Compliance is a key issue for any financial services licensee, as the recent case of Lanterne Fund Services Pty Ltd (Lanterne) demonstrates. Lanterne, a financial services company that provided advice on corporate finance and capital raising, was fined $1.25 million by the Australian Securities and Investments Commission (ASIC) and required to appoint an independent expert for compliance reporting, for failing to comply with the general obligations of its Australian Financial Services Licence (AFSL).
Lanterne’s breach related to its failure to have adequate risk management, technological and human resources, maintain competence to provide financial services, ensure that its representatives were adequately trained and competent to provide financial services, and provide financial services honestly, efficiently and fairly. These are general obligations a financial services licensee must adhere to under the AFSL, as well as requirements under the Corporations Act 2001 (Cth).
ASIC’s decision to impose a financial penalty on Lanterne reflects its increasing focus on compliance issues and its willingness to use its enforcement powers to ensure that licensees meet their obligations. ASIC has stated that it expects licensees to have robust compliance programs in place that meet the standards required by the law and by ASIC’s regulatory guidance. ASIC has also emphasised the importance of having a competent Responsible Manager (RM) who can effectively oversee the licensee’s operations and ensure that it complies with the law.
Similarly, ASIC’s action against RI Advice Group Pty Limited (RI Advice) highlighted the need for licensees to uphold their obligations, particularly regarding risk management and data security. RI Advice faced a $6 million penalty for failing to prevent cyber-attacks and inadequate response measures.
Both cases highlight the importance of overseeing and training representatives, maintaining adequate resources, and appointing competent RMs.
Failure to do so may result in financial penalties, reputational damage, and loss of trust from clients and stakeholders.
Licensees who are unsure about their compliance program can contact Hunt & Hunt’s Banking & Finance lawyers for more information or advice. Our team of experts can help you assess your compliance program and provide practical guidance on how to improve it. We can also assist you with any ASIC inquiries or investigations that may arise from your compliance issues.
Read the full article by Harriet Whitely on LinkedIn.
