ASIC takes court action to restrain SMSF property advice without licence

ASIC is taking court action against a firm and individual who, it is alleged, were recommending clients start SMSFs to invest in property and receiving “substantial commissions” from the builders while not having a financial service licence.

ASIC announced that it had commenced proceedings against Richard Gardner and Advanced Wealth Financial Services Pty Ltd in the Supreme Court of Queensland. Mr Gardner is a credit representative and former financial adviser.

ASIC alleges that Mr Gardner and Advanced Wealth Financial Services were profiting financial services without a licence or authorisation, following an investigation. Read more...

13 charges for alleged transfers from clients’ SMSFs

A former financial planner has been charged with 13 offences relating to alleged transfers from the SMSFs of clients.

ASIC announced that Mr Bradley Grimm has been charged with 13 dishonesty offences in the Melbourne Magistrates Court.

ASIC alleges that in 2015 Mr Grimm “engaged in dishonest conduct on six occasions when he transferred funds between his clients’ self-managed superannuation funds (SMSFs) to three separate companies of which Mr Grimm was the sole director” and to “a superannuation fund of which Mr Grimm’s financial services business was the administrator”.

“ASIC also alleges that on a further seven occasions between 19 October 2015 and 11 November 2015, Mr Grimm dishonestly transferred shares owned by his clients’ SMSFs to Equity Capital Partners Hedge Fund Pty Ltd, a company of which he was sole director.”

The matter, which is being prosecuted by the Commonwealth Director of Public Prosecutions, was adjourned for a committal mention on 31 January 2019.

According to ASIC, the charges follow from action to wind up a number of companies in 2015.

“Mr Grimm and his company Ostrava Equities Pty Ltd were until 21 October 2015 authorised representatives of Australian financial Services licensee Marigold Falconer International Limited (previously known as Falconer & Company Limited), whose AFSL was cancelled in August 2016,” said ASIC.

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This article, as with all content on this site, is for informational purposes only, and is not legal, financial, tax or other advice. Please read our Terms and Conditions of Use.

Conviction for stealing superannuation leads to permanent financial services ban

ASIC announced that it has permanently banned Mr Craig James Wilson from providing financial services or engaging in credit activities. The move by the regulator comes after Mr Wilson was convicted in August of four counts of ‘stealing as a servant’ by the District Court of Western Australia.

ASIC said: “Between 25 October 2017 and 23 January 2018, four of Mr Wilson’s clients received payments into their bank accounts from their superannuation funds. Due to Mr Wilson’s planned actions, the clients received more than they had requested to be withdrawn. The clients then asked for funds to be returned. Mr Wilson provided his own personal bank details for the return of funds, totaling $101,800.”

“Since 2010, Mr Wilson was employed by Lifenet (WA) Financial Advice Pty Ltd, a corporate authorised representative and credit representative of Securitor Financial Group Ltd (Securitor).”

“Mr Wilson was also a credit representative (between July 2014 and November 2015) and an authorised representative (between June 2014 and March 2018) of Securitor.”

ASIC says it has the power under the Corporations Act 2001 and the National Consumer Credit Protection Act 2009 to ban anyone who is convicted of fraud.

Mr Wilson has the right to appeal ASIC’s decision to the Administrative Appeals Tribunal.

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This article, as with all content on this site, is for informational purposes only, and is not legal, financial, tax or other advice. Please read our Terms and Conditions of Use.

Almost $9 million in penalties for loans tied to financial advice

The Federal Court has imposed almost $9 million in penalties on a financial services and credit business.

The firm, Financial Circle, was offering personal loans to consumers of up to $5,000 if they received and implemented financial advice.

“The advice typically recommended purchasing personal insurance products and switching superannuation providers,” said ASIC.

“When consumers implemented the advice, significant advice fees were paid to Financial Circle directly from the consumer’s superannuation. Financial Circle also received ongoing commission payments from the insurers. This process often resulted in a substantial erosion – in many cases up to 30% – of the client’s superannuation balances.”

According to ASIC, the Federal Court found that Financial Circle had made false and misleading representations and engaged in misleading and deceptive conduct, engaged in unconscionable conduct, breached AFSL obligations – including acting in the clients’ best interest – and engaged in credit activity without a licence.

The Court imposed penalties of $8,980,000, and also ordered that the company be permanently restrained from carrying on a financial services business or providing credit or entering into credit contracts as a credit provider.

The company is also required to pay ASIC’s costs.

ASIC had obtained interim orders from the Federal Court in January 2018 – ahead of the court case – preventing the company from carrying on a financial services business, providing financial advice or entering into credit contracts .

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This article, as with all content on this site, is for informational purposes only, and is not legal, financial, tax or other advice. Please read our Terms and Conditions of Use.

