost

Impairment 53 40

Net gain/(loss) on financial assets at amortised cost 53 40

ASIC Annual Report 2020-21 166

7.3 Administered - financial instruments

Notes

2021 $’000

2020 $’000

Financial assets at amortised cost

Cash and cash equivalents1 1,524 1,435

Trade receivables 4.1C 9,532 7,449

Total financial assets at amortised cost 11,056 8,884

Total financial assets 11,056 8,884

Financial liabilities

Financial liabilities at amortised cost

Grants payable 4.2A 4,222 3,995

Suppliers payables 4.2A 28 178

Total financial liabilities at amortised cost 4,250 4,173

Total financial liabilities 4,250 4,173

1. Cash and cash equivalents is cash on hand only and is recognised at its nominal amount.

7.4 Fair value measurement

2021 $’000

2020 $’000

Non-financial assets:

Leasehold improvements 40,929 29,786

Plant and equipment 25,896 19,511

Total non-financial assets 66,825 49,297

ASIC did not measure any non-financial assets at fair value on a non-recurring basis as at 30 June 2021.

Accounting Policy ASIC deems transfers between levels of the fair value hierarchy to have occurred at the end of the reporting period. See Note 3.2 for further details on ASIC’s valuation policy and procedures.

Financial Statements 167

Note 8. Other information

8.1 Current/non-current distinction for assets and liabilities

2021 $’000

2020 $’000

8.1A: Current/non-current distinction for assets and liabilities

Assets expected to be recovered in:

No more than 12 months

Cash and cash equivalents 46,304 41,151

Trade and other receivables 157,936 170,493

Prepayments 13,533 17,706

Total no more than 12 months 217,773 229,350

More than 12 months

Buildings 214,302 236,404

Plant and equipment 25,896 19,511

Computer software 83,417 74,007

Total more than 12 months 323,615 329,922

Total assets 541,388 559,272

Liabilities expected to be settled in:

No more than 12 months

Suppliers 29,750 30,798

Other payables 34,209 37,217

Leases 21,501 24,918

Employee provisions 22,580 22,376

Other provisions 7,740 6,020

Total no more than 12 months 115,780 121,329

More than 12 months

Leases 196,467 217,892

Employee provisions 58,807 60,872

Other provisions 6,221 6,719

Total more than 12 months 261,495 285,483

Total liabilities 377,275 406,812

ASIC Annual Report 2020-21 168

2021 $’000

2020 $’000

8.1B: Administered - current/non-current distinction for assets and liabilities

Assets expected to be recovered in:

No more than 12 months

Cash and cash equivalents 1,524 1,435

Supervisory cost recovery levies receivable 314,471 330,543

Fees and fines receivable 141,513 138,836

Trade and other receivables 10,006 7,901

Total no more than 12 months 467,514 478,715

More than 12 months

Total more than 12 months - -

Total assets 467,514 478,715

Liabilities expected to be settled in:

No more than 12 months

Supplier and other payables 36,981 33,150

Total no more than 12 months 36,981 33,150

More than 12 months

Supplier and other payables 7,545 7,183

Unclaimed monies provisions 491,183 417,284

Total more than 12 months 498,728 424,467

Total liabilities 535,709 457,617

Financial Statements 169

8.2 Restructuring

2021 $’000

Modernising Business Registers

Australian Taxation Office 1

FUNCTIONS RELINQUISHED

Revenue relinquished

Revenue from Government2 4,143

Total revenue relinquished 4,143

Assets relinquished

Appropriations receivable (9,191)

Buildings - ROU asset (15,339)

Buildings - leasehold improvements (2,466)

Plant and equipment (11)

Prepayments (42)

Total assets relinquished (27,049)

Liabilities relinquished

Lease liabilities 16,006

Provision for restoration obligations - leased premises 120

Provision for employee entitlements 5,090

Total liabilities relinquished 21,216

Net (assets)/liabilities relinquished3 (1,690)

1. Under the Modernising Business Registers (MBR) Program, the Government decided to establish a new whole of government registry platform; the Australian Business Registry Services (ABRS). As part of the MBR Program, in-scope business registers are to be transferred (in multiple stages) from ASIC to the ATO, along with associated ASIC staff. The first stage of the transfer of staff and Departmental resources (appropriation) took place on 15 April 2021.

2. $4.143m of employee and supplier expenses will be recognised by the ATO in the 2021 financial year, with ASIC’s Departmental appropriation being reduced by the corresponding amount.

3. With the exception of employee entitlements provision amounts and prepayments, the net book value of assets and liabilities were transferred to the ATO for no consideration.

ASIC Annual Report 2020-21 170

8.3 Expenditure relating to statutory board 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.

2021 $’000

2020 $’000

Companies Auditors Disciplinary Board 371 502

Superannuation Complaints Tribunal 2,025 7,686

The Superannuation Complaints Tribunal 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.

8.4 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. ASIC takes a proactive approach to administering vested property and accounts for any proceeds on realisation of those assets in accordance with its statutory duties.

Vested assets are not available to ASIC and are not recognised in the financial statements.

2021

Quantity

2020

Quantity

Class of asset

Land 544 592

Shares 175 122

Other 150 99

Closing balance 869 813

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.

Financial Statements 171

8.5 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 available to ASIC and are not recognised in the financial statements.

2021 $’000

2020 $’000

Security deposits under Corporations Regulations 2001 regulation 7.6.02AA (dealers and investment advisers)

Cash (at bank) 83 83

Bank guarantees 8,550 8,780

Closing balance 8,633 8,863

Security deposits under the Corporations Act 2001 s1284(1) (liquidators)

Insurance bond 1,800 1,800

Closing balance 1,800 1,800

8.6 Budgetary reports and explanations of major variances

8.6A: Departmental Budgetary Reports

The following tables provide a comparison of the original budget as presented in the 2020-21 Portfolio Budget Statements (PBS) to the 2020-21 final outcome as presented in 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

2021 $’000

2021 $’000

2021 $’000

NET COST OF SERVICES

Expenses

Employee benefits 282,840 279,639 3,201

Suppliers 135,855 148,724 (12,869)

Depreciation and amortisation 70,513 69,673 840

Finance costs - unwinding of restoration provision 2,150 2,220 (70)

Impairment loss on financial instruments 53 - 53

Write-down and impairment of assets 704 - 704

Total expenses 492,115 500,256 (8,141)

ASIC Annual Report 2020-21 172

Actual Original Budget Variance

2021 $’000

2021 $’000

2021 $’000

LESS:

Own-source revenue

Sale of goods and rendering of services 1,343 2,000 (657)

Revenue from other Australian Government entities 30,351 10,645 19,706

Other revenue 8,904 625 8,279

Total own-source revenue 40,598 13,270 27,328

Gains

Reversal of write-downs and impairment 8 - 8

Total gains 8 - 8

Net Cost of Services 451,509 486,986 (35,477)

Total revenue from Government 437,092 441,007 (3,915)

Surplus/(Deficit) (14,417) (45,979) 31,562

Total comprehensive income/(loss) (14,417) (45,979) 31,562

Explanations of major variances Affected line items

Own-source revenue

This revenue stream was higher than budget due to receipts during the year from ATO and DHA, which were provided to fund both capital and operating expense requirements for these programs. At the time of the preparation of the Portfolio Budget Statements, the funding requirement for these programs had not been confirmed.

Sale of goods and rendering of services

The increase mainly relates to higher than expected court cost recoveries in relation to ESA matters. These revenues are unpredictable and therefore subject to variation.

Other revenue

The reduction in the deficit is primarily driven by the revenue variances mentioned above. Most of the funding received was for capital expenditure.

Surplus/(Deficit)

Financial Statements 173

Statement of Financial Position

Actual

Original Budget Variance

2021 $’000

2021 $’000

2021 $’000

ASSETS

Financial assets

Cash and cash equivalents 46,304 30,307 15,997

Trade and other receivables 157,936 132,315 25,621

Total financial assets 204,240 162,622 41,618

Non-financial assets

Buildings 214,302 255,688 (41,386)

Plant and equipment 25,896 14,881 11,015

Computer software 83,417 76,364 7,053

Other non-financial assets 13,533 17,706 (4,173)

Total non-financial assets 337,148 364,639 (27,491)

Total assets 541,388 527,261 14,127

LIABILITIES

Payables

Suppliers 29,750 28,754 996

Other payables 34,209 37,997 (3,788)

Total payables 63,959 66,751 (2,792)

Interest-bearing liabilities

Leases 217,968 231,265 (13,297)

Total interest-bearing liabilities 217,968 231,265 (13,297)

Provisions

Employee provisions 81,387 82,255 (868)

Other provisions 13,961 12,749 1,212

Total provisions 95,348 95,004 344

Total liabilities 377,275 393,020 (15,745)

Net assets 164,113 134,241 29,872

EQUITY

Contributed equity 500,703 502,393 (1,690)

Reserves 22,500 22,500 -

Accumulated deficits (359,090) (390,652) 31,562

Total equity 164,113 134,241 29,872

ASIC Annual Report 2020-21 174

Explanations of major variances Affected line items

Financial assets

The variance is driven by mainly lower than expected expenditure and unbudgeted court cost recoveries related to ESA matters. Cash and cash equivalents

The increase mainly relates to the outstanding cash incentives claims in relation to property accommodation fitouts, payable in 2021-22. Trade and other receivables

Non-financial assets

The decrease mainly relates to transfer of building related assets in relation to Machinery of Government functional transfers from ASIC to ATO.

Buildings

The increase is driven by capital expenditure funded by ATO and DHA. Plant & equipment

Statement of Changes in Equity

Actual

Original Budget Variance

2021 $’000

2021 $’000

2021 $’000

CONTRIBUTED EQUITY

Opening balance 474,633 474,633 -

Transactions with owners

Contributions by owners

Equity injections - Appropriations 6,904 6,904 -

Departmental capital budget 20,856 20,856 -

Restructuring (1,690) - (1,690)

Total transactions with owners 26,070 27,760 (1,690)

Closing balance as at 30 June 500,703 502,393 (1,690)

RETAINED EARNINGS

Opening balance (344,673) (344,673) -

Comprehensive income

Surplus/(Deficit) for the period (14,417) (45,979) 31,562

Total comprehensive loss (14,417) (45,979) 31,562

Closing balance as at 30 June (359,090) (390,652) 31,562

ASSET REVALUATION RESERVE

Opening balance 22,500 22,500 -

Closing balance as at 30 June 22,500 22,500 -

Financial Statements 175

Actual

Original Budget Variance

2021 $’000

2021 $’000

2021 $’000

TOTAL EQUITY

Opening balance 152,460 152,460 -

Comprehensive income

Surplus/(Deficit) for the period (14,417) (45,979) 31,562

Total comprehensive loss (14,417) (45,979) 31,562

Transactions with owners

Contributions by owners

Equity injections - Appropriations 6,904 6,904 -

Departmental capital budget 20,856 20,856 -

Restructuring (1,690) - (1,690)

Total transactions with owners 26,070 27,760 (1,690)

Closing balance as at 30 June 164,113 134,241 29,872

Explanations of major variances

The variances are supported by the explanations provided above in the Statement of Comprehensive Income and the Statement of Financial Position portions of this note.

Cash Flow Statement

Actual

Original Budget Variance

2021 $’000

2021 $’000

2021 $’000

OPERATING ACTIVITIES

Cash received

Appropriations 484,672 441,007 43,665

Operating cash received 1,343 40,803 (39,460)

Net GST received 15,002 - 15,002

Cost recoveries 6,728 - 6,728

Other cash received 28,100 10,291 17,809

Total cash received 535,845 492,101 43,744

ASIC Annual Report 2020-21 176

Actual

Original Budget Variance

2021 $’000

2021 $’000

2021 $’000

Cash used

Employees 283,077 279,639 3,438

Suppliers 148,863 150,627 (1,764)

Interest payments on lease liabilities 2,134 2,210 (76)

Transfers to the Official Public Account 28,768 - 28,768

Total cash used (462,842) (432,476) (30,366)

Net cash from/(used by) operating activities 73,003 59,625 13,378

INVESTING ACTIVITIES

Cash used

Purchase of property, plant and equipment 73,044 65,938 7,106

Total cash used (73,044) (65,938) (7,106)

Net cash (used by) investing activities (73,044) (65,938) (7,106)

FINANCING ACTIVITIES

Cash received

Appropriations - contributed equity 29,784 27,760 2,024

Total cash received 29,784 27,760 2,024

Cash used

Principal payments of lease liabilities 24,590 32,291 (7,701)

Total cash used (24,590) (32,291) 7,701

Net cash from financing activities 5,194 (4,531) 9,725

Net increase/(decrease) in cash held 5,153 (10,844) 15,997

Cash at the beginning of the reporting period 41,151 41,151 -

Cash at the end of the reporting period 46,304 30,307 15,997

Explanations of major variances

The variances are supported by the explanations provided above in the Statement of Comprehensive Income and the Statement of Financial Position portions of this note.

Financial Statements 177

8.6B: Administered budgetary reports

The following tables provide a comparison of the original budget as presented in the 2020-21 Portfolio Budget Statements (PBS) to the 2020-21 final outcome as presented in accordance with Australian Accounting Standards for ASIC. The budget is not audited. Explanations for variances greater than +/- 10% and greater than +/- $5m are provided.

