ASIC gets serious on conflict of interest
ASIC has signalled it is getting serious about financial planners who have a conflict of interest by charging and convicting a former National Australia Bank (NAB) financial adviser
Paul John Borella of Elsternwich Victoria was convicted after pleading guilty to a breach of the Corporations Law section 849 when he failed to disclose his own financial interests in an investment he recommended to his clients.
Section 849 prohibits advisers from making recommendations to consumers about investments in which the adviser has an interest, without disclosing that conflict of interest.
The Melbourne magistrates' Court has placed Borella on a three-year good behaviour bond and ordered him to pay $5,000 plus costs.
The court heard that between 1996 and 1999 Borella advised eight clients, the majority of whom were retirees, to invest in Chatham Finance, a company in which he was a director and shareholder.
The investment was not authorised by the NAB, from which Borella held a proper authority.
Chatham Finance was involved in a number of schemes including a debt factoring arrangement and horse racing industry magazine. All of the company's ventures failed, with a loss to the eight investors of about $235,000.
NAB brought the matter to ASIC's attention, provided ASIC with ongoing assistance during the investigation and arranged full compensation for the losses sustained by Borella's clients.
This conviction follows on from ASIC banning Borella for five years from acting as a representative of a dealer and an investment advisor last October.
ASIC's director of the office of consumer protection, Peter Kell, says the conviction and banning demonstrated ASIC's determination to protect the public from advisers who fail to meet high advisory standards.
Kell says this first-ever conflict of interest conviction reflects ASIC's ability and willingness to ensure that investment advisers do not abuse their position of trust.
He says investors have a legitimate right to expect that their interests will always come first and that their adviser will act honestly and provide advice which is only in their best interests.
Recommended for you
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
Having sold Madison to Infocus earlier this year, Clime has now set up a new financial advice licensee with eight advisers.
With licensees such as Insignia looking to AI for advice efficiencies, they are being urged to write clear AI policies as soon as possible to prevent a “Wild West” of providers being used by their practices.
Iress has revealed the number of clients per adviser that top advice firms serve, as well as how many client meetings they conduct each week.
