Funds Update - 16 May 2025

In this Funds Update for 16 May 2025.

1. ASIC sues AFSL holder re short selling reports
2. ASIC imposes AFSL conditions for OTC derivative trade reporting failures
3. ASIC proposes to consolidate financial advice legislative instruments
4. Further details on ASIC’s new AFSL portal

 

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ASIC sues AFSL holder re short selling reports 

On 14 May 2025, ASIC brought proceedings against the holder of an Australian financial services licence (AFSL) alleging that it had misreported approximately $298 million to $1.5 billion short sales over the course of 14 years. This is ASIC’s first short sale reporting case since the requirement was introduced in 2009.

ASIC has alleged that the AFSL holder contravened:

• section 798H(1) of the Corporations Act 2001 (Cth) (Corporations Act) through failure to comply with the supervision and resourcing duties in rules 2.1.3, 5.5.2(b) or 7.4.2 of the ASIC Market Integrity Rules (Securities Markets) 2017;
• section 912A(1)(h) of the Corporations Act by failing to have adequate risk management systems at all times; and
• sections 1308(5) of the Corporations Act and section 12DF(1) of the ASIC Act 2001 (Cth) by misrepresenting the volume of short sales in its short sale reports.  

ASIC has attributed these alleged contraventions to inadequate systems, operational controls and technological governance and suggested that the AFSL holder should have imposed:

• regular reviews of their short sale reporting processes, including an assessment of related controls and the quality of the output;
• regular reviews of the quality of the data recorded in their orders and trade reports, as well as any related controls; and
• better management controls, testing and subsequent reviews of changes made to IT systems that facilitate these reports and their generation.

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ASIC imposes AFSL conditions for OTC derivative trade reporting failures 

On 7 May 2025, ASIC announced that it would impose additional conditions on an AFSL after finding that the AFSL holder had not complied with its over-the-counter (OTC) derivative trade reporting obligations.

The additional AFSL conditions require the AFSL holder to:

• prepare a remediation plan to address any OTC derivative trade reporting issues; and
• appoint an independent expert to review the remediation plan and review the operational effectiveness of the steps taken to prevent similar issues occurring in the future.

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ASIC proposes to consolidate financial advice legislative instruments 

On 15 May 2025, ASIC announced a proposal, CS 18 Proposed remake of financial advice-related legislative instruments, to consolidate three financial advice legislative instruments into a single instrument and incorporate some minor and technical changes.

The three instruments under consultation are:

• ASIC Corporations (Advertising by Product Issuers) Instrument 2015/539 which exempts financial product issuers from certain requirements when providing general advice in advertisements;
• ASIC Corporations (General Advice Warning) Instrument 2015/540 which exempts AFSL holders and their authorised representatives from needing to provide general advice warnings for oral general advice if they have given certain verbal warnings to the client; and
• ASIC Corporations (Financial Services Guides) Instrument 2015/541 which exempts AFSL holders and their authorised representatives from providing a financial services guide when general advice is included in an expert’s report.

ASIC invites stakeholders to submit their feedback on this consultation by 12 June 2025.

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Further details on ASIC’s new AFSL portal

ASIC has announced further details in relation to the new AFSL portal which it launched on 5 May 2025.

Currently, the portal can only be used to apply for a new AFSL. However, over the coming months, ASIC will add capabilities to vary, cancel, and maintain an AFSL. To ensure a smooth transition, the existing eLicensing system will remain available until all these functionalities are incorporated into the new portal.

The key changes and benefits include:

• automatically pre-filling information on the portal;
• removing the need to separately upload proof documents;
• only presenting questions relevant to the application in question; and
• enabling a more targeted selection of financial services and products.

Once all the changes have been phased out, ASIC will update its AFS application guidance.

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