June 30, 2018
ASIC has revealed the closure of Dover Financial Advisers was triggered by concerns it had around the ability of the group to comply with financial services laws, and owner and director, Terry McMaster would be permanently leaving the industry.
In a recent statement, the regulator explained that the closure followed its acceptance of a Court Enforceable Undertaking (CEU) on 28 June from Dover and McMaster, who is named as the Key Person on the advice group’s AFS Licence.
ASIC added that under the terms of the CEU, Dover would cease operating by 6 July 2018, would apply to cancel its licence and McMaster would remove himself permanently from the financial services industry. This, in turn, led Dover to make its sudden closure announcement on 9 June (see: Dover Financial Advisers to Close in One Month).
At the time of the closure announcement, neither Dover nor ASIC provided reasons for the closure apart from the regulator stating the decision to close the advice business came from Dover and McMaster (see: Dover Shutdown Not Initiated By ASIC).
The latest statement from ASIC, however, notes that on 18 May the regulator “…notified Dover that its concerns arising from the [Client] Protection Policy were significant and that ASIC would conduct an administrative hearing to assess Dover’s ongoing ability to operate a financial services business”.
“Subsequently, ASIC and Dover engaged in discussions in relation to ASIC’s concerns. Dover informed ASIC it would cease operating its financial services business under a timetable to be negotiated with ASIC,” the regulator added, in its statement.
ASIC stated that its concerns about Dover’s Client Protection Policy were raised with the group on 22 March 2018, as part of a wider, and ongoing, investigation which began in 2017.
ASIC “…notified Dover that its concerns arising from the [Client] Protection Policy were significant…”
The regulator added that McMaster prepared the Client Protection Policy, and Dover’s authorised representatives were required to refer to it in statements of advice provided to their clients, but in ASIC’s view the policy “…was designed to burden clients with the liability for losses resulting from advice that was negligent, inappropriate or not in a client’s best interests”.
The policy, which was offered from September 2015, was withdrawn by Dover on 29 March 2018 and ASIC noted the CEU resolved its concerns regarding the policy but stated that in relying upon it “…Dover had failed deliberately and systematically for over two years to:
- comply with its obligations to act efficiently, honestly and fairly
- comply with financial services laws
- take reasonable steps to ensure that its representatives comply with the financial services laws”
Additionally, the regulator also claimed that “…due to his significant involvement in this conduct, ASIC was concerned that Mr McMaster, in his individual capacity and in his capacity as a responsible officer of Dover:
- is not of good fame and character
- impaired Dover’s ability to provide the Financial Services covered by the AFSL
- is likely to contravene a Financial Services Law in the future”
The news of the shutdown of Dover was followed by a warning from ASIC to other licensees to vet any former Dover advisers they may recruit (see: ASIC Issues Warning for Dover Advisers, Clients).
It also led to claims that Dover advisers were being unfairly targeted (see: Dover Closure Highlights Licensing Bias Against Advisers), and the group was identified as a high-risk licensee earlier this year (see: Dover Identified as High-Risk Before Closure).