MIU - Issue 145 - February 2023

New technological and operational resilience rules take effect on 10 March

Securities and futures market operators and participants are reminded that new market integrity rules (MIRs) aimed at strengthening their technological and operational resilience will commence on 10 March 2023.

Recent domestic and international incidents reinforce the importance of robust change management, outsourcing, information security and business continuity arrangements for well-functioning markets. The new MIRs aim to raise these standards across the industry and improve the resilience of Australian markets.

Given the lengthy transition period for these rules, market operators and participants should have completed, or be in the final stages of, implementation. Critical business services should be defined and documented, and there should be a clear understanding of end-to-end processes, vulnerabilities, and third-party dependencies. Arrangements should be in place to maintain, change, protect, and recover the critical business services and to provide business continuity. There should also be a process for planning to review these arrangements at least annually.

You should address any questions you may have before the rules take effect. Refer to our guidance in the relevant regulatory guide below, contact your ASIC supervisor, or email us at Market.Participants@asic.gov.au.

Where a notification to ASIC is required under the new MIRs (after they take effect), it should be submitted through the ASIC Regulatory Portal.

We intend to start engaging with market operators and participants on compliance with the new MIRs soon after they take effect. Our initial focus will be on their identification of critical business services (and activities not considered critical business services).

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Melbourne woman jailed for stealing millions from superannuation and share trading accounts

A 24-year-old Melbourne woman has been sentenced for her central role in a major international criminal syndicate, which stole millions of dollars from the superannuation and share trading accounts of innocent victims using fraud and identity theft.

The woman has been sentenced to five years and six months’ imprisonment with a non-parole period of four years.

The amount stolen through the fraudulent scheme is estimated to be more than $3.3 million. Attempts were made to steal an additional $7.5 million from the victims’ super and share accounts. The group also laundered an additional $2.5 million through the purchase, and on-selling, of luxury goods in Hong Kong.

Together with the Australian Federal Police (as part of the ATO-led Serious Financial Crime Taskforce), we began investigating the syndicate in late 2018. The investigation – codenamed Operation Birks – showed the woman worked as part of an international criminal syndicate which used fraudulently-obtained identities to commit large-scale and sophisticated cybercrimes.

Stolen identity information purchased from darknet marketplaces, together with single-use telephone SIM cards and fake email accounts, were used to undertake an ‘identity takeover’ of unsuspecting victims.

These false identities were created to mimic real individuals who unknowingly had their identities compromised and were then used to open bank accounts at various Australian institutions. Investigators found at least 60 bank accounts created using these mimicked identities.

Once the false identities and accounts were established, the syndicate illegally accessed and stole money from the superannuation and share trading accounts of these victims.

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Largest ever penalty for breach of continuous disclosure laws handed down against GetSwift

The Federal Court has handed down the largest ever penalty against a company for breaching continuous disclosure laws, ordering GetSwift Limited (GetSwift) (in liquidation) to pay a penalty of $15 million.

GetSwift’s former director, CEO and executive chairman, Bane Hunter, was ordered to pay a penalty of $2 million and disqualified from managing corporations for 15 years. Former director Joel Macdonald was ordered to pay a penalty of $1 million and disqualified for 12 years. Brett Eagle, also a former director of GetSwift, has been ordered to pay a penalty of $75,000 and was disqualified from managing corporations for two years.

GetSwift, Mr Hunter, Mr Macdonald and Mr Eagle have also been ordered to pay our costs.

We commenced civil proceedings against GetSwift, Mr Hunter and Mr Macdonald in February 2019 and in March 2019 against Mr Eagle.

In November 2021, the Federal Court found that GetSwift made numerous misleading statements in its announcements on ASX and breached its continuous disclosure obligations on 22 occasions between February and December 2017.

Mr Hunter, Mr Macdonald and Mr Eagle were found to have misled the market and were knowingly concerned in GetSwift’s continuous disclosure breaches. As a consequence, they breached their duties as directors.

The penalties handed down against Mr Hunter and Mr Macdonald are two of the highest penalties ordered against directors for corporate misconduct.

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Don Evans sentenced for conspiring to manipulate Quantum shares

Don George Evans was convicted and sentenced to 12 months’ imprisonment on 31 January 2023 for conspiring to manipulate the shares of Quantum Resources Limited (Quantum).

Mr Evans was released immediately upon entering into a recognisance of $5,000, to be of good behaviour for two years. As a result of his conviction, Mr Evans was automatically disqualified from managing corporations for five years.

Mr Evans was sentenced for conspiring with former Quantum (now known as Nova Minerals Limited) director Avrohom Kimelman and corporate consultant Benjamin Heath Cooper, to artificially inflate the price of Quantum shares.

The Supreme Court of Western Australia found that on 16 November 2015, Mr Evans, Mr Cooper, and Mr Kimelman used an online group chat to coordinate a series of trades in Quantum shares, with the purpose of artificially increasing the Quantum share price and encouraging additional investor activity.

Mr Evans and Mr Kimelman were first charged with conspiring to commit market manipulation on 25 September 2020, and Mr Cooper on 12 March 2021. Mr Evans pleaded guilty to conspiring to manipulate the price of Quantum shares on 5 August 2022.

