Dixon, UGC, Shield common denominator – related party transactions
Related party transaction have been fundamental to the collapse of Dixon Advisory, United Global Capital, Shield Master Fund and First Guardian, according to the Financial Advice Association of Australia (FAAA).
The financial advice group has told the Australian Securities and Investments Commission (ASIC) that the collapses “have been central to consumer harm and the loss of trust in financial services and financial markets”.
In doing so, it has welcomed ASIC’s proposed update of Regulatory Guide 181 which it says represents an important opportunity for the regulatory “to set clear expectations about how related-party conflicts are identified and managed, including when these conflicts are embedded in structures rather than merely transactional”.
“It has become clear to the FAAA that this lack of clarity, as highlighted in the case of Dixon Advisory and others, has led to serious consumer harm. The consequences have been substantial, with downstream effects on the financial advice profession by having to pay for these failures through the Compensation Scheme of Last Resort,” the FAAA said.
“Related party transactions appear to be a central problem in all the recent major product collapses, including more recently with both Shield and First Guardian.
“The Shield and First Guardian matters have highlighted a range of issues with respect to the delivery of financial services, including the operation of cold calling outfits and the payment of marketing payments to entities that are associated with financial planning businesses.
“It is essential that the legal consequences of this are addressed and that this is reflected in the conflicts management guidance. The obligations of licensees in having oversight of their authorised representatives needs to address the expectations in understanding the existence of these arrangements.”
“It is not sufficient for conflict obligations to sit conceptually at the licensee level,” the FAAA said. “Obligations must cascade clearly to the adviser-client relationship.”
“We commend ASIC’s work in developing a “’roadmap’ that demonstrates the intersection of conflict obligations with related duties. This broad approach is useful, but it is important that it remains just that: broad.”
ASIC have had over 60 adviser complaints over more than a decade and still done NOTHING about such obvious and destructive vertical conflicts with owned advisers forced to flog internally owned MIS, that then blow up.
HELLO ASIC, ANYONE HAVE A PULSE IN THAT PLACE to regulate MIS ?
No motivation to regulate better if someone else is picking up the tab. If the tab came from ASIC’s budget we’d have seen action yesterday
I put in a submission for the 2007 review, FOFA I think it was, there’s been so many I’ve lost track.
In that I posited that vertical integration was the biggest issue. This was of course prior to the Storm Financial fiasco. We then had all the mortgage fund collapses in the GFC. Many of these direct to consumer.
Basis Capital collapsed, with recommended or higher ratings, but according to our keystone cop of a regulator advisers should have known better than professional ratings houses. (Yes I know not vertical integration but pointing to useless and pointless regulators).
When will the muppets in ASIC and treasury have the obvious realisation that whilst it’s easy to blame advisers, with the union movement and legacy media jumping on the bandwagon without any wasted time on critical thinking, and just blame advisers for product failures?
Advisers aren’t perfect, no profession is, but the abject lack of ANY applied intelligence from our regulators is simply stunning.
The biggest common denominator is ASIC was made aware of all these scams many times and many years before the ultimate collapse, and they did absolutely nothing about them until after the damage was done and the criminals ran away with the money.
But don’t worry, we got to put account numbers on fee consent forms…….
Yeh ASIC focus on the real big issues of 6 mths of forced back dating Account numbers on FDS / OFAs / FFS they are stupid
How many Billions, $40 Billion odd or more in blown up or frozen MIS over last 20 years and ASIC do……………????????
Why should the small business owner who runs an ethical honest advice business be forced to pay restitution for the criminals that have no ethics. Why are we punished for their criminal acts. It’s pure theft and needs to stop.
Is there anther profession or industry that pays this government Theft ?
Time for a Royal Commission into ASIC.
Good luck with that dream.