June 8, 2016
The Australian Securities and Investments Commission (ASIC) has commenced its first proceedings against a licensee for breaches of best interest duties, taking the action against Melbourne-based NSG Services Pty Ltd.
ASIC stated that NGS Services had failed to take reasonable steps to ensure that its advisers complied with the best interest obligations under the Future of Financial Advice (FoFA) reforms when providing advice to clients; and because of this advisers with NSG had not acted in the best interest of their clients.
The regulator stated that NSG (formerly National Sterling Group Pty Ltd) had been licensed to provide personal advice in risk insurance and superannuation since April 2008 and employed advisers to provide financial advice as its representatives and authorised representatives of NSG. According to ASIC registers, NSG currently has two advisers operating as authorised representatives – one each in Melbourne and Adelaide.
ASIC has also alleged that NSG has not appropriately trained its advisers and claims it has trained its advisers that it was almost always in a client’s best interest to take out some form of life risk insurance, regardless of a client’s financial situation.
The regulator also alleges NSG’s written policies relating to legal and regulatory compliance and risk management have been inadequate, and were not followed or enforced.
It further alleges that since mid-2013 there have been eight occasions where clients were sold insurance and/or advised to rollover superannuation accounts that committed the clients to unnecessary, unsuitable and expensive financial arrangement because of advice provided by NSG advisers.
ASIC also alleges these advisers have not undergone regular and or substantive performance reviews and disciplinary action against NGS advisers who did not act in compliance with Corporations Act obligations has not been taken.
ASIC will seek declarations of the breaches and financial penalties when the matter goes to court with the first hearing listed before the Federal Court of Australia on 8 July 2016.