The Federal Court has ordered three companies pay penalties totalling $7,150,000 in connection to “numerous contraventions of financial services and consumer protection laws”, involving offering ‘fast cash’ linked to superannuation and insurance advice, ASIC has announced.
ASIC said the companies advertised ‘fast cash’ to consumers with poor credit histories and then required them to receive and implement financial advice – switching their superannuation and taking out “high end” insurance. Advice fees were charged, and paid out of the consumers’ superannuation. Upfront insurance commissions were used to provide a ‘cash rebate’ to clients.
“This process often resulted in a substantial erosion of the client’s superannuation balances,” said ASIC.
The Companies are Wealth and Risk Management Pty Ltd, Yes FP Pty Ltd and Jeca Holdings Pty Ltd (which traded as Yes FS), the latter two of which are in liquidation.
The Court found that all three companies engaged in unconscionable conduct. It also found Wealth and Risk Management had breached its licensee obligations by failing to take reasonable steps to ensure its authorised representatives acted in their clients’ best interest and “do all things necessary to ensure that the financial services covered by its licence were provided efficiently, honestly and fairly”. Yes FS was found to have carried on a financial services business without a licence, made false and misleading representatives and engaged in misleading and deceptive conduct.
The Court ordered the companies pay pecuniary penalties, pay ASIC’s costs, be restrained from carrying on a financial services business for 18 years and be permanently restrained from “making any offers of cash payments in connection with the provision of financial advice”, according to ASIC.
The Court also found that Joshua Fuoco, a former director of the companies, was “knowingly concerned in the breaches”, says ASIC. He was ordered to pay a penalty of $650,000. He has also agreed to an order restraining him from providing financial services for 10 years and to pay $100,000 towards ASIC’s costs.
ASIC Deputy Chair Peter Kell said the breaches were the result of very poor conduct.
“This is a significant outcome in a case where a financial services business has deliberately flouted the law and targeted financially vulnerable consumers,” he said.
ASIC notes that Yes FS and Yes FP were placed into liquidation in September 2017 and did not take part in the trial. Wealth and Risk Management was unrepresentaed and also didn’t take part in the trial.