Administered Schedule of Comprehensive Income

Actual Original Budget Variance

2021 $’000

2021 $’000

2021 $’000

EXPENSES

Grants 6,007 7,118 (1,111)

Impairment loss allowance on financial instruments 60,436 76,049 (15,613)

Claims for unclaimed monies 160,701 101,852 58,849

Promotional costs for MoneySmart initiatives 574 574 -

Total expenses 227,718 185,593 42,125

LESS:

Own-source revenue

Taxation revenue

Fees 892,685 855,473 37,212

Supervisory cost recovery levies 62,960 61,853 1,107

Total taxation revenue 955,645 917,326 38,319

Non-taxation revenue

Supervisory cost recovery levies 235,781 271,791 (36,010)

Fees and fines 321,137 206,899 114,238

Unclaimed monies 295,304 153,541 141,763

Total non-taxation revenue 852,222 632,231 219,991

Total revenue 1,807,867 1,549,557 258,310

Net contribution by services 1,580,149 1,363,964 216,185

ASIC Annual Report 2020-21 178

Explanations of major variances Affected line items

The decrease in the impairment loss allowance is due to the delay in the ASIC/ATO MOG as the review of aged debt and write offs processed commenced later in the financial year than expected.

Impairment loss allowance on financial instruments

The increase in unclaimed monies claim expense is due to valuation adjustment of the claims provision. The valuation is directly impacted by emerging trends of higher lodgements received for all categories of unclaimed monies. Refer to the Accounting Policy note at 4.2B.

Claims for unclaimed monies

The difference between budgeted and actual revenue reflects the estimated impact of Government decisions since the budget was prepared.

Taxation revenue - Supervisory cost recovery levies

The increase in revenue for fees and fines is due to the unexpected value of compliance matters fines during 2020-21.

Fees and fines

Significant increase in the volume of records lodged under the Banking Act 1959, combined with more lodgements received under s601 of the Corporations Act 2001 and higher value of lodged records under the Life Insurance Act 1995 has contributed to an increase in lodgement revenue.

Non-taxation revenue - Unclaimed monies

Financial Statements 179

Administered Schedule of Assets and Liabilities

Actual Original Budget Variance

2021 $’000

2021 $’000

2021 $’000

ASSETS

Financial assets

Cash and cash equivalents 1,524 1,419 105

Supervisory cost recovery levies receivable 314,471 339,313 (24,842)

Fees and fines receivable 141,513 153,251 (11,738)

Trade and other receivables 10,006 8,221 1,785

Total assets administered on behalf of Government 467,514 502,204 (34,690)

LIABILITIES

Payables and provisions

Suppliers and other payables 44,526 42,242 2,284

Unclaimed monies provisions 491,183 409,336 81,847

Total liabilities administered on behalf of Government 535,709 451,578 84,131

Net assets/(liabilities) (68,195) 50,626 (118,821)

Explanations of major variances Affected line items

The provision for unclaimed monies payable valuation is impacted by emerging actual experience of higher lodgements, change in claim trends, higher discount rate and lower CPI. These combined factors have impacted all unclaimed monies categories and resulted in overall increase to the provision.

Unclaimed monies provisions

ASIC Annual Report 2020-21 180

6Appendices6.1 Appendices relating to ASIC’s governance and operations 1826.2 Appendices relating to assessments 2096.3 Appendices relating to statements required by law 2146.4 Five-year summary of key stakeholder data 233 Appendices 181

6.1 Appendices relating to ASIC’s governance and operations

Parliamentary oversight

Responsible Ministers

At 30 June 2021, the Minister responsible for ASIC was the Treasurer, the Hon. Josh Frydenberg MP.

Parliamentary committees

ASIC is accountable to Parliament through the following Parliamentary committees:

› Parliamentary Joint Committee on Corporations and Financial Services

› Senate Standing Committee on Economics

› House of Representatives Standing Committee on Economics

› 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.

We aim to respond to 100% of correspondence within 28 days of receipt. In 2020-21, we received 204 letters and emails from members of Parliament and responded to 202. We responded to 67% of this correspondence within 14 days and 96% within 28 days.

Financial and operational oversight

ASIC is a non-corporate Commonwealth entity under the 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 Interim Corporate Plan, to address the impact of the COVID-19 pandemic, was published in June 2020 and the priorities outlined in it have been incorporated into our current Corporate Plan. ASIC’s Corporate Plan for 2020-24 was published in August 2020.

The Auditor-General audits our annual financial statements on behalf of the Parliament.

ASIC Annual Report 2020-21 182

External scrutiny of our agency

Implementation of Royal Commission recommendations

The Royal Commission provided its final report to the Government on 1 February 2019. On 4 February 2019, the Treasurer released the Government’s response to the Royal Commission recommendations.

We have remained focused on a range of initiatives we began before or in response to the Royal Commission’s recommendations and we continue to take action on all Royal Commission recommendations directed at ASIC.

We have published regular updates on our actions to implement Royal Commission recommendations, including in April 2021: 21074MR ASIC enforcement update July to December 2020.

Details of our actions are set out in Chapter 1.

Judicial decisions and decisions of administrative tribunals and the Office of the Australian Information Commissioner

There were no judicial decisions, administrative tribunal decisions, or decisions by the Office of the Australian Information Commissioner in 2020-21 that have had, or may have, a significant impact on ASIC’s operations.

Parliamentary Joint Committees

During 2020-21, ASIC testified before the following Parliamentary Joint Committees and provided answers to Questions on Notice:

› Joint Committee on Corporations and Financial Services - Oversight of ASIC, the Takeovers Panel and the Corporations Legislation No.1 of the 46th Parliament

› Joint Committee on Corporations and Financial Services - Inquiry into litigation funding and the class action industry

› Joint Committee on Corporations and Financial Services - Inquiry into mobile payment and digital wallet financial services

› Joint Committee on Law Enforcement - Inquiry into criminal activity and law enforcement during the COVID-19 pandemic.

ASIC made submissions to the following Parliamentary Joint Committee inquiries:

› Joint Committee on Corporations and Financial Services - Inquiry into mobile payment and digital wallet financial services

› Joint Standing Committee on Trade and Investment Growth - Inquiry into the prudential regulation of investment in Australia’s export industries

› Joint Committee on Law Enforcement - Inquiry into criminal activity and law enforcement during the COVID-19 pandemic.

Appendices 183

Senate Committees

During 2020-21, ASIC testified before the following Senate Committees and provided answers to Questions on Notice:

› Senate Economics Legislation Committee - Senate Estimates

› Senate Economics References Committee - Treasury Laws Amendment (2021 Measures No. 1) Bill 2021

› Senate Economic Legislation Committee - Inquiry into the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020

› Senate Economic Legislation Committee - Inquiry into the Treasury Laws Amendment (Your Future, Your Super) Bill 2021 [Provisions]

› Senate Select Committee on Australia as a Technology and Financial Centre.

ASIC made submissions to the following Senate Committee inquiries:

› Senate Economics References Committee - Treasury Laws Amendment (2021 Measures No. 1) Bill 2021

› Senate Economic Legislation Committee - Inquiry into the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020

› Senate Economic Legislation Committee - Inquiry into the Treasury Laws Amendment (Your Future, Your Super) Bill 2021 [Provisions]

› Senate Select Committee on Australia as a Technology and Financial Centre.

House of Representatives Committees

During 2020-21, ASIC testified before the following House of Representatives Committee and provided answers to Questions on Notice:

› House of Representatives Standing Committee on Economics - Review of ASIC Annual Report.

› ASIC made submissions to the following House of Representatives Committee inquiry:

› House of Representatives - Inquiry into the Tax Treatment of Employee Share Schemes.

Corporate governance

The role of the Chair and the Commission

In line with the PGPA Act, the Chair as accountable authority will govern ASIC in a way that is not inconsistent with the policies of the Australian Government.

Our Chair has sole executive management responsibility and relies on and uses our key senior executives to carry out day-to-day management activities and deal with operational issues. The Chair delegates functions where he considers this would benefit the executive management of ASIC.

The Commission acts as a strategic non-executive body, focusing on high-level regulatory and statutory decision making and stakeholder management. It provides support to the Chair on organisational oversight.

ASIC Annual Report 2020-21 184

In 2020-21, ASIC continued to implement its program to improve its governance, structure and decision-making processes. As set out in Chapter 1, ASIC introduced the role of Chief Risk Officer to implement our new risk management framework. We also introduced a Head of Office function to increase internal oversight and executive accountability and enable the Commission to give greater focus to strategic matters, regulatory decision making, external engagement and communication.

The Commission utilises a number of committees to assist it with the effective and efficient performance of its regulatory and governance roles. Details of these committees are set out in Chapter 1.

Commission meetings take place twice a month and may be convened more regularly as required. The Commission also meets as a team on a weekly basis to provide early direction or guidance on issues, or to consider urgent matters. Unscheduled Commission meetings are called to obtain Commission decisions on specific issues where required outside of the meeting timetable.

The Commission appoints and evaluates the performance of its Executive Directors and Senior Executive Leaders and approves budgets and business plans for each team.

Commissioners are appointed by the Governor-General, on the nomination of the Treasurer. The Treasurer may nominate only those people who are qualified by knowledge of, or experience in, business, the administration of companies, financial markets, financial products and financial services, law, economics or accounting.

Commissioners are appointed on fixed 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 on major regulatory and enforcement matters. Other independent legal and accounting experts also advise on specific matters.

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 business is carried out efficiently and 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 38 meetings in 2020-21. The Commission Enforcement Committee met 21 times, the Commission Regulatory Committee met 13 times, and the Commission Risk Committee met 10 times in 2020-21.

Additional information on ASIC’s internal governance is published on our website.

Appendices 185

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, economical and ethical use of Commonwealth resources. The Committee does this by providing independent assurance to the Chair on ASIC’s financial and performance reporting, risk oversight and management, and system of internal control.

ASIC’s Audit Committee Terms of Reference, which are available on our website, sets out the Committee’s role, authority, membership and functions, and its procedural, reporting and administrative arrangements.

The Committee met six times during the year, with four regular and two special meetings. Details of the Audit Committee’s membership in 2020-21, including remuneration for the period are set out in table 6.1.1.

Table 6.1.1 Membership of the Audit Committee, 2020-2021

Member Member experience

No. of meetings Remuneration (excluding GST)

Peter Achterstraat AM (Chair)

Peter holds a Bachelor of Economics (Hons), a Bachelor of Laws, and a Bachelor of Commerce from the Australian National University, and has been inducted into the ANU College of Business and Economics Hall of Fame. He has been awarded a Member of the Order of Australia for significant service to public administration through financial management and governance roles. Peter currently retains the following positions:

› NSW Productivity Commissioner

› Chairman, Bankstown Airport Limited

› Chair, Sydney Financial Forum

› Chair, Australian Taxation Office Audit and Risk Committee

6 $38,409

ASIC Annual Report 2020-21 186

Member Member experience

No. of meetings Remuneration (excluding GST)

Lisa Woolmer (Deputy Chair) Lisa holds a Bachelor of Economics and Postgraduate Diploma in Japanese

Business Communication from Monash University, and a Postgraduate Diploma of Employment Relations from the University of Canberra. She is a member of both the Australian Institute of Company Directors and Chartered Accountants Australia and New Zealand. Lisa currently retains the following positions:

› Independent Chair/member of audit and risk committees for Comcare, Adult Community and Further Education Board, Bayside City Council, Glen Era City Council, City of Whitehorse, Mornington Peninsula Shire Council and Orygen

She is a former Principal at PWC, Melbourne

6 $29,023

Timothy Montgomery Timothy holds a Bachelor of Economics and a Bachelor of Science (Hons) from

the Australian National University, a Graduate Certificate in Management from the Australian Graduate School of Management, and a Graduate Certificate in Statistics from the University of Canberra. He currently retains the following positions:

› Program Manager, Technology and Security Division, Australian Bureau of Statistics

› Senior ICT roles across Commonwealth agencies

› ICT management consultant roles.

6 nil (a)

Appendices 187

Member Member experience

No. of meetings Remuneration (excluding GST)

Cathie Armour (ASIC Commissioner)

Cathie is an ASIC Commissioner and holds a Bachelor of Economics and a Bachelor of Laws (Hons) from the Australian National University, and a Masters of Law from Sydney University.

6 nil (b)

(a) Audit Committee services are being provided free of charge in accordance with an MOU between ASIC and the Australian Bureau of Statistics (ABS).

(b) Commissioner Armour ceased as a Committee member on 12 June 2021. ASIC’s key management personnel remuneration details are provided in Table 6.1.10.

Peter Achterstraat AM Chair Audit Committee August 2021

Consultative panels and committees

ASIC takes a consultative approach to addressing harms and emerging developments in Australia’s financial system.

As part of ASIC’s strategic change program, we have enhanced our advisory panel processes to bolster their efficiency and to ensure that we are effectively engaging with our stakeholders to gain a deeper understanding of industry and consumer developments, consult on policy matters, and identify threats and harms in the sectors we regulate.

ASIC Business Advisory Panel

ASIC’s Business Advisory Panel 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 were drawn from a wide range of business, industry and professional organisations. Each member represents an area of relevant experience and expertise.

During the 2020-21 year, the Panel’s themes of engagement included the continuation of the Government’s commitment to modernise business registers and the introduction of a director identification number.

ASIC Annual Report 2020-21 188

The Panel was discontinued in March 2021 following the transfer of ASIC registry staff and functions to the ATO.

