January 16, 2018
A Gold Coast based financial advice business will cancel its own licence and its director will remove himself from the advice sector for at least two years, following an investigation by ASIC and the acceptance of an enforceable undertaking (EU) by the regulator.
ASIC received the EU from Breakaway Finance Group, of Burleigh Heads, Queensland, which offered a range of financial advice including life insurance, after it conducted surveillance of the business and its director, Mark Godfrey Roberts.
As part of its investigation, ASIC reviewed client files containing advice provided by Roberts for the period from July 2013 to August 2016, and stated it had concerns regarding the conduct of Breakaway as an AFS licensee and of Roberts as an adviser.
ASIC stated it was concerned that Roberts had failed to make reasonable inquiries into the relevant circumstances of clients prior to providing advice, and had recommended insurance cover where clients were unable to afford the premiums.
The regulator was also concerned that he had failed to failed to conduct a needs analysis to determine if the amount of insurance cover recommended was in the clients’ best interests, and failed to provide adequate product replacement disclosure when recommending clients to switch products.
Under the EU, Breakaway will cancel its AFS licence and write to clients who have received advice in the last three years informing them of the EU and of their rights to raise a complaint.
Additionally, Roberts has agreed to not provide financial services for a period of two years, nor act as an officer, shareholder, employee or responsible manager of an AFS licensee or authorised representative for two years.
He must also notify ASIC and complete relevant training and education requirements before re-entering the financial services industry.
ASIC acknowledged the cooperation of both Breakaway and Roberts during the surveillance, which recognised that ASIC’s views were reasonably held.
ASIC Stops Melbourne-based Business Providing Advice
In related news, ASIC has stopped a Victorian based advice business offering any form of financial services after it alleged the business was offering loans that were tied to the implementation of life insurance advice.
The regulator commenced proceedings in the Federal Court of Australia in mid-December, which made interim orders restraining Financial Circle from carrying on a financial services business and providing financial product advice or dealing in financial products.
Those orders were extended on 10 January until a final hearing and determination into the matter, on the basis there was an “appreciable risk” of future contraventions by Financial Circle of the issues raised by ASIC.
According to the regulator, Financial Circle offered loans to consumers, which ASIC alleged, could only be obtained if a consumer agreed to obtain and implement financial advice, which included purchasing personal insurance products and switching superannuation providers.
Financial Circle holds an AFS licence and is authorised to advise clients about life risk insurance and superannuation products, and is also authorised to engage in credit activities under an Australian credit licence.
ASIC alleged that when consumers implemented the advice, fees were paid to Financial Circle from commissions received from insurers and from the consumer’s superannuation, and this conduct was misleading, deceptive and unconscionable.
As such, ASIC stated the behaviour breached the Corporations Act, the National Consumer Credit Protection Act and the Australian Securities and Investments Commission Act and also included breaches of the best interests duty and unlicensed conduct.