RC washup: Advisers most blamed, least guilty

ANALYSIS

When it was all said and done, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services sectors nailed just one financial planning licensee which was not connected to the major banks.

That’s right. Just one.

At the same time as announcing that its civil action against ANZ over offset transaction accounts represented its final Royal Commission-related legal action, ASIC provided a summary of the enforcement action it had taken since Commissioner Kenneth Hayne’s final report was published in February, 2019.

And what that summary confirms is that only one non-bank licensee was targeted – Dover Financial Advisers and its sole director, Terry McMaster while former financial adviser, Sam Henderson, also came up for mention.

Every other issue under the heading of “poor financial advice cases” related to bank-owned or controlled licenses.

What is more, by ASIC’s own admission, most of the cases dealt with by the Royal Commission, including that of Dover Financial Advisers, had been investigated before the Final Report was produced. In reality, the issue of fee for no service had been identified and acknowledged well before Hayne even took his chair.

Despite the exit of the banks from the provision of financial advice and the relative absence non-bank licensees or advisers on the Royal Commission hitlist, the Government’s track record of consequent legislation has not only seen a raft of new legislation and regulation imposed on licensees via the so-called “Hayne bills” but the industry funding levy for ASIC meant that the remaining financial advice licensees have predominantly paid for the regulator’s activity over the past three years.

According to ASIC’s list, this is what happened in the advice space:

1. Dover Financial Advisers and its sole director Terry McMaster

ASIC alleged that Dover misled and deceived clients from September 2015, when they commenced using their ‘Client Protection Policy’ (Protection Policy), to March 2018 when Dover withdrew the Protection Policy in response to ASIC’s concerns

ASIC further alleged that Mr McMaster was knowingly concerned in that misconduct, as he was Dover’s sole director, the Key Person named on Dover’s Australian financial services licence and a responsible manager during the relevant period.

2. RI Advice Group Pty Ltd and a former financial adviser, John Doyle (RI Advice was previously an ANZ financial advice business)

ASIC alleged that RI Advice failed to take reasonable steps to ensure that Mr Doyle provided appropriate advice, acted in clients’ best interests, and put his clients’ interests ahead of his own, as required by law. Mr Doyle was an authorised representative of RI Advice between May 2013 and June 2016.

ASIC also took action against Mr Doyle, alleging that he gave inappropriate “cookie cutter” advice to retail clients to invest in complex structured financial products without taking into account their financial goals or risk tolerance.

The impacted clients were, in some cases, preparing for retirement.  ASIC alleges that Mr Doyle received upfront and ongoing commissions for each of his clients’ investments in the structured products.

ASIC alleged RI Advice knew, or should have known, that there was substantial risk Mr Doyle was not complying with his obligations under the law and was repeatedly recommending structured products to his clients, bypassing compliance processes. ASIC further alleged RI Advice did not take reasonable steps in response.

3. Former financial adviser, Ahmed Saad

Mr Ahmed Saad, of Glenroy, Victoria, was criminally charged with dishonestly obtaining a financial advantage by deception for another and a further charge of attempting to obtain a financial advantage by deception for another.

The matter was prosecuted by the Commonwealth Director of Public Prosecutions following a referral from ASIC.

The ASIC summary makes abundantly clear that where fee for no service was an issue, it was the banks and even some industry superannuation funds who were in their targets – NAB superannuation companies NULIS and MLC Nominees, Aware Financial Services previously known as State Super Financial Services, BT Funds Management and Asgard Capital and Avanteos Investment limited, previously part of the Commonwealth.