Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
ASIC warns directors to up business risk disclosure in annual reports
The Australian Securities and Investments Commission has reminded directors of listed companies to improve their disclosure of material business risks in annual reports, citing new instances of companies failing to make required disclosures until probed by the corporate regulator.
ASIC issued a similar warning in November after five companies provided disclosure in response to its concerns that they were not properly disclosed in the operating and financial review (OFR) of directors’ reports. Its financial reporting surveillance program and subsequent inquiries into certain 2022 annual reports have now led to additional disclosure by another four companies.
“ASIC reminds company directors to ensure material business risks are adequately disclosed in annual reports, to better inform shareholders and prospective investors,” the regulator said in a February 10 media release.
As set forth in a 2019 ASIC regulatory guide titled “Effective disclosure in an operating and financial review,” a listed company’s directors’ report must contain information shareholders would need to make an informed assessment of the company’s operations, financial position and business strategies, as well as its future prospects. The information must be included in the report’s OFR.
As part of its financial reporting surveillance program, ASIC closely reviews a selection of annual reports to ensure companies are properly disclosing their material business risks.
“ASIC reiterates the importance of a high-quality operating and financial review, including disclosure of material risks that may affect the achievement of a listed entity’s strategies and prospects,” ASIC Commissioner Danielle Press said. “Directors must provide investors with useful and meaningful information about the impact on current and future performance of changing and uncertain market conditions.”
In its November statement, the regulator said BlueBet Holdings Ltd, Little Green Pharma Ltd, Hipages Group Holdings Ltd, Australian Strategic Materials Ltd and Australian Agricultural Company had provided additional disclosures after it inquired about financial reports and presentations that insufficiently included the information.
The new entities that have come forward with improved disclosures are MedAdvisor Ltd, Alcidion Group Ltd, WOTSO Property and Webcentral Ltd. WOTSO also a separate disclosure regarding its reporting practices after ASIC raised concerns that it insufficiently disclosed certain adjustments to its calculations.
“ASIC encourages investors and other interested parties to review the additional materials disclosed by these entities in their OFRs,” the regulator said. “ASIC also suggests preparers of the OFR for other entities review the additional disclosures made by the above entities, as this may assist them to improve their own disclosure.”
New enforcement priorities
Separately, ASIC has flagged an expansion of its enforcement focus areas in the coming year, warning businesses it will be targeting greenwashing, predatory lending and misleading insurance pricing claims.
“Throughout 2023, ASIC will have a strong focus on enforcement activity targeting sustainable finance practices and disclosures of climate risks, financial scams, cyber and operational resilience, and investors harms involving crypto-assets,” the regulator said in a February 15 media release.
“We take our role to protect consumers and investors seriously and won’t hesitate to take action to protect consumers where we identify poor conduct.”
The statements follow the release of ASIC’s most recent enforcement and regulatory report, highlighting key outcomes from the past year including 312 criminal charges laid and $222 million in civil penalties imposed.
It has issued 22 design and distribution obligations (DDO) stop orders to prevent companies from inappropriately targeting consumers for financial products, and in October it commenced its first greenwashing action and issued infringement notices to three entities over misleading sustainability-related statements.