The sentencing decision finalises our actions in relation to the manipulation of Quantum shares in 2015.

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Federal Court makes findings against social media ‘finfluencer’ Tyson Scholz

The Federal Court has found social media ‘finfluencer’ Tyson Scholz contravened the Corporations Act 2001 by carrying on a financial service business without an Australian financial services licence.

In December 2021, we filed proceedings in the Federal Court seeking orders restraining Mr Scholz from promoting or carrying on any financial services business in Australia. We alleged Mr Scholz was carrying on a financial services business, by providing financial product advice in relation to share trading on the ASX, without a licence by:

  • delivering training courses and seminars about trading in ASX-listed securities during which he made recommendations about share purchases
  • promoting those courses and seminars on Twitter and Instagram
  • making share purchase recommendations on private online forums (that he administered) and on Instagram.

In making its decision, the Federal Court noted that the advice given by Mr Scholz was not a one-off but formed part of the continuous and systemic business operations by which Mr Scholz derived profit from.

A hearing on relief is scheduled for 13 April 2023 to determine the remaining issues. We’re seeking numerous orders against Mr Scholz, including that he be prohibited from directly or indirectly carrying on any financial services business in Australia.  

Separately, we’ve published an Information Sheet with advice for social media influencers who discuss financial products and services online.

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Former CEO of Big Un Limited charged with insider trading

The former CEO of Big Un Limited, Mr Richard Evans (also known as Richard Evertz), has appeared in court charged with insider trading.

Mr Evans allegedly communicated inside information about Big Un to a shareholder in January 2017. The information concerned the number of customers who had already been onboarded to purchase Big Un’s promotional ‘TV Show’ package at a cost of $12,000, together with a $20 million funding arrangement with financier First Class Capital, which allowed customers to make this purchase on deferred payment terms. 

Big Un was one of the top performing shares listed on the ASX in 2017. Big Un’s shares were suspended from trading in February 2018 after information was released in relation to the funding arrangement between Big Un and First Class Capital. Big Un was placed in voluntary administration and delisted from the exchange in August 2018. It’s now in liquidation.

The matter has been listed for mention on 11 April 2023. Our investigation of Big Un and its officers and executives is ongoing.

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OTC derivative transaction reporting final rules package

We’ve released a package of rules and supporting materials to remake and update the ASIC Derivative Transaction Rules (Reporting) 2013 (2013 Rules).

The updated rules align with international reporting standards, consolidate transitional provisions and exemptions within the rules and ensure that the reporting requirements are fit for purpose.

We’ve incorporated industry feedback to our consultations by consolidating our proposed two-stage rules update process into a single update commencing on 21 October 2024. In the interim, we’ve repealed and remade the 2013 Rules in the same form to extend the current reporting requirements beyond their 1 October 2023 sunsetting date.

The final rules package includes:

Existing exemption instruments and ASIC determinations continue to apply as references to the 2013 Rules are construed as referring to the 2022 Rules under provisions of the Acts Interpretation Act 1901 and the Legislation Act 2003.

We’ve updated the derivative transaction reporting webpage to reflect the final rules package. We’ve also added a new 2024 Rules from 21 October 2024 webpage, which provides information to support implementation of the 2024 Rules and includes:

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Consulting on mandatory clearing rule amendments to reflect benchmark reforms

We’re seeking feedback on proposed amendments to the OTC derivative clearing rules, designed to reflect ongoing reforms to interest rate benchmarks and ensure that the rules remain fit for purpose.

Consultation Paper 366 Proposed amendments to the ASIC Derivative Transaction Rules (Clearing) 2015: Second consultation (CP 366) includes amendments to remove contracts referencing USD LIBOR – which is due to cease by 30 June 2023 – from the scope of the clearing requirement. Instead, we propose to replace them with overnight index swaps contracts, with the same range of maturities, referencing the Secured Overnight Financing Rate (SOFR).

We also propose to remove AUD-denominated forward rate agreements, which are currently covered by an exemption.

We welcome your feedback on CP 366 by 29 March 2023. After receiving submissions, we’ll consider the feedback, publish a feedback report, and submit the amended rules for Ministerial consent.

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Relief extended for certain client money provisions for NZD-denominated OTC derivatives

We’ve extended relief from certain requirements of the client money provisions for some New Zealand dollar (NZD) denominated over-the-counter (OTC) derivatives.

The relief allows ASX 24 market participants who are not otherwise able to maintain a compliant account with an Australian authorised deposit-taking institution (ADI), to offer NZD-denominated futures and clearing products to their clients.

ASIC Corporations (NZD Denominated Client Money) Instrument 2018/152 (the principal instrument) provides class relief to ASX 24 participants, from holding client money with an Australian ADI for NZD-denominated futures contracts quoted on the ASX 24 market. Under the Principal Instrument, ASX 24 market participants can instead hold this client money with any bank that is incorporated in New Zealand, and which is prudentially regulated by the Reserve Bank of New Zealand.

From 18 January 2023, ASIC Corporations (Amendment) Instrument 2023/2 extends the relief provided in the principal instrument to NZD-denominated OTC derivatives, that are cleared or to be cleared by ASX Clear (Futures) Pty Limited.

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Last updated: 21/02/2023 03:00