ASIC Consultative Panel

The ASIC Consultative Panel was established in 2020 to provide ASIC with a flexible and responsive approach to external engagement. It enables ASIC to consult on proposed regulatory changes; provides intelligence on the external environment, including market conditions; and can assist ASIC in identifying threats and harms in the markets we regulate.

Panel members are senior representatives from the academic, consumer, industry, legal and regulatory sectors and are appointed in their personal capacity. They can be called upon to consult on emerging issues as they arise and meet as a group at a plenary meeting at least once annually.

In November 2020, the inaugural plenary meeting of the Panel was hosted virtually by ASIC. Members discussed trends in financial services, banking and consumer behaviour. The Panel also reflected on emerging threats and harms within ASIC’s regulatory remit to assist in the development of its strategic priorities for 2021-22.

Consumer Advisory Panel

Established in 1998, ASIC’s Consumer Advisory Panel (CAP) advises ASIC on current issues affecting retail investors and consumers in the financial services and wealth management industries. Information from CAP members also informs ASIC’s surveillance, enforcement, policy and financial education initiatives.

Due to the COVID-19 pandemic, CAP met virtually three times in 2020-21. Priority areas of CAP member focus included:

› impacts of the pandemic and measures responding to it on different consumer cohorts (borrowers and debtors, superannuation fund members, insurance policy holders, retail investors, timeshare members and small businesses)

› implementation of reforms resulting from the Royal Commission, including the deferred sales model for add-on insurance

› product intervention orders and ASIC’s consultation on the implementation of the design and distribution obligations

› ASIC’s consultation on the issues and impediments relating to the supply of good quality and affordable personal advice

› the Financial Advisers Standards and Ethics Authority Code

› ASIC consultations on updates to internal dispute resolution standards and requirements and remediation guidance in Regulatory Guide 256 Client review and remediation conducted by advice licensees and the inaugural independent review of AFCA

› responsible lending, debt management firms and the buy now pay later sector.

CAP also held two out-of-session virtual meetings, the first focusing on retirement incomes and the second a joint meeting with the ACCC’s equivalent consumer panel, the Consumer Consultative Committee.

Appendices 189

Corporate Governance Consultative Panel

The Corporate Governance Consultative Panel was established in 2020 to enable ASIC to gain a deeper understanding of developments and emerging issues in corporate governance practices.

Members of this Panel include listed company directors, industry association representatives, institutional investors and academics.

The Panel met twice in 2020-21 to discuss the impact of the COVID-19 pandemic; environmental, social and governance issues; cyber resilience; and insolvency reforms.

Digital Finance Advisory Panel

The Digital Finance Advisory Panel (DFAP) was established in 2015 to help inform ASIC’s fintech and regtech approach and to advise on engagement with the sector. Members of DFAP are drawn from a cross-section of the fintech and regtech communities, academia and consumer organisations.

DFAP also has active observer members from public sector and regulatory agencies, which facilitates dialogue between industry and the public sector. The establishment of DFAP has helped foster a network of domestic departments and agencies dealing with innovative businesses, which has promoted a coordinated approach to financial innovation and regtech.

DFAP met four times in 2020-21 and discussed and provided observations to ASIC on topics such as the issues of interest to the Senate Select Committee on Financial Technology and Regulatory

Technology, decentralised finance, open banking, consumer credit reforms, central bank digital currencies, and the implementation of the Government’s enhanced regulatory sandbox.

Financial Advisers Consultative Panel

The Financial Advisers Consultative Panel was established in 2017. Its members are practising financial advisers who are skilled in insurance, superannuation (including self-managed funds) and digital financial advice. The members sit in a personal capacity.

The Panel met three times in 2020-21. It discussed a number of topics of interest this year including Royal Commission law reform and ASIC’s work in relation to unmet advice needs, life insurance, general advice, fee and cost disclosure for superannuation and managed investment products.

Markets Consultative Panel

The Markets Consultative Panel was established in 2010 and advises on ASIC’s approach to its responsibilities for supervision of the Australian market and on broader market developments. Members are drawn from the financial services industry, with experience in retail markets, institutional banking, asset management and academia.

During 2020-21, the Panel met five times. Issues discussed included equity and debt capital markets, retail investor trading, climate disclosures, resilience, cyber risk, crypto assets, market events, and the implementation of the product intervention power and design and distribution obligations.

ASIC Annual Report 2020-21 190

Disciplinary or peer review panels

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) makes decisions about whether to ban individuals from providing financial services or engaging in credit activities. Matters are referred to sitting panels drawn from the FSCP. Each sitting panel consists of two experienced industry participants from the financial services or credit sector and an ASIC staff member.

The FSCP regime, which operates alongside ASIC’s existing administrative decision-making processes, is reserved for matters that we consider are appropriate for peer review because of their

significance, complexity or novelty. No matters were referred to the FSCP during 2020-21.

Liquidator registration and disciplinary committees

Applications for registration as a liquidator, or to vary or remove conditions imposed on a liquidator’s registration, and potential disciplinary action against registered liquidators are referred to committees convened by ASIC.

Each committee consists of an ASIC delegate who chairs the committee, a registered liquidator chosen by the Australian Restructuring, Insolvency and Turnaround Association, and a person appointed by the Minister, as set out in sections 20-10, 20-45 and 40-45 of Schedule 2 to the Corporations Act.

During 2020-21, ASIC convened 37 committees to consider applications for registration as a liquidator, and registered 31 liquidators, as set out in Table 6.1.2.

Table 6.1.2 Committees convened, 2020-21

Results of committees convened in 2020-21 Convened Registered

Applicants should be registered (no conditions) 17 151

Applicants should be registered (conditions) 10 10

Applicant - not registered 8 -

Committee decision pending 2 -

Prior year committee decision registered during the year - 6

Total 37 31

1 Two registrations were pending at the end of 2020-21.

Appendices 191

During 2020-21, ASIC received two applications from liquidators to vary or remove conditions attached to their registration. The applications were referred to committees convened by ASIC for consideration. One committee decided to remove a condition imposed on the liquidator’s registration and ASIC implemented that decision. One committee decided to vary the conditions imposed and ASIC implemented that decision.

Also during 2020-21, two disciplinary committees considered matters referred by ASIC. Both committees decided that the liquidator registrations should continue.

The register of liquidators and a summary of disciplinary actions 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 2020-21, the MDP issued infringement notices in respect of two matters:

› Macquarie Securities (Australia) Limited (MSAL) paid a $126,000 infringement notice in connection with a buy-back transaction. The MDP was of the view that MSAL had not acted in accordance with its client’s instructions by entering

into a transaction on ASX’s common ‘dark market’ that was not made in the ordinary course of trading because MSAL’s order was preferenced ahead of another participant’s orders that had time priority.

› Life Trading Pty Ltd Limited (Life Trading) paid a $200,000 infringement notice, and entered into an enforceable undertaking to appoint an independent expert to review and report on Life Trading’s supervisory framework in relation to its futures trading business, in connection with the MDP’s view that Life Trading did not have an appropriate supervisory framework throughout the period from January 2019 to June 2020.

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 participant is not taken to have contravened subsection 798H(1) of the Corporations Act.

ASIC Annual Report 2020-21 192

Regional action

Australian Capital Territory

This year, the ACT team continued to build collaborative working relationships at the state and Commonwealth levels of the public service.

Throughout the year, the team met regularly with representatives from the Department of Social Services, Services Australia, the Department of Education, Skills and Employment, the Department of the Prime Minister and Cabinet (Office for Women), the ABS, the Department of Agriculture, Water and the Environment, the National Indigenous Australians Agency, the ATO and Treasury to discuss the Government support available to Australians during the pandemic.

In August 2020, Regional Commissioner Laura Higgins, invited Australian Statistician and Agency Head of the ABS, Dr. David Gruen to provide a virtual group of 200+ stakeholders with insights on the role of data in shaping responses to the pandemic.

The Consumer Insights and Communications team in the ACT office has a strong relationship with ACT schools. This year, as part of our education outreach work, we led a number of financial education presentations and workshops in Canberra secondary schools. The team also met regularly with the ACT Education Directorate to support the expansion of its financial education program.

In May 2021, Commissioner Danielle Press joined presenters from the Australian Small Business and Family Enterprise Ombudsman, the ACCC, the Fair Work Ombudsman and the ATO in Canberra for a live-streamed webcast providing information for small business operators across Australia.

New South Wales

Throughout 2020-21, we met with financial institutions based in New South Wales to assess how they are dealing with the impacts of the COVID-19 pandemic and their operational resilience. Generally, institutions have introduced programs to address the effects of the pandemic at an operational level.

Our New South Wales Acting Regional Commissioner and Executive Director of Markets, Greg Yanco, warned first-time investors to be aware of the inherent volatility and complexities of market trading. He advised first-time investors to focus on long-term goals and not make rash decisions based on a fear of missing out on market falls or gains.

We continue to monitor institutions remotely to gather information on trends, identify risks and respond to requests, including through information-sharing arrangements with APRA and leveraging established working arrangements with senior executives to both supervise and support institutions.

Appendices 193

Our regulatory work and priorities have temporarily changed to allow us and regulated entities to focus on the impact of the COVID-19 pandemic. This includes the deferral of some activities and the redeployment of staff to address issues of immediate concern, maintaining the integrity of markets and protecting vulnerable consumers. We have established three ASIC-wide working groups to focus on scams, false and misleading advertising, and unlicensed advice.

Northern Territory

We have maintained consistent in person engagement and communication with multiple Commonwealth and Northern Territory Government agencies, industry bodies, regional and community groups, and other key industry stakeholders throughout the year. In October 2020, ASIC delivered ‘COVID-19 and Small Business’ workshops and participated in business fairs in Alice Springs, Katherine and Darwin.

In May 2021, ASIC hosted an event for 60 people from the business, education and community sectors to discuss challenges that local stakeholders may be facing, ASIC’s role during the COVID-19 pandemic, and ASIC’s current and future priorities. Commissioner Sean Hughes spoke at the event alongside Australian Small Business and Family Enterprise Ombudsman Bruce Billson and Northern Territory Minister for Small Business Paul Kirby MLA. ASIC also attended and supported Financial Counselling Australia’s national conference in Darwin in May 2021.

Queensland

This year, we took part in a range of stakeholder events which were primarily conducted virtually. We continued to meet with consumer groups and regulators, as well as our Regional Liaison Committee to better understand how the COVID-19 pandemic conditions were impacting consumers and businesses in Queensland, and take action as appropriate.

In March 2021, we participated in panel discussions at the Financial Counsellors Association Queensland Conference in Far North Queensland.

South Australia

Regional engagement continued in a virtual format throughout 2020-21. Then-Chair James Shipton and Commissioner Danielle Press joined Regional Commissioner Melissa Smith at a meeting of members of the Regional Liaison Committee and discussion with our key industry stakeholders focusing on ASIC’s response to the pandemic and the shared experiences faced by South Australian industry.

The South Australian office has a strong relationship with local universities. Our Small Business Engagement team presented to the University of Adelaide’s Entrepreneur and Venture Advice Clinic, which provides advice to small businesses. In October 2020 and May 2021, the team provided a general overview of ASIC and its investigation powers.

ASIC Annual Report 2020-21 194

In May 2021, Commissioner Danielle Press joined presenters from the Australian Small Business and Family Enterprise Ombudsman, the ACCC, the Fair Work Ombudsman and the ATO in Canberra for a live-streamed webcast from South Australia, providing information for small business operators across Australia.

Tasmania

Due to the uncertainty caused by the COVID-19 pandemic and restrictions, we did not undertake many of our normal stakeholder activities. We did, however, maintain our connections with the University of Tasmania, attending a University open day in April.

Victoria

Throughout this financial year, Victoria’s Regional Commissioner, Warren Day, appeared on ABC’s Drive program to discuss a range of topics, including debt, hardship assistance, superannuation and buy-now/pay-later services.

In November 2020, ASIC team members were invited to a virtual NAIDOC Week event discussing Victoria’s truth and justice process with guest speaker Marcus Stewart, Co-Chair of the First Peoples’ Assembly of Victoria.

In March 2021, ASIC’s Small Business Engagement and Compliance team supported the Victorian Government’s Small Business Bus program and attended various locations across Melbourne. The buses provide an opportunity to engage with the community, sole traders and small businesses by actively listening, answering queries and providing assistance.

In April 2021, ASIC’s registry colleagues in Traralgon were farewelled ahead of their transition to the ATO. The event was attended by then-Chair James Shipton, Deputy Chair Karen Chester and Commissioners Sean Hughes, Cathy Armour and Danielle Press. Hosting the event was Chief Operating Officer and Victoria’s Regional Commissioner, Warren Day.

Western Australia

In 2020-21, we continued virtual meetings with stakeholders in light of the COVID-19 pandemic restrictions. Our engagement with local and interstate stakeholders included 10 liaison meetings during the period, convened by the Credit and Banking, Financial Reporting and Audit, Corporations, Insolvency Practitioners and Market Supervision teams.

The Regional Liaison Committee convened on three occasions, with virtual attendance by Deputy Chair Karen Chester in August 2020, Commissioner Danielle Press in November 2020 and Commissioner Cathie Armour in April 2021.

Appendices 195

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 2021, ASIC had a total of 2008 full-time equivalent (FTE) employees. Table 6.1.3 and Table 6.1.4 show a breakdown by location for each classification in 2020-21 and 2019-20 respectively. Table 6.1.5 and table 6.1.6 provide a detailed picture of the gender breakdown of our people in 2020-21 and 2019-20 respectively.

