ASIC prosecutes on best interests duty
The Australian Securities and Investments Commission (ASIC) has targeted a risk-focused advice group for its first-ever action relating to alleged breaches of the Future of Financial Advice (FOFA) best interest duties requirements.
The regulator announced the move today saying the action had been initiated against Melbourne-based NSG Services Pty Ltd (formerly National Sterling Group Pty Ltd) (NSG).
It said this was the first civil penalty action ASIC had taken against a licensee alleging breaches of the best interests duty and that it was seeking declarations of breaches and financial penalties.
The ASIC announcement said that since 3 April 2008, NSG had been licensed to provide personal advice on risk insurance and superannuation products to retail clients.
The announcement said that ASIC was alleging that NSG failed to take reasonable steps to ensure that its advisers complied with the best interests obligation when providing advice to clients; and that, as a result, on numerous occasions, NSG advisers did not act in the best interests of their clients.
It said that, additionally, it was being alleged that:
- NSG had not provided appropriate training to its advisers to ensure clients receive advice in their best interests. Instead, ASIC contends that NSG had trained its advisers that it is almost always in a client's best interest to take out some form of life risk insurance, regardless of a client's financial situation;
- NSG's written policies relating to legal and regulatory compliance and risk management had been inadequate, and in any event, not followed or enforced;
- since 1 July 2013, on eight specific occasions, and because of advice provided by NSG advisers, clients were sold insurance and/or advised to rollover superannuation accounts that committed them to costly, unsuitable, and unnecessary financial arrangements; and
- regular and or substantive performance reviews of advisers had not been conducted, and disciplinary action against advisers who did not act in compliance with their obligations under the Corporations Act had not been taken.
The first hearing of the matter is listed before the Federal Court of Australia on 8 July 2016.
Recommended for you
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
