Advice Businesses Hit with $7m Fine for Misconduct

A trio of Melbourne financial advice businesses has been fined $7.15 million and a director has been restrained from providing financial services as a result of providing advice linked to life insurance that breached obligations to act in the best interests of clients.

The three business – Wealth and Risk Management (WRM), Yes FP and Jeca Holdings, trading as Yes FS – were ordered to pay the penalties after the Federal Court found they had engaged in numerous contraventions of financial services and consumer protection laws.

The Court also ordered Joshua Fuoco to pay a penalty of $650,000 after it found he was concerned in the breaches and to pay $100,000 towards ASIC’s costs of its investigation and conducting the court proceeding. Fuoco also agreed to an order restraining him from providing financial services for a period of 10 years.

The court orders follow breaches in financial services laws in which WRM, Yes FP, and Yes FS offered and gave cash payments to clients in connection with the provision of financial advice.

According to ASIC, the businesses offered cash to consumers with poor credit histories but required them to receive and implement financial advice that recommended switching their superannuation and taking out insurance.

The businesses then charged advice fees that were paid out of consumers’ superannuation funds and received upfront and trailing insurance commissions and used those commissions to provide a ‘cash rebate’ to clients.

The Court found that WRM breached its licensee obligations to take reasonable steps to ensure its authorised representatives act in clients’ best interests and provide advice that is appropriate; and to ensure the financial services covered by its licence were provided efficiently, honestly and fairly.

At the time, WRM was licensed to advise retail clients about, and deal in, life risk insurance and superannuation products. Its advisers were employed by WRM’s corporate authorised representative Yes FP, to provide personal financial advice to retail clients referred to them by Yes FS website.

The Court also found Yes FS carried on a financial services business without holding an AFSL, made false and misleading representations and engaged in misleading and deceptive conduct; and all three companies engaged in unconscionable conduct.

As a result of its findings, the Federal Court ordered all three companies be restrained from carrying on a financial services business for 18 years.

Yes FS and Yes FP Pty Ltd, were placed into liquidation in September 2017 and did not take part in the trial.  WRM was unrepresented and also did not take part in the trial.