How much did Melissa Caddick’s enforcement action cost the advice sector?
The costs of action against unlicensed operators should be borne by the whole financial sector as data shows Melissa Caddick’s case cost the financial advice sector almost $700,000 in the 2022–23 financial year.
In its pre-budget submission, the Financial Advice Association Australia (FAAA) called for the government to review and implement the changes to the industry funding model before the levy for the next financial year is finalised.
This includes amending it to ensure proceeds of successful enforcement are used to offset costs before compliant small advice businesses are charged.
The FAAA particularly highlighted the burden that unlicensed operators and fraudsters have on the sector that is forced to bear the cost of ASIC’s enforcement action, including against Caddick.
Caddick masqueraded as a financial adviser by operating without an Australian financial services licence (AFSL) from about October 2012–November 2020, while her company Maliver operated without an AFSL from about June 2013–November 2020.
She was alleged to have fraudulently stolen between $20–30 million from investors via a Ponzi scheme, which was spent on designer clothes, holidays and jewellery. In November 2020, her home was raided by ASIC and Caddick went missing.
A foot then washed up on the NSW South Coast in February 2021, which is believed to have belonged to her.
The FAAA said: “Actions against fraudsters and unlicensed operators are currently funded by financial advisers. The Melissa Caddick matter alone cost the advice profession $687,852 in the 2022–23 financial year and yet her activities would more accurately be described as running a Ponzi scheme rather than providing advice.
“Total costs for unlicensed operators were estimated in the Treasury report at around $6 million in 2022–23. Advisers are not responsible for those who impersonate them, and the entire financial sector suffers when such people and businesses defraud the public.
“The costs of action against fraudsters and unlicensed operators ought to be borne across the entirety of the financial sector rather than the single financial advice subsector, as the entirety of the sector benefits from consumers having confidence that fraudsters will be actively pursued.”
It also noted more clarity could be given by ASIC as to why certain sectors are charged over others, which has led to a “profound lack of faith” in the fairness and efficiency of the regulator. Providing greater insight into these decisions would lead to more confidence in the system, the FAAA said.
“As a matter of basic fairness, ASIC ought to disclose more detail regarding how their funding is spent. Financial advisers have a right to know what activities they are paying for, and this will lead to greater confidence in the system by ensuring any errors or misallocations can be resolved.”
AUTHOR
Laura Dew
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It is the only industry that gets punished for the actions of people who are outside of the industry
I don't see how a non-financial adviser's criminal behaviour should be borne by us in any circumstances.
Are you telling me I am paying for someone who isn't even licensed doing the wrong thing? I never knew. If this is what the government deem as fair and it doesn't change I'm out. I have enough costs without this. This is about the most pathetic thing I have heard the government allow. I'm actually in shock right now.
She was a common criminal, the costs associated need to be paid by the police budget!!
ASIC's conduct is beyond unconscionable. Charging Finanacil Advisers for the legal fees for the criminal behavior of random citizens is mind boggling. And then when they do charge penalties, that money magically disappears into Treasury never to be seen again, rather than funding the cost of bringing the criminal to justice.
Imagine if other professions were charged the cost to prosecute criminals who impersonate them. What a joke of a so called regulator.
So Financial Advisers get to pay for the wrongdoings of people who are NOT Financial Advisers? Sounds plausible.
Why is it that legal action taken by ASIC against an unlicensed adviser (which makes her a member of the public) whom perpetrated multiple illegal acts is funded by us? There was a recent case in South Australia where an 80 year old man (making out he was an adviser) defrauded 16 victims. Police prosecuted him .... we didn't have to pick up the tab because he was a member of the public!
Seems like the $3.1 billion lost in scams in 2022 will be recouped by Advisers.
Utter joke but not an unexpected joke