Received an infringement notice from ASIC? What to do next…

In March 2023, the Australian Securities and Investments Commission (ASIC) reissued guidance on infringement notices. The revised guidance note provides a more in-depth explanation as to the circumstances in which ASIC is likely to issue infringement notices, and aligns with ASIC’s guidance note regarding its approach to enforcement (accessible via the following link: Information Sheet 151).

What is an infringement notice?

An infringement notice is an administrative action that can be taken by ASIC at its discretion in circumstances where it has reasonable grounds to believe that there has been a contravention of an infringement notice provision.

There are a number of different infringement notice regimes detailed in legislation with differing levels of potential penalty. ASIC has statutory power to issue an infringement notice under:

• Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act);
• Corporations Act 2001 (Cth) (Corporations Act);
• National Consumer Credit Protection Regulations 2010 (Cth);
• National Consumer Credit Protection Act 2009 (Cth); and
• Insurance Contracts Act 1984 (Cth).

Each of the above legislative instruments contains different infringement notice provisions. For example, under the ASIC Act, provisions relating to unconscionable conduct, consumer protection, deferred sales for add-on insurance products and substantiation notices are subject to infringement notices. In contrast, the Corporations Act provides that provisions which relate to continuous disclosure are subject to infringement notices. The Federal Register of Legislation (accessible via the following link: Federal Register of Legislation) provides further information on the legal provisions relating to infringement notices.

An infringement notice includes the provision under which the notice was issued, the grounds under which ASIC believes a contravention of an infringement notice has occurred and the amount payable under the notice.

Importantly, ASIC is not required to prove that the alleged conduct has actually occurred before issuing an infringement notice.

When can an infringement notice be issued?

An infringement notice is an alternative to court-based action, and may be issued if:

• the alleged misconduct is minor and does not indicate a broader pattern of misconduct by the entity;
• an infringement notice would be a proportionate enforcement response, having consideration to the nature and size of the entity and the need for general and specific deterrence; or
• ASIC is not required to make a complex assessment of facts to evaluate whether the alleged misconduct contravened the law.

ASIC is required to issue infringement notices within 12 months of the date when the contravention is alleged to have taken place.

Recent cases in which infringement notices have been issued

Recently, ASIC has cracked down on companies it alleges have been engaged in greenwashing actions. Greenwashing is the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.

Vanguard Investments Australia Ltd (Vanguard)

In December 2022, ASIC issued three infringement notices to investment manager, Vanguard. ASIC was concerned that Product Disclosure Statements for the Vanguard International Shares Select Exclusions Index Funds may have been liable to mislead the public by overstating an exclusion claimed to prevent investment in companies involved in significant tobacco sales. Vanguard paid $39,960 in compliance with the infringement notices on 1 December 2022.

Black Mountain Energy Limited (BME)

After becoming concerned about alleged false or misleading sustainability-related statements made by BME to the Australian Securities Exchange (ASX) between 23 December 2021 and 8 September 2022, ASIC issued BME three infringement notices. BME paid $39,960 in compliance with the infringement notices.

ASIC has sometimes issued infringement notices for failure to comply with ASX disclosure obligations.

Midway Limited (Midway)

On 18 January 2023, Australian wood-fibre processor and exporter, Midway, paid a $33,000 infringement notice in response to ASIC’s allegation that it had failed to notify the ASX upon becoming aware of a revenue downturn it experienced on 11 February 2022.

ASIC has also been found to issue infringement notices in cases where alleged misleading or deceptive conduct has occurred.

Jacaranda Finance Pty Ltd (Jacaranda)

Jacaranda was issued two infringement notices by ASIC in February 2023. Jacaranda is a credit provider that, at the relevant times, offered loans up to $15,0000, typically for between 12 to 36 months. ASIC became concerned that a repayment estimate calculator on Jacaranda’s website may have been false or misleading because the annual percentage rate used in the calculator was significantly less than the rate that applied to most consumers who entered a credit contract with Jacaranda, and the calculator was advertising loans at an annual percentage rate that Jacaranda did not offer.

What should I do if I am issued with an infringement notice?

You are not obliged by law to pay the penalty contained in the infringement notice and failure to pay does not create a debt that ASIC can enforce. However, ASIC will generally pursue court-based action if you do not pay an infringement notice, and a court may impose a higher penalty than the penalty specified in the infringement notice.

If you choose to pay the penalty, it will be recorded on the infringement notices register (accessible by the public via the following link: Infringement notices register | ASIC), along with your name and details of the alleged contravention. Payment should be made within 28 days of receiving the infringement notice. Your liability for the alleged contravention will be discharged if the penalty is paid in full and on time, and ASIC will be unable to commence prosecution or civil proceedings for the alleged contravention. Choosing to pay the penalty will not amount to an admission of guilt or liability for the alleged contravention.

Notably, payment of the penalty does not preclude a consumer from taking civil action against you for the alleged contravention, or ASIC from applying to the court on behalf of a plaintiff for a compensation order under the National Credit Act for loss or damages arising from the alleged contravention.

Further information

If you require further information about infringement notices, ASIC’s guidance sheet can be accessed via the following link: Information Sheet 275.