ASIC Fires Warning Shot for Accountants Giving Advice

The Australian Securities and Investments Commission (ASIC) has warned accountants providing financial advice on self-managed superannuation funds (SMSF) that they risk breaking the law if they are not appropriately licensed to do so by 1 July.

The regulator stated it would take regulatory action against accountants who did not hold a limited Australian financial services (AFS) licence or were not an authorised representative (AR) of a licence-holder or licensee to provide financial product advice on SMSFS.

“Providing unlicensed financial services is a criminal offence”

However, ASIC further stated that even where an accountant had applied for a licence but not yet been granted the licence they would also be unable to provide SMSF-related financial advice and must refrain from doing so until they were licenced or became an AR of a licensee.

The comments by ASIC come at the end of a three-year transition period that started on 1 July 2013 and 11 months after ASIC stated that accountants who had not met the new licensing requirements by 1 March 2016 were unlikely to have their application assessed and approved by 30 June 2016.

ASIC, Senior Executive Leader, Assessment & Intelligence, Warren Day said accountants providing unlicensed advice after 30 June could face regulatory action stating “Providing unlicensed financial services is a criminal offence”.

ASIC stated it was currently assessing more than 300 applications for a limited AFS licence and would only accept complete applications in the lead up to 30 June.

Adviser Loses Appeal to Overturn Ban

In further ASIC news, the regulator’s decision to ban a former Meritum adviser from providing financial services for five years has been upheld by the Administrative Appeals Tribunal (AAT).

ASIC announced that it had banned Alfie Chong on 16 September 2015 with Chong applying for a review and stay of ASIC’s decision two days later on 18 September 2015.

On 12 November 2015, the AAT refused Chong’s stay application and on 26 May 2016 the AAT found that a five-year ban was appropriate in the circumstances stating Chong’s conduct showed repeated compliance failures and that he repeatedly blamed Meritum for his own failure to comply with Corporations Law.

ASIC’s review, which led to Chong’s banning found he had

• provided inappropriate advice;
• failed to determine clients’ relevant personal circumstances or failed to conduct reasonable investigations into the subject matter of his advice;
• engaged in misleading or deceptive conduct in relation to a client signature that was copied and pasted on to an authority to proceed form;
• provided personal advice without giving clients a statement of advice (SOA);
• failed to provide sufficient detail about the basis on which the advice was given; and
• arranged for clients to implement advice and transactions before providing clients with an SOA.