Adviser’s non-compliant SOA problems broken down by ASIC

Details have been shared regarding an adviser’s non-compliant statements of advice (SOAs) as well as how improvements in his behaviour saw a ban being reduced to 12 months.

Christopher Betalli was banned in May 2021 from providing financial services for two years after finding he failed to provide financial advice that was in the best interest of his clients. ASIC found that Betalli failed to keep adequate records and gave non-compliant SOAs by not including information about the basis of his advice.

However, an appeal to the Administrative Appeals Tribunal (AAT) saw his ban reduced to 12 months.

In details shared by the AAT, it outlined the findings and Betalli’s uncompliant actions which affected eight clients out of a total of 60–70 clients over a nine-month period from February to September 2018 when he worked as an authorised representative of HNW Planning.

A full report by financial planner Paul Green of Betalli’s client files found that he:
 

• Did not act in the best interest of clients.
• Did not identify the subject matter or purpose of the advice, that is the objective the advice was seeking to achieve.
• Did not identify the objectives, financial situation and needs of the client; did not take reasonable steps to obtain complete and accurate information upon which to provide advice.
• Was not in a position to reasonably consider providing advice and did not properly assess the appropriateness of the financial product to the goals, objectives and needs of the client having regard to their personal circumstances and risk profile.
• Did not base recommendations on the relevant circumstances including financial situation goals objectives and needs as well as risk profile.
• Failed to provide sufficient information to allow the clients to make an informed decision about the advice.

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ASIC relied upon the repeated failings found in the eight client files as forming the foundation for the tribunal having reason to believe that Betalli is not competent to provide financial advice and would be likely to continue this non-compliance in the future.

Case study

As an example from one of the eight affected client files, one case study detailed the “woeful” advice provided by Betalli to a couple in their 30s. The couple had two children and a third on the way and were seeking to buy a commercial property. 

Failings included how Betalli’s SOA referred to an SMSF which the couple did not have, no comparison between superannuation and SMSFs, and failing to take into account the changed financial situation they would be in once the third child arrived.

“The Green report identified many matters that: there was no identification of financial position, goals, objectives and risk profiles were not identified; there was no identification of the clients’ personal circumstances, especially so far as their exposure to real estate investment and their debt levels, and the failure to consider alternatives to what the client themselves were proposing. 

“The Green report also concluded that the advice was not appropriate because it failed to adequately explain and warn about the risks of purchasing with borrowings within the SMSF specific to their circumstances, and the risk of being responsible for repayment of debt and interest associated with the proposed purchase and rent to the SMSF. In particular, the Green report did not consider the advice was appropriate because it should not have recommended any additional borrowing having regard to the clients’ personal circumstances, financial position, goals objectives and needs.”

AAT verdict

However, the AAT noted changes Betalli has made to his work since 2018 to improve his standing. These include undertaking further training and CPD, only accepting work that is full financial planning, changing the process of how he provides financial advice, and hiring a paraplanner to help in preparing SOAs.

This has led AAT member Rob Reitano to decide that Betalli is unlikely to fail to comply with regulations again in the future. 

He also noted there has been remediation of the matter for clients, Betalli has accepted responsibility and cooperated with ASIC, and no financial loss was suffered by the clients.

“It should not be forgotten that since 2018, a lot has happened to change the terrain for Betalli including the fact of the delegate’s banning order and these proceedings. Having seen and heard him give evidence, I am to consider this process has had a salutary effect on him. 

“Betalli’s evidence, generally speaking, demonstrated that things like the changed procedures are accompanied by a level of care and commitment to ensuring he does not contravene financial services laws in the future.”