Table 6.1.3 ASIC employees (FTE), by location, 2020-211,2,3,4

Roles Vic. NSW Qld WA SA Tas. ACT NT Total

Chair 1 - - - - - - - 1

Deputy Chair 1 - - - - - - - 1

Member 2 1 - - - - - - 3

SES 19 35 - 2 2 - 1 - 59

ELS - 1 - - - - - - 1

Exec 2 208 289 50 29 11 14 7 - 608

Exec 1 138 230 45 34 13 3 6 1 470

ASIC 4 147 181 43 24 12 1 1 - 409

ASIC 3 116 109 32 16 8 5 3 - 289

ASIC 2 123 11 13 1 1 1 1 - 151

ASIC 1 16 - - - - - - - 16

Total 771 857 183 106 47 24 19 1 2,008

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 Companies Auditors Disciplinary Board.

3 Excludes contractors and secondments from other agencies.

4 Data rounded - some totals and subtotals may vary.

ASIC Annual Report 2020-21 196

Table 6.1.4 ASIC employees (FTE), by location, 2019-201,2,3,4

Roles Vic. NSW Qld WA SA Tas. ACT NT Total

Chair 1 - - - - - - - 1

Deputy Chair 1 1 - - - - - - 2

Member 3 1 - - - - - - 4

SES 16 35 - 1 1 - 1 - 54

Exec 2 190 284 48 28 8 11 5 - 574

Exec 1 135 220 41 32 11 3 4 1 447

ASIC 4 151 161 38 27 13 2 - - 392

ASIC 3 125 91 32 12 8 4 5 - 277

ASIC 2 142 13 11 1 2 1 - - 170

ASIC 1 19 - - - - - - - 19

Total 783 806 170 101 43 21 15 1 1,940

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 Companies Auditors Disciplinary Board.

3 Excludes contractors and secondments from other agencies.

4 Data rounded - some totals and subtotals may vary.

Appendices 197

Table 6.1.5 Combined totals by gender and employment type, 2020-211,2,3,4

Roles

Permanent Temporary

Total

Full-time Part-time Full-time Part-time

Female Male Female Male Female Male Female Male

Chair - - - - - 1 - - 1

Deputy Chair - - - - 1 - - - 1

Member - - - - 2 1 - - 3

SES 27 18 - 1 7 6 - - 59

ELS 1 - - - - - - - 1

Exec 2 200 282 77 12 21 14 1 1 608

Exec 1 180 193 53 3 15 21 5 - 470

ASIC 4 196 140 27 3 18 24 1 - 409

ASIC 3 121 101 15 1 23 16 4 - 289

ASIC 2 62 27 26 4 18 7 5 2 151

ASIC 1 5 1 3 - 3 2 1 1 16

Total 800 762 201 24 108 92 17 4 2,008

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 Companies Auditors Disciplinary Board.

3 Excludes contractors and secondments from other agencies.

4 Data rounded - some totals and subtotals may vary.

ASIC Annual Report 2020-21 198

Table 6.1.6 Combined totals by gender and employment type, 2019-201, 2,3, 4

Roles

Permanent Temporary

Total

Full-time Part-time Full-time Part-time

Female Male Female Male Female Male Female Male

Chair - - - - - 1 - - 1

Deputy Chair - - - -- 1 1 - - 2

Member - - - - 2 2 - - 4

SES 17 14 4 1 9 9 - - 54

Exec 2 182 268 73 12 18 19 1 1 574

Exec 1 157 192 48 6 16 23 5 - 447

ASIC 4 184 127 26 1 24 26 3 1 392

ASIC 3 101 86 14 - 44 28 1 3 277

ASIC 2 73 23 33 6 18 4 11 2 170

ASIC 1 7 1 3 1 4 2 - - 19

Total 721 711 201 27 136 115 21 8 1,940

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 Companies Auditors Disciplinary Board.

3 Excludes contractors and secondments from other agencies.

4 Data rounded - some totals and subtotals may vary.

Most of our staff are employed under the ASIC Enterprise Agreement 2019-22, which is ongoing. Table 6.1.6 shows the industrial arrangements for all ASIC employees. Table 6.1.7 shows the salary ranges per annum for ASIC employees.

We continue to provide our people with the opportunity to receive an annual performance bonus. Table 6.1.8 shows the performance payments we made in 2020-21.

Appendices 199

Table 6.1.7 ASIC employees (FTE) by stakeholder team, 2020-21

Stakeholder teams Total net FTE

Markets

Corporations 33

Financial Reporting and Auditing 30

Insolvency Practitioners 27

Market Infrastructure 31

Market Supervision 87

Financial Services and Wealth

Financial Advisers 54

Investment Managers 42

Superannuation 39

Credit, Retail Banking and Payments 62

Insurers 40

Financial Capability/Consumer Insights and Communications 45

Assessment and Intelligence 170

Supervision 33

Office of Enforcement 1

Financial Services Enforcement

Financial Services Enforcement 173

Wealth Management Enforcement Major Financial Institutions2 75

Market Enforcement

Corporations and Corporate Governance 45

Enforcement WA and Criminal Intelligence Unit 49

Market Enforcement 47

Registry 147

Total net FTE 1,229

1 Plus 73 full-time equivalent (FTE) staff working on Enforcement Special Account matters, and an additional 101 FTEs providing Enforcement support services and legal counsel.

2 We adopt the definition used in the last couple of financial years to prepare FTE annual report. 75 FTEs for Wealth Management Enforcement Major Financial Institutions is reported as a separate line under Office of Enforcement in the Annual Report table. The residual of FTE working on Enforcement in ESA group is reported in Note 1 attached to the Annual Report table.

ASIC Annual Report 2020-21 200

Table 6.1.8 Industrial arrangements for ASIC employees as at 30 June 20211

Classification ASIC Act s120(1) AWA2 EA3 Total

ASIC 1 - - 10 10

ASIC 2 - - 74 74

ASIC 3 - - 238 238

ASIC 4 - - 432 432

Exec 1 - - 530 530

Exec 2 - - 736 736

ELS 8 8

SES 34 7 16 57

Total 42 7 2,036 2,085

1 The number of industrial arrangements for ASIC team members is calculated based on total headcount as at 30 June rather than FTEs. This is because each industrial instrument belongs to an individual, regardless of their work pattern, and our obligations against those instruments related to a number of people, not FTEs.

2 Australian Workplace Agreement.

3 Enterprise agreement.

Table 6.1.9 Performance payments, 2020-21, by classification

Classification No. of recipients Aggregate Minimum Maximum Average

ASIC 4 317 $1,059,893 $583 $14,867 $3,312

Exec 1 456 $2,613,259 $681 $18,334 $5,681

Exec 2 686 $6,122,662 $521 $28,537 $8,848

* Note: This table includes payments for the 2019-20 performance year which were paid in 2020-21, plus any pro-rata payments for the 2020-21 performance year for staff who left ASIC in 2020-21. The table includes the registry.

Appendices 201

Executive remuneration

ASIC’s executive remuneration is determined by:

› the Remuneration Tribunal Act 1973

› the ASIC Act 2001

› the ASIC Enterprise Agreement 2019-2022

› remuneration policies and procedures

Commission remuneration is set according to the Remuneration Tribunal Act 1973 and the Remuneration Tribunal Determinations. This year, ASIC implemented a new Statutory Appointments Governance Framework - Remuneration Expense and Relocation Policy to support the Determinations and provide clear guidance on Commission remuneration.

Executive Director and Senior Executive Leader remuneration is determined under section 120 of the ASIC Act 2001. Remuneration and conditions are consistent across the cohort and jobs are evaluated under Mercer IPE methodology. Remuneration for Executive Directors and Senior Executive Leaders is based on a fixed total remuneration package that comprises base salary and superannuation and may include car allowance. Contracts under the ASIC Act provide for contingent remuneration (bonuses) of between 3% and 15% of base salary, conditional upon achieving performance priorities. No bonuses have been paid during 2020-21 due to the COVID-19 pandemic Government wage freeze. Bonuses were provisioned in the financial statements, however, at the time of publication were not yet awarded. ASIC is moving to remove bonuses from executive remuneration over the course of the next financial year, in line with the APSC Performance Bonus Guidance.

As a Commonwealth Entity we provide an annual update on the remuneration paid to the executives in the agency. Details for the 2020-21 reporting period are outlined in Tables 6.1.10, 6.1.11 and 6.1.12.

ASIC Annual Report 2020-21 202

Table 6.1.10 Remuneration paid to key management personnel in 2020-21

1,2

Short-term benefits

Post-

employment benefits Other long-term benefits

Termination benefits

Total

remuneration

Name Position title

Base salary ($) Bonuses

9

($)

Other benefits and allowances ($)

Superannuation contributions ($)

Long service leave

Other

long-term benefits

Termination benefits ($)

Total

remuneration ($)

Joseph Longo Chair

3

67,384 - - 1,418 1,229 - - 70,031

James Shipton Chair

4

743,484 - - 21,674 (43,803) - - 721,355

Sarah Court Deputy Chair 3

49,479 - - 5,610 902 - - 55,991

Daniel Crennan Deputy Chair 5

192,094 - - 8,848 (28,545) - - 172,397

Karen Chester Deputy Chair 550,728 - - 79,083 13,801 - - 643,612

Catherine Armour

Commissioner 557,286 - - 21,694 13,271 - - 592,251

Danielle Press Commissioner 569,536 - - 21,694 13,271 - - 604,501

Sean Hughes Commissioner 528,792 - - 72,936 12,322 - - 614,050

Christopher Savundra General Counsel 356,939 21,242 21,388 25,000 8,810 - - 433,379

Greg Kirk Executive

Director Strategy 307,657 19,237 21,388 56,400 7,980 - - 412,662

Timothy Mullaly Executive Director Financial Services Enforcement 322,714 19,404 18,550 57,196 8,051 - - 425,915

Appendices 203

Short-term benefits

Post-

employment benefits Other long-term benefits

Termination benefits

Total

remuneration

Warren Day Chief Operating Officer 344,446 20,683 25,791 56,400 8,550 - - 455,870

Joanna Bird Executive Director Wealth Management 314,874 19,237 20,931 54,210 7,980 - - 417,232

Sharon Concisom

Executive Director Markets Enforcement 332,386 19,404 17,558 57,727 8,051 - - 435,126

Greg Yanco Executive Director Markets 342,216 20,350 21,388 40,248 8,430 - - 432,632

Diana Steicke Acting Executive Director Assessment & Intelligence

6

240,088 14,306 21,823 21,154 5,874 - - 303,245

Louise Macaulay

Chief of Staff

3

28,100 1,397 2,288 3,865 530 - - 36,180

Paul Newson Executive Director Financial Services 7

56,495 - 5,163 5,424 1,566 - 88,870 157,518

ASIC Annual Report 2020-21 204

Short-term benefits

Post-

employment benefits Other long-term benefits

Termination benefits

Total

remuneration

Rosanne Bell Executive Director Registry

8

269,328 14,973 20,831 45,554 6,395 - - 357,081

1 This table is prepared on an accrual basis. This includes accrued long service leave which can only be realised when the vesting requirements have been met.

2 The remuneration for these positions is set by the Remuneration Tribunal. This is outlined in Remuneration Tribunal (Remuneration and Allowances for Holders of Full-time Public Office) Determination 2020

3 Part year remuneration disclosure - commenced as a KMP on 1 June 2021

4 Part year remuneration disclosure - ceased as a KMP on 31 May 2021

5 Part year remuneration disclosure - ceased as a KMP on 26 October 2020

6 Part year remuneration disclosure - commenced as a KMP on 24 August 2020

7 Part year remuneration disclosure - ceased as a KMP on 24 August 2020

8 Part year remuneration disclosure - ceased as a KMP on 13 April 2021

9 Bonus values are notional only, based on the 6% bonus provision in the financial statements. Bonus percentages had not yet been awarded at time of publication.

Appendices 205

Table 6.1.11 Remuneration paid to senior executives in 2020-21

1

Short-term benefits

Post-

employment benefits Other long-term benefits

Termination benefits

Total

remuneration

Remuneration band ($)

Number of senior executives

Average base salary ($)

Average bonuses

2

($)

Average other benefits and allowances ($)

Average

superannuation contributions ($)

Average long service leave

Average other

long-term benefits

Average termination benefits ($)

Average total remuneration ($)

0-220,000 14 84,407 4,127 2,659 11,950 2,023 - - 105,166

220,001-245,000 1 196,407 11,323 - 27,485 4,718 - - 239,933

245,001-270,000 3 201,353 11,805 17,538 29,737 4,919 - - 265,352

270,001-295,000 6 213,073 8,251 27,247 28,313 5,345 - - 282,229

295,001-320,000 17 224,436 13,591 27,759 34,430 5,663 - - 305,879

320,001-345,000 9 251,243 12,969 26,287 34,329 5,825 - - 330,653

345,001-370,000 6 264,354 15,901 27,524 43,951 6,625 - - 358,355

370,001-395,000 1 270,891 16,729 29,738 47,288 6,971 - - 371,617

395,001-420,000 1 343,412 14,244 26,306 20,275 5,935 - - 410,172

420,001-445,000 2 361,537 20,888 24,333 26,346 8,703 - - 441,807

1 This table is prepared on an accrual basis. This includes accrued long service leave which can only be utilised realised when the vesting requirements have been met.