ASIC cancels financial services licence, due in part to SMSF set up advice

ASIC is going to cancel a financial services licence, in part relating to not acting in the best interest of clients when advising the set up of SMSFs.

ASIC announced that it would cancel the AFSL of Austplan Pty Ltd, effective from 25 November 2018, by agreement with the licensee.

“ASIC was concerned about Austplan’s ability to do all things necessary to ensure the advice provided by its representatives was compliant,” said the regulator.

Surveillance found “deficiencies” in the financial services of a number of Austplan representatives, including failing to act in the best interest of their clients when establishing an SMSF.

“Austplan also received client referrals from GM Homes (Australia) Pty Ltd, a building and mortgage business, which is not licensed to provide financial advice or any other financial service.”

“AFS licensees have an obligation to ensure that their representatives are adequately trained and competent to provide financial services that are in their clients’ best interest,” said ASIC Deputy Chair Peter Kell.

“ASIC will take action where we see licensees not properly supervising their representatives,” he said.

“SMSFs are not right for everyone. We encourage consumers to think carefully about investing in property and do their research before they set up an SMSF.”

ASIC says it is continuing to make enquiries about the advice provided.

In December 2017, ASIC accepted enforceable undertakings from authorised representatives of Austplan Pty Ltd. The regulator had concerns about the insurance advice they were both giving, saying it “did not meet the standards required of a financial adviser” and that they had “failed to comply with financial services laws”.

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This article, as with all content on this site, is for informational purposes only, and is not legal, financial, tax or other advice. Please read our Terms and Conditions of Use.

ASIC Deputy Chair Peter Kell resigns, effective December 6

It has been announced that ASIC Deputy Chair Peter Kell will resign, effective 6 December.

Mr Kell has been an ASIC Commissioner since November 2011, and Deputy Chair since May 2013. He was reappointed as Deputy Chair for a one-year period from May 2018 by then Minister for Revenue and Financial Services Kelly O’Dwyer.

“His experience and understanding of corporate regulation has been appreciated by successive governments as well as members of ASIC,” said a statement from Treasurer Josh Frydenberg.

“The Coalition Government thanks Mr Kell for his contribution to ASIC and wishes him well in his future endeavours.”

In June Minister O’Dwyer announced that Mr Daniel Crennan QC would serve as the second ASIC Deputy Chair, pending the passage of legislation – which has since passed – allowing for two Deputy Chairs.

Following the recent cabinet reshuffle Treasurer Frydenberg has “primary oversight” of ASIC, instead of the responsibility resting another Treasury minister.

A reason for Mr Kell’s resignation is not given in the statement by the Treasurer. ASIC has yet to make a statement at the time of publication.

Prior to joining ASIC, Mr Kell had been Deputy Chair of the ACCC, Chief Executive of CHOICE and also ASIC’s Executive Director of Consumer Protection and New South Wales Regional Commissioner. He was also President of the International Consumer Protection Enforcement Network and served on the Consumer Policy Committee of the Organisation for Economic Co-operation and Development (OECD).

On Monday the Government’s Treasury Laws Amendment (Enhancing ASIC’s Capabilities) Bill 2018 passed Parliament. The Treasurer said the soon-to-be Act enhances ASIC’s capabilities “by providing it with greater operational flexibility and making express provision for ASIC to consider competition in its decision-making processes”.

Mr Kell had twice appeared before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which continues.

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This article, as with all content on this site, is for informational purposes only, and is not legal, financial, tax or other advice. Please read our Terms and Conditions of Use.

ASIC plans to increase regulatory scrutiny on superannuation

ASIC plans to increase the intensity of its regulatory scrutiny on the superannuation sector, including more shadow shopping.

ASIC Commissioner John Price told a recent conference that the regulator was strengthening its supervision of, and enforcement on, the superannuation sector.

“Another new project we will be implementing is to deliver an enhanced supervisory approach for superannuation. We have already strengthened our team focused on this area,” he said.

This will include building on “public actions in the superannuation sector, including more enforcement outcomes”, and better leveraging new and existing data available to ASIC and APRA.

“We will also increase our focus on the consumer perspective through the incorporation of more consumer testing and shadow shopping.”

“Our strengthened superannuation team will also move towards a more intensive engagement model, where superannuation stakeholders will deal with specific ASIC staff on a more consistent and regular basis.”

Price said that ASIC plans to “heighten the intensity of our regulatory scrutiny in superannuation”.

He noted that ASIC is not the sole regulator of superannuation. Instead ASIC, APRA and the ATO “all have a common interest in this area”.

“Accordingly, you can expect our approach to continue to build on our already close working relationship with these agencies.”

