Key issues:
- ASIC has again emphasized its stern stance against misleading and deceptive conduct in the crypto-asset industry.
- ASIC Commissioner John Price noted that notwithstanding the varying financial services laws that may apply to crypto tokens or ICOs, laws on misleading and deceptive conduct will always apply to the crypto products, regardless of whether there is a financial product involved.
- The Commissioner also expressed desire to support innovation in regulatory technology (regtech) domestically and internationally.
ASIC Commissioner John Price addressed the Monash Centre for Commercial Law and Regulatory Studies Symposium last week on 12 November 2018 and discussed the regulatory challenges in the fintech era. He noted that, notwithstanding the varying financial services laws that may apply to crypto tokens or ICOs, laws on misleading and deceptive conduct will always apply to the crypto products, regardless of whether there is a financial product involved. Commissioner Price further stated that the Australian corporate and consumer law may still apply even if the ICO is offered from overseas.
The Commissioner also expressed a desire to support innovation in regtech domestically and internationally and further stated that innovation in the regtech sector has great potential to help organisations build a culture of compliance and improve outcomes for consumers. ASIC has conducted its own regtech trials and has started encouraging the use of Natural Language Processing technologies in an attempt to explore potential innovation in market supervision. This will no doubt be supported by the Government funding announced in August to the tune of $6 million for ASIC to further work in the regtech space.
A full copy of the speech can be accessed here.
Misleading & deceptive conduct
Australia’s misleading and deceptive conduct laws are specified in the Australian Consumer Law, found in schedule 2 to the Competition and Consumer Act 2010 (Cth) (ACL). The prohibition is simply stated in section 18 of the ACL - a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
This law will apply regardless of whether there is any intent to mislead or deceive, and regardless of whether any person suffers any loss or damage as a result of the conduct. The most important query which needs to be asked is whether the overall impression created by the conduct is likely to mislead a person into thinking something false of the product or service being advertised.
Where the product or service involved is a financial product, additional advertising restrictions specified in the Corporations Act 2001 (Cth) will also apply. These restrictions indicate that advertising, promotional materials and published statements for financial products must:
- identify the issuer of the product;
- if the product is available via sale offers, identify the seller of the product;
- refer to a product disclosure statement (PDS) and identify where it can be obtained from; and
- indicate that a person should consider the PDS in deciding whether to acquire or hold the product.
There are exceptions available to the advertising restriction. For example, an exception may apply where the published statement is a news report, or is a genuine comment in the media.
Further information and guidance on advertising of financial products and services can be found in ASIC’s Regulatory Guide 234: Advertising Financial Products and Services Good Practice Guide.
If you require more information, or guidance on conducting an ICO, please contact HopgoodGanim Lawyers’ Corporate Advisory and Governance team.