2 Bonus values are notional only, based on the 6% bonus provision in the financial statements. Bonus percentages had not yet been awarded at time of publication.

Other highly paid team members are remunerated either under the ASIC Act 2001 with similar conditions to Executive Directors and Senior Executive Leaders, or through higher duties or individual flexibility arrangements under the ASIC Enterprise Agreement 2019-22.

ASIC Annual Report 2020-21 206

Table 6.1.12 Remuneration paid to other highly paid staff in 2020-21

1

Short-term benefits

Post-

employment benefits Other long-term benefits

Termination benefits

Total

remuneration

Remuneration band ($)

Number of other highly paid staff

Average base salary ($)

Average bonuses ($)

Average other benefits and allowances ($)

Average

superannuation contributions ($)

Average long service leave

Average other

long-term benefits

Average termination benefits ($)

Average total remuneration ($)

230,001-245,000 16 187,770 14,314 - 30,185 4,607 - - 236,876

245,001-270,000 14 203,539 14,358 - 33,635 4,934 - - 256,466

270,001-295,000 3 217,667 17,549 - 35,853 5,451 - - 276,520

295,001-320,000 1 238,249 22,461 - 34,354 5,587 - - 300,651

1 This table is prepared on an accrual basis. This includes accrued long service leave which can only be utilised realised when the vesting requirements have been met.

Appendices 207

Governance arrangements

Remuneration reviews for senior executives are conducted by the Chair around June-July each year. In 2020-21, ASIC did not provide salary increases or bonuses to senior executives under the ASIC Act. Highly paid team members employed under the ASIC Enterprise Agreement 2019-22 had their 2% salary increase deferred six months to November 2021 in accordance with the COVID-19 pandemic Government wage freeze.

Remuneration decisions are based on:

› the duties, responsibilities and accountabilities required by the position

› the performance of the relevant executive

› managing internal consistency, recognising the different skills, experience and capabilities of executives in comparable level roles.

ASIC Annual Report 2020-21 208

6.2 Appendices relating to assessments

Assessing misconduct and other reports

Misconduct reports from the public

We record and assess every report of alleged misconduct we receive and use this information to identify and respond to misconduct.

In 2020-21, we dealt with 10,711 reports of alleged misconduct. Table 6.2.1 shows the outcome of the misconduct reports received by ASIC during the financial year.

Table 6.2.1 Misconduct issues, by category, 2020-21

Category 2020-21

Corporations and corporate governance

Governance issues 10%

Failure to provide books and records or a report on company affairs and property to a registered liquidator 7%

Fraud allegations 3%

Registered liquidator misconduct 8%

Insolvency matters 2%

Other (e.g. shareholder issues, reporting issues) 9%

Subtotal 39%

Financial services and retail investors

Credit issues 10%

Operating an unregistered managed investment scheme or providing financial services without an AFS licence 17%

General licence obligations 5%

Other (e.g. insurance, advice, misleading or deceptive conduct, unconscionable conduct) 8%

Subtotal 40%

Appendices 209

Category 2020-21

Market integrity - including insider trading, continuous disclosure, misleading statements, and market manipulation 12%

Registry integrity - including incorrect address recorded on ASIC’s register, lodging false documents with ASIC, and issues with business names 3%

Subtotal 15%

Issues out of ASIC’s jurisdiction 6%

Total 100%

Table 6.2.2 Misconduct issues, by outcome, 2020-21

Misconduct reports

2020-21 Number

2019-20 Number

Total misconduct reports finalised 1 10,711 12,355

Outcome Percentage Percentage

Referred for action by ASIC2 15% 19%

Resolved3 9% 10%

Compliance achieved <0.5% 1%

Warning letter issued 6% 3%

Referred for internal or external dispute resolution 3% 6%

Assistance provided <0.5% <0.5%

More appropriate agency <0.5% <0.5%

Analysed and assessed for no further action4 65% 61%

Insufficient evidence 48% 41%

No action 17% 20%

No jurisdiction5 9% 8%

No breach or offences 2% 2%

Total 100% 100%

ASIC Annual Report 2020-21 210

1 Where ASIC receives reports about the same entity and issue, we merge these matters.

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 external dispute resolution 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 to insufficient evidence or other reason, such as where another agency or law enforcement body or third party (e.g. a liquidator) is better placed to appropriately deal with the underlying issues or is already taking action.

5 Where relevant, ASIC directs reporters to the appropriate agency or solution.

Breach reports from licensees and auditors

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. 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 6.2.3 provides a breakdown of the breach reports we assessed in 2020-21 by type and outcome.

Table 6.2.3 Breach reports by type and outcome, 2020-21

Breach 2020-21

Type Number

Breach reports provided by auditors 1,174

Breach reports about AFS licensees and managed investment schemes 2,435

Total breach reports finalised 3,609

Outcome Percentage

Referred for action by ASIC 11%

Referred for compliance, investigation or surveillance 11%

Assist existing investigation or surveillance NA1

Analysed and assessed for no further action 89%

No further action 77%

Awaiting update 12%

Total 100%

1 Assist existing investigation or surveillance is no longer tracked separately. It is now included in the ‘Referred for action by ASIC’ figure.

Appendices 211

For more information on 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 registered liquidators

The Corporations Act requires registered liquidators to report to ASIC if it appears that company officers are guilty of an offence. Liquidators (except in the case of a simplified liquidation) must also report if the return to unsecured creditors may be less than 50 cents in the dollar.

We received 4,566 initial reports from registered liquidators, 3,810 of which reported possible offences by company

officers. The remainder were lodged because the return to unsecured creditors may be less than 50 cents in the dollar. Of the 3,810 reports of misconduct, we requested supplementary reports from the registered liquidators in 709 cases.

These supplementary reports typically set out the results of the registered liquidator’s inquiries and the evidence to support the alleged offences. We referred 18% of supplementary reports assessed in 2020-21 for compliance, investigation or surveillance action, compared to 23% in 2019-20.

Table 6.2.4 provides details of the statutory reports we assessed in 2020-21 by type and outcome.

Table 6.2.4 Statutory reports from registered liquidators, 2020-21

Type Number

Initial reports from registered liquidators1 4,566

Reports alleging misconduct 3,810

Reports not alleging misconduct 756

Supplementary reports finalised 517

Total reports finalised (initial + supplementary) 5,083

Outcome Percentage

Supplementary report analysed and assessed, no further information required2 82%

Supplementary reports referred 18%

Total 100%

1 We requested a further report (supplementary report) from the registered liquidator in 19% of cases.

2 There was insufficient evidence to warrant commencing a formal investigation in 82% of the cases where a supplementary report was requested and subsequently it was determined that no further information was required. We retain these reports for intelligence purposes for possible future use.

ASIC Annual Report 2020-21 212

Whistleblowing

ASIC’s Office of the Whistleblower ensures that we record and assess the disclosures we receive from whistleblowers, and that we communicate with whistleblowers as we undertake our inquiries. We also engage with stakeholders about implementing Australia’s corporate sector whistleblower protection regime.

This year, we dealt with 817 disclosures by whistleblowers, an increase compared to the previous year. Around 73% of these disclosures related to corporations and corporate governance, including internal company disputes. We also dealt with matters related to credit and financial services and the conduct of licensees (20%), markets (5%) and other issues (2%).

ASIC is unable to comment on our assessment of, or investigation into, whistleblower disclosures, considering the strong confidentiality protections for whistleblowers. Following our preliminary inquiries, we assessed approximately 91% of disclosures as requiring no further action by ASIC due to insufficient evidence, no actionable breach being disclosed, or the breach being in the jurisdiction or remit of other regulators. In a number of 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.

Appendices 213

6.3 Appendices relating to statements required by law

Portfolio Budget Statement outcomes

Table 6.3.1 Agency resource statement, 2020-21

Actual available

appropriation for 2020-21 $’000

Cash

payments made1 2020-21 $’000

Balance remaining 2020-21 $’000

Ordinary annual services2

Departmental

Departmental appropriation3 637,949 536,440 101,509

Administered expenses

Outcome 1 - Bill 1

Administration fund 22,985 7,674 15,311

Total ordinary annual services A 660,934 544,114 116,820

Other services

Departmental non-operating

Equity injections4 13,396 9,035 4,361

Total other services B 13,396 9,035 4,361

Total available appropriations (A+B) 674,330 553,148 121,181

Special appropriations limited by criteria/amount

Banking Act 1959 N/A 52,551 N/A

Life Insurance Act 1995 N/A 4,960 N/A

Total special appropriations C N/A 57,511 N/A

Total appropriations excluding special accounts (A+B+C) 674,330 610,659 N/A

ASIC Annual Report 2020-21 214

Actual available

appropriation for 2020-21 $’000

Cash

payments made1 2020-21 $’000

Balance remaining 2020-21 $’000

Special Account5

Opening balance 39,599 N/A N/A

Appropriation receipts 59,221 N/A N/A

Costs recovered 5,964 N/A N/A

Payments made N/A 59,610 N/A

Total special account D 104,784 59,610 N/A

Total resourcing (A+B+C+D) 779,114 670,269 N/A

Less appropriations drawn from annual appropriations above and credited to special accounts (59,221) N/A N/A

Total net resourcing for ASIC 719,893 670,269 N/A

1 Does not include GST.

2 Appropriation Bill (No. 1) 2020-21, Appropriation Bill (No. 3) 2020-21, prior year departmental appropriation and section 74 relevant agency receipts.

3 Includes $20.856 million for the Departmental Capital Budget. For accounting purposes, this amount has been designated as ‘contributions by owners’.

4 Appropriation Bill (No. 2) and (No. 4) 2020-21

5 Does not include Special Public Money.

Appendices 215

Table 6.3.2 Expenses by outcome

Budget1 2020-21 (1) $’000

Actual expenses 2020-21 (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 12,399 7,727 4,672

B Departmental expenses funded by departmental appropriations and own-source revenue 430,583 421,602 8,981

Total for Outcome 1 (A+B) 442,982 429,329 13,653

Average FTE2 1,993 2,008 (15)

1 Based on the 2020-21 forecast as set out in ASIC’s 2020-21 Portfolio Budget Statements.

2 2020-21 Portfolio Budget Statements quoted the average staffing level, which is different from FTE. The average staffing level includes employees working on capital projects, while the FTE excludes employees working on capital projects

Reports required under statute and other reporting requirements

ASIC Act

As required by section 136 (1) (a) of the ASIC Act, in 2020-21, ASIC reports that we provided relief under Part 29 of the SIS Act from the requirement to hold a meeting of members for the 2019-20 year of income for one superannuation fund whose members were transferring to another fund as part of a successor fund transfer on conditions that included a requirement that the meeting of the recipient fund

allow for questions to be asked about the former fund and the successor fund transfer. We did not exercise our powers under Part 15 of the Retirement Savings Account Act 1997.

As required by section 136(1)(c), ASIC reports that during 2020-21 we did not conduct joint inspections with the US Public Company Accounting Oversight Board under the terms of an agreement between the two organisations.

We did not conduct any joint inspections with the Canadian Public Accountability Board or the Luxembourg Commission de

ASIC Annual Report 2020-21 216

Surveillance du Secteur Financier or share any information with them under relevant provisions of the ASIC Act during 2020-21.

As required by section 136(1)(cb), ASIC reports that there were no instances during the period where ASIC failed to consult before making a product intervention order, as required by section 1023F of the Corporations Act or section 301F of the National Credit Act.

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 Risk Committee.

We have appropriate fraud prevention, detection, investigation and reporting mechanisms in place, considering the nature of ASIC’s activities.

ASIC conducts fraud risk assessments as part of our enterprise risk management protocols for each business unit. Results are contained in the operations risk registers.

We have taken all reasonable measures to deal appropriately with fraud.

Auditor-General reports

This financial year, there was one report by the Auditor-General on ASIC’s operations.

On 23 October 2020, the Auditor-General released a report on the ASIC 2019-20 financial statements audit. During the audit, the Australian National Audit Office (ANAO) identified payments made on behalf of the then-ASIC Chair and a then-Deputy Chair that it considered

may exceed the limits set in the remuneration determination made by the Remuneration Tribunal.

ASIC acknowledged the ANAO’s audit findings and agreed to its recommendations.

ASIC made further changes following the release of Dr Vivienne Thom AM’s review of ASIC governance. Details on these changes can be found in Chapter 1, pages 4 and 8. In August 2021 ASIC approved a new remuneration, expense and relocation policy for Statutory Appointees.

Commonwealth Ombudsman reports

This financial year, there was one report by the Commonwealth Ombudsman on ASIC’s operations.

In February 2021, the Commonwealth Ombudsman released its annual report, Monitoring agency access to stored communications and telecommunications data under Chapters 3 and 4 of the Telecommunications (Interception and Access) Act 1979, for the period 1 July 2018 to 30 June 2019.

The report noted that ASIC had disclosed 28 instances where officers who were no longer authorised to do so had made telecommunications data authorisations. The report further noted that ASIC took appropriate remedial action to quarantine all telecommunications data received as a result of these unauthorised disclosures.

Appendices 217

Other reports

This financial year ASIC reported one alleged instance of fraud valued at approximately $31,182.28 to the Finance Minister under section 19 of the PGPA Act. The matter was referred to the Australian Federal Police.

This financial year, there were no:

› reports by parliamentary committees on ASIC operations

› capability reviews of ASIC.

