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$10 million civil penalty for contraventions arising from wholesale client classification errors
On 27 March 2026, the Federal Court ordered a former Australian financial services licence (AFSL) holder and issuer of derivatives (Company) to pay a $10 million pecuniary penalty for misclassifying more than 85% of its Australian client base as wholesale clients over a nine-month period.
The Company admitted that it had exposed 524 retail client investors to high-risk crypto derivative products without the required retail client protections, due to their misclassification as wholesale clients, resulting in failures to:
- provide a product disclosure statement to retail clients;
- make a target market determination and comply with the design and distribution obligations;
- maintain a compliant internal dispute resolution system;
- ensure financial services were provided efficiently, honestly, and fairly;
- comply with AFSL conditions; and
- adequately train and ensure the competency of employees.
The contraventions arose from the Company's client onboarding process, which did not provide sufficient information for the Company to confirm that the investors were not retail clients.
In addition to this civil penalty, the mis-categorisation of retail clients as wholesale clients has resulted in compensation payments of approximately $13.1 million and the cancellation of the Company's AFSL.
FFSP certainty at last
On 1 April 2026, the Federal Parliament passed laws to introduce new AFSL exemptions for foreign financial service providers (FFSPs) including the "comparable regulator exemption" and the "professional investor exemption".
For more information see our article here.
ASIC remakes relief for foreign AFSL holders from financial reporting requirements
ASIC has announced continuation of relieffor foreign companies who are AFSL holders licensees from the financial reporting requirements for under Pt 7.8 of the Corporations Act 2001 (Cth).
Pursuant to the ASIC Corporations (Foreign Licensees and ADIs) Instrument 2026/121, foreign AFSL holders are exempt from the obligation to lodge audited financial statements under Div 6 of Pt 7.8 of the Corporations Act 2001 (Cth), subject to meeting certain conditions.
The new instrument will replace ASIC Corporations (Foreign Licensees and ADIs) Instrument 2016/186 and will expire on 1 April 2031.
Consultation paper released on proposed derivative transaction reporting rules updates
ASIC has released a consultation paper on proposed updates to the ASIC Derivative Transaction Rules (Reporting) Rules 2024, which set out the requirements for reporting derivative transaction information to derivative trade repositories.
ASIC states that the proposed changes aim to simplify reporting and reduce regulatory complexity, in response to industry feedback and are intended to respond to industry requests for practical improvements, simplify reporting and support continued alignment with international data standards and the reporting rules of other major jurisdictions.
Submissions to the consultation paper are open until 8 May 2026.
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