ASIC initiates advice charges against time share company and ARs

The Australian Securities and Investments Commission (ASIC) has broken new ground by commencing civil penalty proceedings against a time share company for providing financial advice to consumers that it alleges was not in their best interests.

The regulator announced today that it had initiated the proceedings against Ultiqa Lifestyle Promotions Ltd (Ultiqa) for failing to ensure that financial advice to consumers to buy timeshare products was in the consumers’ best interests.

ASIC said it would be alleged the advice was provided by financial advisers who were authorised representatives of Ultiqa from October 2017 to March 2019. Ultiqa promoted a timeshare scheme called the Ultiqa Lifestyle Scheme.

“ASIC’s case is that Ultiqa’s authorised representatives did not act in their clients’ best interests and did not give appropriate advice based on clients’ circumstances. ASIC claims that some consumers had not sought advice regarding a timeshare scheme and some were not aware they were receiving financial advice.”

ASIC said that during its investigation, consumers reported to ASIC that upfront costs of joining the timeshare scheme were approximately $10,000 to $25,000, with ongoing fees of up to $800 per year. Some consumers complained to ASIC that they had difficulty booking holidays due to lack of availability.

Commenting on the litigation, ASIC Deputy Chair Karen Chester said, “Timeshare schemes are complex financial products. They can be difficult to understand and compare with other products, and involve long-term financial commitments.  Consumer harm can and has resulted when consumers are not aware of the up-front costs, ongoing fees or the nature of their investment – like how easy it is (or not) to exit”.

“This is the first time ASIC has taken action against a timeshare provider in relation to financial product advice practices. The timeshare industry is on notice to ensure existing compliance and advice practices comply at all times with the obligations on all financial advisers, especially for that advice to be in the consumers’ best interests,” she said.

She said that ASIC was alleging that Ultiqa did not:

• provide relevant training to its authorised representatives
• monitor and supervise its authorised representatives appropriately, and
• have documented policies and procedures in place to support the advice process.

ASIC also alleges Ultiqa’s conduct amounted to a breach of its obligations as an Australian financial services licensee to act efficiently, honestly and fairly.

ASIC is seeking declarations, pecuniary penalties and other orders to be made by the Court.

Ultiqa ceased selling interests in the Scheme on 28 January 2020 and was placed into members’ voluntary liquidation on 30 April 2021. The Scheme remains active, as does the balance of the Ultiqa Group entities. Ultiqa currently holds an AFS licence.