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 such information as is reasonably necessary 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 Freedom of Information Team GPO Box 9827 Brisbane QLD 4001

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:

› licence and professional registration applications

› applications from businesses, correspondence, internal working papers, policy proposals and submissions

› administrative, civil and criminal enforcement matters, including documents obtained under ASIC’s compulsory powers.

› And, for other matters, categories of documents include:

› law reform, including submissions and proposal papers

› correspondence with members of the public, Government entities, parliamentary committees, business entities and other bodies

› administration, including accommodation, accounts, expenditure, invoices, audit, human resources, recruitment and employee management, delegation and authorisation

› reference materials, including those contained in the library, handbooks, guidelines, manuals, regulatory documents, media releases, information releases, pamphlets and annual reports

› 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 2020-21 218

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.

1 These notices may include directions to provide reasonable assistance or produce documents.

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/.

ASIC’s use of compulsory information-gathering powers

Since 2010-11, ASIC has reported the use of significant compulsory information-gathering powers under statute.

This appendix discloses data by number of instances in 2020-21, with comparative data for 2019-20.

Table 6.3.3 Use of significant compulsory information-gathering powers

Number of notices 2020-21

Number of notices 2019-20

Appear for examination

ASIC Act, s19 1 Requirement to appear for examination 975 857

ASIC Act, s58 Power to summons a witness and take evidence 0 0

National Credit Act, s2531 Requirement to provide reasonable assistance 74 153

Give reasonable assistance

Corporations Act, s1317R Power to require assistance in prosecutions 3 22

s49(3) ASIC Act, s49(3) Power to require reasonable assistance in prosecutions 39 13

Appendices 219

Number of notices 2020-21

Number of notices 2019-20

s51 National Credit Act, s51 Requirement to provide reasonable assistance 0 0

s601FF 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

s912E Corporations Act, s912E Power to require assistance and disclosure of books and information

from an AFS licensee 170 274

Produce documents

National Credit Act, s266 Requirement to produce books (credit activities) 75 100

National Credit Act, s267 Requirement to produce books

135 247

ASIC Act, s30 Notice to produce books about affairs of body corporate or registered scheme 862 1,040

ASIC Act, s31 Notice to produce books about financial products 10 29

ASIC Act, s32A Notice to produce books about financial services 3 0

ASIC Act, s33 Notice to produce books in person’s possession 1,969 1,589

Corporations Act, s1213P Power to require a notified foreign passport fund to lodge a copy of the

register of members. 0 0

Provide access

ASIC Act, s29 Power to inspect books 0 0

Corporations Act, s821D Power to require access to a CS facility 0 0

ASIC Annual Report 2020-21 220

Number of notices 2020-21

Number of notices 2019-20

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 0 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) 46 40

Corporations Act, s912C Power to require information from an AFS licensee 667 962

National Credit Act, Item 17 Sch 2 Power to require information (obtain statement or audit report) 0 0

Corporations Act, s672A Power to require disclosure of relevant interests 0 4

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 41 22

Provide information and produce books

ASIC Act, s30A Notice to auditors requiring information or books 58 70

ASIC Act, s30B Notice to registered liquidators requiring information or books 9 5

Search warrants

Crimes Act 1914, s3E Warrants to search premises/ conveyance or person 0 10

ASIC Act, s36 Warrant to search premises 30 0

Appendices 221

Table 6.3.4 Use of other powers

Use of other powers

Number of notices 2020-21

Number of notices 2019-20

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 62 50

Grants programs

The Assetless Administration Fund (AA Fund) is a grant scheme established by the Government and administered by ASIC to address illegal phoenix activity or other serious misconduct. The scheme may fund the following types of activities:

› further investigations and reports by liquidators into the failure of companies with few or no assets, where it appears that a director may be banned, or other enforcement action may result from the investigations and reports

› liquidator recovery actions to undertake legal action to recover assets when misconduct has occurred which resulted in the dissipation of company assets

› the appointment of reviewing liquidators to companies under external administration where ASIC suspects misconduct of either the director, the adviser or the registered liquidator

› the appointment of liquidators to abandoned companies under Part 5.4C of the Corporations Act.

On 1 July 2020, ASIC was allocated $7.118 million, which, together with an amount of $6.964 million rolled over from the previous financial year, resulted in total available funds of $14.082 million. ASIC paid and committed the amount of $ 9.6 million to liquidators in 2020-21. Applications in progress and grants approved have substantially committed the balance of the funding allocation.

The 2010-21 year saw an approximate 45% decrease in liquidations. Despite this, ASIC received 781 applications (an overall 2% decrease on the previous financial year) for funding comprising:

› 612 director banning reports (a 3.5% decrease)

› 107 matters other than section 206F director banning reports (a 28.5% decrease)

ASIC Annual Report 2020-21 222

› 62 funding liquidator actions to recover assets (a fivefold increase).

ASIC approved grant funding for 197 director banning reports, 60 matters other than director banning reports and 2 asset recovery actions. An additional 15 variations for increased funding were approved.

ASIC also funded liquidators appointed by ASIC to 19 windings up of abandoned companies.

The AA Fund assisted in:

› 41 director bannings, representing 93% of the total of 44 directors banned

› 2 criminal convictions/prosecutions

There have also been in-principle approvals across several matters for liquidators to undertake public examinations of between an estimated 37 and 45 parties.

Information on grants by ASIC under the AA Fund can be found at https://asic.gov. au/for-finance-professionals/registered-liquidators/your-ongoing-obligations-as-a-registered-liquidator/assetless-administration-fund/.

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, into the Official Public Account in accordance with our statutory duties. The proceeds are treated like any other unclaimed money for which ASIC is responsible.

In 2020-21, the number of new cases received increased to 1,737 and the number of cases finalised increased to 1,683.

Table 6.3.5 shows vested properties of deregistered companies by number of cases.

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, the Commonwealth.

We generally only deal with vested property once an application is made by a third party for us to exercise powers under section 601AE or section 601AF of the Corporations Act. We do not consider it practical to value any identified vested property and, consequently, such property is not recorded or disclosed in these financial statements.

Appendices 223

Table 6.3.5 Vested properties of deregistered companies (by number of cases)

Claims by type 2020-21 2019-20

Total new cases 1,737 1,608

Total finalised cases 1,683 1,610

Property disposals

Transferred 46 68

Sold 13 16

No longer vested1 769 767

Other2 43 60

Total property disposals 871 911

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.

Ecologically sustainable development

ASIC continues to focus on our environmental performance in accordance with Government policy. In 2020-21, we continued to mitigate our impact on the environment through initiatives consistent with the Environmental Protection and Biodiversity Conservation Act 1999 principles of ecologically sustainable development (ESD). The progress and results of these initiatives are reported and reviewed by our Executive on a twice-yearly basis.

In our core business in 2020-21, we ensured that direct contributions to ESD principles were achieved by way of activities such as increasing options for

online lodgement, online self-service and digital communication channels which included reduction of hard copy mail.

Energy efficiency

Our total electricity consumption has reduced by 57% since 2010-11.

A major driver of consumption decrease has been a reduction in our leased floor space with a 31% decrease since 2014-15, while reducing work points by only 4%. This space efficiency is complemented by ongoing energy minimisation initiatives including programmable motion sensor-controlled lighting, LED lighting and default power saving modes for equipment. These approaches ensure the reduction of associated environmental impacts and we continue to review and report on our energy consumption

ASIC Annual Report 2020-21 224

results against the Energy Efficiency in Government Operations (EEGO) Policy targets.

Our consumption of energy during the 2020-21 reporting period was influenced by significant numbers of staff working

from home during this time and the closure of various offices around the country during state lockdowns to control the COVID-19 pandemic.

Table 6.3.6 Consumption of office energy

Indicator 2020-21 2019-20

Light and power - ASIC tenancies (kWh) 2,124,313 2,947,775

MJ per person 2,864 4,011

Light and power - ASIC computer centres (kWh) 620,355 758,544

MJ per m2 5,120 6,064

Greenhouse gas emissions (tonnes CO2-e) - attributed to all light and power 2,138 3,318

Resource efficiency and waste

We have improved our sustainable consumption to minimise the environmental impacts over whole-of-life of products. Strategies include reducing the environmental impacts of shipping by buying Australian made copy paper and consumables supplied from state-based warehouses, reducing the waste volume going to landfill by extending waste streams to include organics and coffee cups and reducing the potential release of harmful substances into the environment by introducing a waste stream for batteries and our continued zero IT waste to landfill policy.

The fit out of our offices in Melbourne, Brisbane and Sydney has included landfill reduction by the extensive re-use of furniture in our offices, excess furniture sent for external re-use or recycling, and the extensive use of environmentally friendly materials such as carbon neutral flooring and 100% recyclable wall panels.

Appendices 225

Table 6.3.7 Resource efficiency and waste

Indicator 2020-21 2019-20

Office paper purchased by FTE (A4 reams/FTE) 1.1 3.4

Percentage of office paper purchased with recycled content 100% 100%

Toner cartridges recycled (kgs) 140.92 416

IT equipment recycled or re-used (tonnes) 13.88 9.3

Travel

This year there has been an ongoing requirement for staff to work from home given COVID-19 pandemic restrictions with limited business essential travel. This has seen a 95% decrease in flights and associated carbon emissions. Alternative communication tools, such as telephone and video conferencing, have been extensively used, with over 220,224 video connections between ASIC employees and externals.

Table 6.3.8 Type and amount of travel undertaken by ASIC employees

Indicator 2020-21 2019-20

Ground travel1

Total number of fleet vehicles 1 2

Total distance travelled by fleet vehicles (kms) 555 20,672

Average fuel consumption of fleet vehicles (litres/100 kms) 8.83 8.53

Total direct greenhouse emissions of fleet (tonnes CO 2-e) .229 4.19

Total distance travelled using GoGet carshare (kms) 12,524 25,407

Air travel

Total distance of air flights (kms) 575,445 10,524,116

Total greenhouse emissions of flights (tonnes CO 2-e) 153 1,012

Alternative meeting communications

Total number of video conferencing calls 220,224 41,526

1 The fleet data is for the period 1 April to 31 March each year.

ASIC Annual Report 2020-21 226

Information and engagement

This year we continued to provide options for team members’ participation in our sustainability initiatives. We improved and refreshed our intranet information for team members on sustainability initiatives and performance reporting, complemented by ongoing participation in environmental activities such as Earth Hour.

Consultancies and expenditure on advertising

During 2020-21 ASIC conducted the advertising campaigns set out in Table 6.3.9.

Further information on ASIC’s advertising campaigns is available on our website at www.asic.gov.au. 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 6.3.9 Expenditure on advertising agency services, 2020-21

Agency Expenditure ($) Purpose

Mediabrands Australia Pty Ltd 192,500.00 Ads campaign

Mediabrands Australia Pty Ltd 137,500.00 Google Ads campaign

Mediabrands Australia Pty Ltd 14,681.11 Graduate advertising 2021-22 via GradConnection

Mediabrands Australia Pty Ltd 55,959.55 Seek ad packs FY 20-21

Mediabrands Australia Pty Ltd 16,498.90 2021 GradAustralia Subscription

Mediabrands Australia Pty Ltd 29,645.62 LinkedIn renewal FY 20-21

Mediabrands Australia Pty Ltd 16,498.90 GradAustralia yearly advertising campaign 2021-22

The Nielsen Company (Australia) Pty Ltd 187,930.60

Advertising Monitoring Services 2020-21

Total 651,214.68

Appendices 227

Procurement

ASIC’s use of Commonwealth resources and expenditure of public money is primarily governed by the 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 financial delegates.

The delegates are supported by a central procurement team of qualified procurement advisers who:

› develop and maintain our procurement processes, guidance and systems to promote compliance with the PGPA Act, the PGPA Rule and the CPRs for all levels of procurement

› manage in partnership with the business complex and high risk procurement activities, including procurements that are subject to the mandatory procurement procedures of the CPRs

› advise on all procurement activities.

Our procurement framework aims to facilitate compliance with the core principles and policies of the CPRs to achieve ‘value for money’ by ‘encouraging competition’, ‘efficient, effective, ethical and economical use of resources’, ‘accountability and transparency’, and ‘appropriate engagement with risk’ through a process that is ‘commensurate with the scale and scope of the business requirement’.

We undertake regular audits of procurement and any instances of noncompliance are reported through

the compliance report and addressed, as required, through process improvement initiatives.

All major contracts entered into in 2020-21 contained provisions, as required, allowing the Auditor General access to information held by contractors relating to contract performance.

Using AusTender

This annual report contains information about actual expenditure on contracts for consultancies. Information on the value of contracts and consultancies is available through the AusTender website, www.tenders.gov.au.

During 2020-21, ASIC awarded 795 procurement activities (each valued at $10,000 or more reported on AusTender) for a total value of $144.231 million. Of these procurements, 246 were valued in excess of $80,000 for a total value of $123.676 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 2021 and was updated as required during the year.

No contracts were exempt from the contract reporting requirements.

ASIC Annual Report 2020-21 228

Table 6.3.10 Expenditure on non-consultancy contracts

Business data 2020-21

Number of new non-consultancy contracts 757

Expenditure on new non-consultancy contracts ($ millions) 60.349

Number of ongoing non-consultancy contracts 992

Expenditure on ongoing non-consultancy contracts ($ millions) 87.573

Note: The above figures are GST inclusive. Annual reports contain information about actual expenditure on reportable nonconsultancy contracts. Information on the value of reportable nonconsultancy contracts is available on the AusTender website.

