ASIC calls on AFS licensees to 'step up'

The Australian Securities and Investments Commission (ASIC) has issued a warning about share sale fraud after a spike in reports of stolen shares due to identify theft.

ASIC said it has conducted an industry review and provided updated guidance for AFSLs on how to reduce share sale fraud risks for clients and businesses.

The regulator said the fraudulent activity can have a "devastating financial and emotional impact" on the lives of those who fall victim.

The updated Information Sheet 237 Protecting against share sale fraud includes examples of share sale fraud methods by bad actors and better practices for licensee prevention and detection.

These include being alert to possible use of stock images, fakes, forgeries, and independently verifying their authenticity when onboarding new clients; monitoring trading behaviour and conducting additional due diligence where trading is unusual for a client, a client makes large withdrawal requests or newly opened accounts are observed; and conducting further due diligence when clients add or request changes to personal information such as postal/email addresses and bank accounts, including, where possible, checking that bank accounts are held in the client's name.

ASIC said the updated guidance reflects findings from a recent ASIC-led industry review into AFSLs' client onboarding and verification practices, in addition to their share sale fraud detection practices.

ASIC added that AFS licensees that deal in securities have a critical role in preventing and detecting share sale fraud, both individually and collectively.

"In the last four years, ASIC analysis has identified a seven-fold increase in the number of share sale fraud reports made by market intermediaries," ASIC commissioner Simone Constant said.

"There are terrible stories out there, where in some cases entire investment portfolios are lost, and millions of dollars are involved. There is a tremendous emotional and financial impact for investors who fall victim."

Constant called on market intermediaries to "step up" and protect their customers by strengthening their share sale fraud prevention, detection and response practices.

"Share sale fraud can happen to anyone, at any time, with unsuspecting investors having their accounts hacked, and shares sold or transferred to others. Vigilance is key as share sale fraud is often difficult to detect," Constant said.