“This common interest also necessarily means there are boundaries to ASIC’s jurisdiction in super, and some issues will be in the remit of other regulators.”

“Nevertheless, we plan to do everything within our powers to improve member outcomes in superannuation.”

The regulation of superannuation, including by ASIC, is likely to be raised in the interim report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services, which is due by the end of September.

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This article, as with all content on this site, is for informational purposes only, and is not legal, financial, tax or other advice. Please read our Terms and Conditions of Use.

ANZ & CBA accept Undertaking over distribution of super products in branches

The ANZ and CBA have reached an agreement with ASIC to change how they distribute some of their superannuation products.

ASIC announced that it has accepted enforceable undertakings from the two banks, following an investigation.

The regulator says it found the banks had a “common practice” of offering their superannuation products – Smart Choice Super for ANZ and Essential Super for the CBA – to customers at the conclusion of a fact-finding process. ANZ called its process an ‘A-Z review’ and CBA called theirs a ‘Financial Health Check’.

“ASIC was concerned that the proximity between the fact-finding process and the discussion about Essential Super or Smart Choice Super was leading CBA staff and ANZ staff to provide personal advice to customers about their superannuation,” said ASIC. The bank branch staff were only authorised to provide general advice.

“ASIC was concerned that customers may have thought, due to the proximity of the fact-finding process to the offer of Essential Super or Smart Choice Super, that the CBA branch staff or the ANZ branch staff were considering risks specific to the customer when this was not the case.”

The enforceable undertakings prevent the banks from distributing these superannuation products in conjunction with the reviews. The banks will also each make a $1.25 million ‘community benefit payment’.

“ASIC will continue to proactively monitor how complex financial products such as superannuation are sold,” said ASIC Deputy Chair Peter Kell.

CBA had already suspended the distribution of the Essential Super product in branches in October 2017.

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This article, as with all content on this site, is for informational purposes only, and is not legal, financial, tax or other advice. Please read our Terms and Conditions of Use.

No “systemic” issue of unlicensed accountant SMSF advice: ASIC

ASIC says a review seeking to identify accountants recommending clients set up SMSFs while not holding a financial services licence found “no systemic concerns”.

Though the review did find “significant levels” of inaccurate and out of date information on the websites and in the marketing material of accountants. This seemingly led ASIC to initially target accountants who were then found to be complying with the law.

ASIC says it used a range of information to identify accountants who may have been giving unlicensed SMSF advice, including data from the ATO, AFSL applications, analysis of social media, public advertisements and reports from the public. Another source of information was ASIC’s ongoing project investigating the quality of SMSF advice.

“Further enquiries revealed that most of the accountants identified were not providing unlicensed SMSF advice,” said ASIC.

“ASIC continues to make enquiries of five accountants whose services we have concerns about, and will take appropriate regulatory action where necessary.”

Where accountants were initially targeted by ASIC and later found to be complying it was generally because services listed on their websites hadn’t been updated since the repeal of the accountants’ exemption, or the websites didn’t state a financial services license number or that the accountant was an authorised representative or had a referral arrangement.

“ASIC has followed up with all accountants identified as part of the review who need to update their website,” said ASIC.

The regulator encourages other accountants to update their services and AFSL details, where relevant, on their websites.

“Having clear and accurate disclosure of any relevant AFS licences, as well as services provided and who provides them, is important for consumers and should avoid future misunderstandings.”

ASIC recently updated guidance on how far tax agents can go in giving tax advice to SMSF clients before it becomes financial advice.

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This article, as with all content on this site, is for informational purposes only, and is not legal, financial, tax or other advice. Please read our Terms and Conditions of Use.

Spaceship super fund fined by ASIC over misleading investment claims

ASIC has imposed penalties on the promoter and trustee of the Spaceship super fund for misleading claims about its investments.

ASIC announced that $12,600 Infringement Notices have been issued on, and paid by, Spaceship Financial Services Pty Ltd – the promoter of the fund – and Tidswell Financial Services Pty Ltd – the trustee of the fund. These penalties relate to concerns by the regulator about “misleading claims about the ‘fundamental investment philosophy’ of the Spaceship Super Fund’s ‘GrowthX’ portfolio”.

Spaceship promotes itself as a super fund for young people, saying that “old super funds are dramatically out of touch with what young people demand need and want from their finances”. According to ASIC the Spaceship Fund had over 6,000 members and $100 million in Funds Under Management in June 2017.

The announcement by ASIC says there were concerns that Spaceship promotional statements prioritised marketing over accurate disclosure, pointing to the following statement:

We will fight to get you the very best assets in your portfolio…. We will measure companies in our portfolio based on their ability to provide defensibility of profits and high levels of product differentiation. Read more...