Table 6.3.11 Additional information - reportable non-consultancy contracts

Organisations receiving a share of reportable non-consultancy contract expenditure 2020-21 Expenditure ($)

Oracle Corporation (Aust) Pty Ltd 4,282,385.40

Broadspectrum Property Pty Ltd 3,135,958.71

Johnson Winter & Slattery 2,293,856.44

Australia Post 2,284,599.60

DXC Technology Australia Pty Ltd 2,077,542.50

Note: The above figures are GST inclusive and include the names of the organisations that received the five largest shares of ASIC’s total expenditure on such contracts during the 2020-21 financial year, and the total amounts they received.

Appendices 229

Consultancy contracts

During 2020-21, ASIC entered into 39 new consultancy contracts, involving total expenditure of around $5.826 million. In addition, 35 ongoing consultancy contracts were active during the year, involving total expenditure of $8.280 million.

Table 6.3.12 Consultancy trend data

Business data 2020-21 2019-20

Number of new consultancies 39 39

Expenditure on new consultancies ($ millions) 4.539 6.733

Number of ongoing consultancies 35 35

Expenditure on ongoing consultancies ($ millions) 5.073 8.638

Note: The above figures are GST inclusive and include all consultancies valued over $10,000, as indicated on AusTender. The figures differ from the consultancy expenditures shown in the financial statements, which are the 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.

Table 6.3.13 Additional information - Reportable consultancy contracts

Organisations receiving a share of reportable consultancy contract expenditure 2020-21 Expenditure ($)

State of Matter Consulting Pty Ltd 2,868,137.83

LAB3 Pty Ltd 793,727.00

Unify Solutions Pty Ltd 514,910.00

Wardy IT Solutions Pty Ltd 430,451.45

Deloitte Access Economics Pty Ltd 422,181.07

Note: The above figures are GST inclusive and include the names of the organisations that received the five largest shares of ASIC’s total expenditure on such contracts during the 2020-21 financial year, and the total amounts they received.

ASIC Annual Report 2020-21 230

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 39 consultants that ASIC engaged during 2020-21:

› 36 were for specialised or professional skills

› three were for independent research or assessment.

The method of procurement used was open tender for 30 engagements (including engagements from panels) and limited tender for 9 engagements.

The consultants were engaged for the following main service categories:

› information technology consultation services

› research programs

› risk management consultation services

› business intelligence consulting services

› management advisory services

› market research

› strategic planning consultation services.

Procurement initiatives to support small business

ASIC supports small business participation in the Australian Government procurement market. Small to medium-sized enterprise (SME) 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:

› use of the Commonwealth Contracting Suite for low-risk procurements valued under $200,000, where applicable

› encouraging use of the SME exemption under the Commonwealth Procurement Rules

› using the Digital Transformation Agency’s digital marketplace, which is accessible to SMEs and clearly identifies their SME status.

Appendices 231

Australian Financial Complaints Authority

ASIC has oversight of AFCA. AFCA is a single EDR scheme for financial services that aims to resolve complaints that a financial firm could not resolve by internal dispute resolution (IDR).

Financial firms must have a dispute resolution system that consists of IDR procedures that meet the standards or requirements made or approved by ASIC, as well as membership of AFCA.

AFCA deals with financial services, credit and superannuation complaints made by consumers, small businesses and primary producers that a firm has not resolved at IDR.

In 2020-21, AFCA received 70,510 complaints, a 12.5% decrease on 2019-20, securing $240.64 million in compensation to consumers and small businesses. AFCA continued to respond to complaints arising from the COVID-19 pandemic in 2020-21, although these complaints also declined relative to last financial year.

As an authorised 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.

In February 2021, Treasury published terms of reference for the inaugural Independent Review of AFCA. Required by legislation, this is an important and timely opportunity to assess AFCA’s performance against its statutory mandate and to ensure that it continues to operate effectively.

In 2020-21, ASIC issued regulatory requirements and approved material changes to the AFCA Rules to close a gap in AFCA’s jurisdiction identified in a judgment in the Supreme Court (NSW) in the matter of DH Flinders Pty Ltd v AFCA.

Under the legislative requirements, AFCA reported 67 systemic issues to ASIC in 2020-21. AFCA also reported possible serious contraventions and shared information with ASIC under applicable statutory requirements and provisions of the AFCA Rules.

Compliance with AFCA determinations is a critical part of a licensee’s general obligations and critical to confidence in the financial services dispute resolution framework. In April 2021, ASIC commenced proceedings in the Federal Court against a credit assistance provider and its director for failing to comply with AFCA determinations. ASIC commenced this action under reforms resulting from the Royal Commission which mean that a failure to cooperate with AFCA is a civil penalty offence.

Other reforms affecting AFCA include:

› ASIC’s updated requirements about how financial firms deal with consumer and small business complaints under their IDR procedures (Regulatory Guide 271) which commence 5 October 2021

› ASIC’s further consultation on the IDR data collection and reporting framework

› ASIC’s updates to its remediation policy settings, which, together with the AFCA Independent Review presents an opportunity to consider the respective roles of financial firms, AFCA and ASIC in consumer remediations.

ASIC Annual Report 2020-21 232

6.4 Five-year summary of key stakeholder data

Table 6.4.1 Five-year summary of key business and stakeholder data, 2015-20

Business data 2020-21 2019-20 2018-19 2017-18 2016-17

Registry services

Companies (total) 2.9m 2.8m 2.7m 2.6m 2.5m

New companies registered 279,853 222,048 223,661 244,510 249,394

Business names (total) 2.4m 2.3m 2.3m 2.2m 2.2m

New business names registered 460,409 387,827 375,052 366,181 348,266

% company data lodged on time 94% 93% 95% 95% 95%

Total searches of ASIC databases 219.2m 243.7m 142.6m 122.5m 90.6m

Regulated entities

AFS licensees 6,179 6,127 6,159 6,170 6,058

Credit licensees 4,777 4,930 5,188 5,503 5,576

Authorised market infrastructure providers 67 64 64 65 67

Registered SMSF auditors 5,540 5,699 5,919 6,039 6,339

Registered company auditors 3,553 3,781 3,962 4,226 4,365

Registered liquidators 649 633 651 663 711

Registered managed investment schemes 3,612 3,650 3,712 3,726 3,632

Appendices 233

Business data 2020-21 2019-20 2018-19 2017-18 2016-17

Fundraising and takeovers

Fundraising documents lodged 884 711 794 898 1,017

Fundraising where ASIC required additional disclosure $3.8bn $2.3bn $3.2bn $3.5bn $7.2bn

Control transactions - schemes and bids 85 55 73 60 72

Control transactions - schemes and bids implied target size $40.5bn $23.5bn $34.3bn $32bn $18bn

Enforcement outcomes

Criminal and civil litigation completed1 75 72 108 127 101

% successful criminal and civil litigations2 97% 93% 94% 99% 90%

Individuals imprisoned3 7 7 10 6 13

Recoveries, costs, compensation or fines 4 $10.2m $1.5m $77.7m $437.8m $849.7m

Reports of misconduct

Reports of misconduct finalised 10,711 12,355 10,249 9,567 9,011

Other key statistics

Fees and charges collected for the Commonwealth $1,513m $1,358m $1,273m $1,227m $920m

Staff (average FTEs)5 2008 1,940 1,701 1,656 1,640

1 This excludes summary prosecutions for strict liability offences.

2 This excludes summary prosecutions for strict liability offences.

3 This excludes custodial sentences served by way of an Intensive Correction Order or where the defendant is released on recognisance to be of good behaviour.

4 Compensation or remediation programs monitored by ASIC are not included in this statistic. The amount includes compensation or remediation agreed in court enforceable undertakings accepted by ASIC, fines and costs ordered by the Courts and infringement notices paid. The decrease in

5 Data rounded. This data excludes contractors and secondees from other agencies.

ASIC Annual Report 2020-21 234

7Glossary

Glossary 235

Glossary

Term Definition

AA Fund Assetless Administration Fund

ABR Australian Business Register

ABRS Australian Business Registry Services

ABS Australian Bureau of Statistics

ACCC Australian Competition and Consumer Commission

AFCA Australian Financial Complaints Authority

AFS licence Australian financial services licence

ANAO Australian National Audit Office

ANZ Australia and New Zealand Banking Group Limited

APRA Australian Prudential Regulation Authority

APRC Asia Pacific Regional Committee

APS Australian Public Service

ASIC Act Australian Securities and Investments Commission Act 2001

ASX ASX Limited or the exchange market operated by ASX

Limited

ATO Australian Taxation Office

BRII Business Research and Innovation Initiative

CAP Consumer Advisory Panel

CBA Commonwealth Bank of Australia

CFDs Contracts for difference

CFR Council of Financial Regulators

CHESS ASX Clearing House Electronic Subregister System

Corporate Plan Corporate Plan 2020-24

ASIC Annual Report 2020-21 236

Term Definition

Corporations Act Corporations Act 2001

CP Consultation Paper

CPRs Commonwealth Procurement Rules

CRF Corporate Registers Forum

CS facilities Clearing and settlement facilities

cyber resilience An organisation’s ability to prepare for, respond to and recover from a cyber attack

derivative A financial instrument where the value is derived from an

underlying asset, such as a share, commodity or index

DFAP Digital Finance Advisory Panel

DISER Department of Industry, Science, Energy and Resources

EDR External dispute resolution

EEGO Energy Efficiency in Government Operations Policy

ERS Enhanced regulatory sandbox

ESA Enforcement Special Account

ESD Ecologically sustainable development

FASEA Financial Advisers Standards and Ethics Authority

FFNS Fees-for-no-service

FICC Fixed income, currencies and commodities

financial capability The combination of an individual’s attitude, knowledge, skills, confidence and ability to make sound financial decisions

fintech Financial technology

FOI Act Freedom of Information Act 1982

FSCP Financial Services and Credit Panel

FTE Full-time equivalent

GFIN Global Financial Innovation Network

Glossary 237

Term Definition

GST Goods and services tax

IDPS Investor-directed portfolio service

IDR Internal dispute resolution

INFO Information Sheet

Innovation Hub ASIC’s online hub providing tailored content for fintech businesses that are developing innovative financial products or services

Interim Corporate Plan ASIC Interim Corporate Plan 2020-21: Strategic priorities responding to the impact of the COVID-19 pandemic

IOP Indigenous Outreach Program

IOSCO International Organization of Securities Commissions

IPO Initial public offering

IT Information technology

KMP Key management personnel

kWh Kilowatt-hour, a measure of energy

LED Light-emitting diode. A semiconductor device that

converts electricity into light.

LGBTIQ+ Lesbian, gay, bisexual, transgender, intersex and queer

LIBOR London Interbank Offered Rate

MAI Markets Assessment and Intelligence

MBR Modernising Business Registers

MDA Managed discretionary account

MDP Markets Disciplinary Panel

MJ Megajoule, a unit of energy measurement

MoG Machinery of government

Moneysmart ASIC’s consumer website

MOU Memorandum of understanding

ASIC Annual Report 2020-21 238

Term Definition

NAB National Australia Bank

NAIDOC National Aborigines and Islanders Day Observance

Committee

National Credit Act National Consumer Credit Protection Act 2009

OAIC Office of the Australian Information Commissioner

OTC Over-the-counter

PACE Positive Action towards Career Engagement

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 established by the Government in 2014, to combat illegal phoenix activity.

PJC Parliamentary Joint Committee

RAP Reconciliation Action Plan

RBA Reserve Bank of Australia

regtech Regulatory technology; technology designed to address

regulatory challenges in the financial services sector

Regulatory Transformation program ASIC’s program to increase efficiency by establishing a common 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

ROA Record of Advice

Glossary 239

Term Definition

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

SES Senior Executive Service

SFCT Serious Financial Crime Taskforce

SIS Act Superannuation Industry (Supervision) Act 1993

SME Small to medium-sized enterprise

SMSF Self-managed superannuation fund

SRC Act Superannuation (Resolution of Complaints) Act 1993

Thom Review Dr Vivienne Thom AM’s review of ASIC Governance

UMIS Unregistered managed investment scheme

WBC Westpac Banking Corporation

ASIC Annual Report 2020-21 240

8Compliance index8.1 Reporting requirements under the Public Governance, Performance and Accountability Act 2013 2428.2 Additional compliance reporting requirements 253 Compliance index 241

8.1 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 on the date the final text is approved, with a statement that the report has been prepared in accordance with section 46 of the PGPA Act and any enabling legislation that specifies additional requirements in relation to the annual report

Mandatory 1

17AD(h) Aids to access

17AJ(a) Table of contents Mandatory 2-4

17AJ(b) Alphabetical index Mandatory 150

17AJ(c) Glossary of abbreviations and acronyms Mandatory 135-139

17AJ(d) List of requirements Mandatory 141-148

17AJ(e) Details of contact officer Mandatory Inside

back cover

17AJ(f) Entity’s website address Mandatory Inside

back cover

17AJ(g) Electronic address of report Mandatory Inside

back cover

ASIC Annual Report 2020-21 242

PGPA rule reference Part of report/Description Requirement

Location (page(s))

17AD(a) Review by accountable authority

17AD(a) A review by the accountable authority of the entity Mandatory 5-6

17AD(b) Overview of the entity

17AE(1)(a)(i) A description of the role and functions of the entity Mandatory 7-9, 101

17AE(1)(a)(ii) A description of the organisational structure of the entity Mandatory 10-20

