Federal Court orders over $7 million in fines
The Federal Court has penalised three companies with fines of over $7,000,000, following the Australian Securities and Investments Commission (ASIC) proving that they offered and gave cash payments to financially vulnerable clients in connection with the provision of financial advice.
The Court found that the three companies, Wealth and Risk Management (WRM), Yes FP and Jeca Holdings (trading as Yes FS), ran a business model meant that all three engaged in unconscionable conduct. The businesses:
- Advertised ‘fast cash’ to consumers seeking loans who had poor credit ratings
- Made consumers receive and implement financial advice to switch their superannuation and take out ‘high end’ insurance
- Charged advice fees that were paid out of consumers’ super funds
- Received upfront and trailing insurance commissions, and
- Used the upfront insurance commission to provide a ‘cash rebate’ to clients.
It also ruled that WRM breached its Australian financial services licence (AFSL) obligations. The company did not take reasonable steps to ensure its representatives acted in clients’ best interests or ensure that it provided financial services efficiently, honestly and fairly.
Yes FS was found guilty of carrying on a financial services business without holding an AFSL. It also made false and misleading representations and engaged in misleading and deceptive conduct.
The three companies were penalised $7,150,000. The Court also restrained them from carrying on a financial services business for 18 years. It permanently banned them from making any offers of cash payments in connection with providing financial advice or entering into or advertising Cash Rebate Agreements or other like arrangements.
A former director of the companies, Joshua Fuoco, was ordered to pay $650,000 after the Court found he was knowingly concerned in the breaches. In a settlement with ASIC, he also agreed to an order restraining him from providing financial services for 10 years. In a settlement with ASIC, he also agreed to an order restraining him from providing financial services for 10 years.
ASIC deputy chair, Peter Kell, welcomed the result, saying that “this is a significant outcome in a case where a financial services business has deliberately flouted the law and targeted financially vulnerable customers.”
The companies and Fuoco were ordered to pay ASIC’s costs. Fuoco also agreed to pay $100,000 toward the regulator’s costs of conducting both its investigation and the court proceeding.
AUTHOR
Hannah Wootton
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.