17AE(1)(a)(iii) A description of the outcomes and programs administered by the entity Mandatory 21-25, 29-63

17AE(1)(a)(iv) A description of the purposes of the entity as included in the Corporate Plan Mandatory 7-9

17AE(1)(aa)(i) Name of the accountable authority or each member of the accountable authority Mandatory 10

17AE(1)(aa)(ii) Position title of the accountable authority or each member of the accountable authority Mandatory 10

17AE(1)(aa)(iii) Period as the accountable authority or member of the accountable authority within the reporting period

Mandatory 10

17AE(1)(b) An outline of the structure of the portfolio of the entity Portfolio departments

- mandatory

N/A

17AE(2) Where the outcomes and programs 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

If applicable, mandatory N/A

Compliance index 243

PGPA rule reference Part of report/Description Requirement

Location (page(s))

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 27-63

17AD(c)(ii) Report on financial performance

17AF(1)(a) A discussion and analysis of the entity’s financial performance Mandatory 26, 97

17AF(1)(b) A table summarising the total resources and total payments of the entity Mandatory 118-119

17AF(2) If there may be significant changes in the financial results during or after the previous 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 a significant impact on the entity’s future operation or financial results

If applicable, mandatory N/A

Management and accountability

Corporate governance

17AD(d) Information on the management and accountability of the entity for the period in accordance with section 17AG

Mandatory 99-107

17AG(2)(a) Information on compliance with section 10 (fraud systems) of the PGPA Rule Mandatory 120

17AG(2)(b)(i) A certification by the accountable authority that fraud risk assessments and fraud control plans have been prepared

Mandatory 120

ASIC Annual Report 2020-21 244

PGPA rule reference Part of report/Description Requirement

Location (page(s))

17AG(2)(b)(ii) A certification by the accountable authority that appropriate mechanisms for preventing, detecting incidents of, investigating or otherwise dealing with, and recording or reporting, fraud that meet the specific needs of the entity are in place

Mandatory 120

17AG(2)(b)(iii) A certification by the accountable authority that all reasonable measures have been taken to deal appropriately with fraud relating to the entity

Mandatory 120

17AG(2)(c) An outline of structures and processes in place for the entity to implement principles and objectives of corporate governance

Mandatory 10-11, 101-107

17AG(2)(d)-(e) A statement of significant issues reported to the Minister under paragraph 19(1)(e) of the PGPA Act that relate to noncompliance with finance law and action taken to remedy non-compliance

If applicable, mandatory 121

Audit committee

17AG(2A)(a) A direct electronic address of the charter determining the functions of the entity’s audit committee.

Mandatory 102

17AG(2A)(b) The name of each member of the entity’s audit committee. Mandatory 102

17AG(2A)(c) The qualifications, knowledge, skills or experience of each member of the entity’s audit committee.

Mandatory 103

17AG(2A)(d) Information about the attendance of each member of the entity’s audit committee at committee meetings.

Mandatory 102

17AG(2A)(e) The remuneration of each member of the entity’s audit committee. Mandatory 102-103

Compliance index 245

PGPA rule reference Part of report/Description Requirement

Location (page(s))

External scrutiny

17AG(3) Information on the most significant developments in external scrutiny and the entity’s response to the scrutiny

Mandatory 10-11, 21-25, 99-100, 120-121

17AG(3)(a) Information on judicial decisions and decisions of administrative tribunals and by the Australian Information Commissioner that may have a significant effect on the operations of the entity

If applicable, mandatory 100

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 120-121

17AG(3)(c) Information on any capability review on the entity that was released during the period If applicable, mandatory

121

Management of human resources

17AG(4)(a) An assessment of the entity’s effectiveness in managing and developing employees to achieve entity objectives

Mandatory 90-96

17AG(4)(aa) Statistics on the entity’s employees on an ongoing and non-ongoing basis, at the end of that and the previous reporting period, including the following:

(a) statistics on fulltime employees

(b) statistics on parttime employees

(c) statistics on gender

(d) statistics on staff location

Mandatory 107-109

ASIC Annual Report 2020-21 246

PGPA rule reference Part of report/Description Requirement

Location (page(s))

17AG(4)(b) Statistics on the entity’s APS employees on an ongoing and non-ongoing basis, including the following:

› Statistics on staffing classification level

› Statistics on full-time employees

› Statistics on part-time employees

› Statistics on gender

› Statistics on staff location

› Statistics on employees who identify as Indigenous

No longer mandatory N/A

17AG(4)(c) Information on any enterprise agreements, individual flexibility arrangements, Australian workplace agreements, common law contracts and determinations under subsection 24(1) of the Public Service Act 1999

If applicable, mandatory 109-110

17AG(4)(c)(i) Information on the number of SES and non-SES employees covered by agreements, arrangements, contracts or determinations during this period

If applicable, mandatory 109-110

17AG(4)(c)(ii) The salary ranges available for APS employees by classification level No longer mandatory

N/A

17AG(4)(c)(iii) A description of non-salary benefits provided to employees If applicable, mandatory

90, 111

17AG(4)(d)(i) Information on the number of employees at each classification level who received performance pay

No longer mandatory 111

17AG(4)(d)(ii) Information on aggregate amounts of performance pay at each classification level No longer mandatory

111

17AG(4)(d)(iii) Information on the average amount of performance payment, and the range of such payments, at each classification level

No longer mandatory 111

17AG(4)(d)(iv) Information on the aggregate amount of performance payments No longer mandatory

111

Compliance index 247

PGPA rule reference Part of report/Description Requirement

Location (page(s))

Assets management

17AG(5) An assessment of the effectiveness of assets management where asset management is a significant part of the entity’s activities

If applicable, mandatory 97, 125

Purchasing

17AG(6) An assessment of the entity performance against the Commonwealth Procurement Rules

Mandatory 129

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 130

17AG(7)(b) A statement that ‘During [reporting period], [specified number] new consultancy contracts were entered into involving total actual expenditure of $[specified million]. In addition, [specified number] ongoing consultancy contracts were active during the period, involving total actual expenditure of $[specified million].’

Mandatory 130

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 130-131

ASIC Annual Report 2020-21 248

PGPA rule reference Part of report/Description Requirement

Location (page(s))

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 130

17AG(7A)(a) A statement on the number of new reportable nonconsultancy contracts that were entered into during the period, including:

(a) the total actual expenditure during the period on all such contracts (inclusive of GST)

(b) the number of ongoing reportable nonconsultancy contracts that were entered into during a previous reporting period

(c) the total actual expenditure during the period on those ongoing contracts (inclusive of GST)

Mandatory 133

17AG(7A)(b) A statement that ‘Annual reports contain information about actual expenditure on reportable nonconsultancy contracts. Information on the value of reportable nonconsultancy contracts is available on the AusTender website.’

Mandatory 130

17AD(daa) Additional information, in accordance with section 17AGA, about organisations receiving amounts under reportable consultancy contracts or reportable nonconsultancy contracts.

Mandatory 130-131

Compliance index 249

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 131

17AG(10)(b) An outline of the ways in which the procurement practices of the entity support small and medium enterprises

Mandatory 131

ASIC Annual Report 2020-21 250

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 131

Financial statements

17AD(e) Inclusion of the annual financial statements in accordance with subsection 43(4) of the PGPA Act

Mandatory Chapter 5

Executive remuneration

17AD(da) Information about executive remuneration in accordance with Subdivision C of Division 3A of Part 2-3 of the Rule.

Mandatory 11-112

Other mandatory information

17AH(1)(a)(i) If the entity conducted advertising campaigns, a statement that ‘During [reporting period], the [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 128-129

17AH(1)(a)(ii) If the entity did not conduct advertising campaigns, a statement to that effect If applicable, mandatory

N/A

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 125

Compliance index 251

PGPA rule reference Part of report/Description Requirement

Location (page(s))

17AH(1)(c) Outline of mechanisms of disability reporting, including reference to website for further information

Mandatory 95

17AH(1)(d) Website reference to where the entity’s Information Publication Scheme statement pursuant to Part II of the FOI Act can be found

Mandatory 122

17AH(1)(e) Correction of material errors in previous annual report If applicable, mandatory

N/A

17AH(2) Information required by other legislation Mandatory 120-124

Note: N/A means not applicable.

Source: Department of Finance, Resource Management Guide No. 135 Annual reports for non-corporate Commonwealth entities, 2016.

ASIC Annual Report 2020-21 252

8.2 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) 120

ASIC’s monitoring and promotion of market integrity and consumer protection in relation to the Australian financial system and the provision of financial services

Mandatory ASIC Act, s136(1)(b) 64-88

ASIC’s activities in accordance with each agreement or arrangement entered into by ASIC under s11(14) of the ASIC Act

Mandatory ASIC Act, s136(1)(c) 120

Information about the activities that ASIC has undertaken during the period in exercise of its powers, and performance of its functions, under Chapter 5 of, or Schedule 2 to, the Corporations Act and any provisions of that Act that relate to that Chapter or Schedule;

Mandatory ASIC Act, s136(1)(ca) 32, 81-87

Information about any instances during the period where ASIC failed to consult as required by section 1023F of the Corporations Act or section 301F of the National Credit Act;

Mandatory ASIC Act, s136(1)(cb) 120

Compliance index 253

Description Requirement

Source of requirement

Location (page(s))

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) 33, 61

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 financial year ASIC used the power

Mandatory ASIC Act, s136(1)(e), reg 8AAA(1) 122-124

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) 51, 103-105

A report on the activities of each state and Northern Territory Regional Liaison Committee maintained by the Regional Commissioners.

Mandatory Corporations Agreement, s604(4) 51-53

A report on the work of the financial services and consumer credit external dispute resolution schemes, and ASIC’s assessment of the systemic and significant issues the schemes have raised in their reports to ASIC.

Suggested Senate Economics References Committee inquiry into the performance of ASIC, Recommendation 4

132

ASIC Annual Report 2020-21 254

Description Requirement

Source of requirement

Location (page(s))

Commentary on ASIC’s activities related to monitoring compliance with court enforceable undertakings, and on how court enforceable undertakings have led to improved compliance with the law

Suggested Senate Economics References Committee inquiry into the performance of ASIC, Recommendation 27

30-31

Accountable authority must state, in the annual financial statements, whether, in the authority’s opinion, the statements comply with subsection 42(2)

Mandatory PGPA Act, s42(3) 97

Work health and safety

(a) initiatives taken during the year to ensure the health, safety and welfare of workers who carry out work for the entity

Mandatory Work Health and Safety Act 2011, s4(2) Sch 2

91-92

(b) health and safety outcomes (including the impact on injury rates of workers) achieved as a result of initiatives mentioned under paragraph (a) or previous initiatives

Mandatory 91-92

(c) statistics of any notifiable incidents of which the entity becomes aware during the year that arose out of the conduct of businesses or undertakings by the entity

Mandatory 92

(d) any investigations conducted during the year that relate to businesses or undertakings conducted by the entity, including details of all notices given to the entity during the year under Part 10 of this Act

Mandatory N/A

Compliance index 255

Description Requirement

Source of requirement

Location (page(s))

(e) such other matters as are required by guidelines approved on behalf of the Parliament by the Joint Committee of Public Accounts and Audit.

Mandatory N/A

Environmental performance

(a) include a report on how the activities of, and the administration (if any) of legislation by, the reporter during the period accorded with the principles of ecologically sustainable development

Mandatory Environment Protection and Biodiversity Conservation Act 1999, s516A(6)

126-127

(b) identify how the outcomes (if any) specified for the reporter in an Appropriations Act relating to the period contribute to ecologically sustainable development

Mandatory 126-127

(c) document the effect of the reporter’s activities on the environment

Mandatory 126-127

(d) identify any measures the reporter is taking to minimise the impact of activities by the reporter on the environment

Mandatory 126-127

(e) identify the mechanisms (if any) for reviewing and increasing the effectiveness of those measures

Mandatory 126-127

Any other Committee recommendations

N/A

ASIC Annual Report 2020-21 256

9General index

General index 257

ASIC Annual Report 2020-21 258

General index 259

ASIC Annual Report 2020-21 260

General index 261

ASIC Annual Report 2020-21 262

General index 263

ASIC Annual Report 2020-21 264

General index 265

ASIC Annual Report 2020-21 266

General index 267

ASIC Annual Report 2020-21 268

Contact details

For general information about ASIC, specific information for ASIC’s regulated populations 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.

For consumer and investor information, go to www.moneysmart.gov.au.

General inquiries

Go to www.asic.gov.au/question or telephone 1300 300 630

To report misconduct to, or complain about, ASIC

Go to www.asic.gov.au/complain or telephone 1300 300 630

Media inquiries

Go to www.asic.gov.au/media, email media.unit@asic.gov.au or telephone 1300 300 630

Annual report contact officer

Senior Manager, Strategic Policy Telephone: 1300 300 630 Email: sophie.trumble@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

ASIC registry and licensing services

Twitter: @ASIC_Connect Facebook: facebook.com/ASICConnect YouTube: youtube.com/ASICConnect

To contact ASIC by mail

For all correspondence with ASIC Commissioners, stakeholder teams, enforcement, strategy group, corporate affairs, chief legal office and administration:

ASIC, GPO Box 9827 Brisbane, QLD 4001

For registry and licensing matters, including company and annual statements, notification of changes to company or licence details, routine company or licence compliance documents, deregistration and reinstatements:

ASIC, PO Box 4000 Gippsland Mail Centre, VIC 3841