The Australian Securities and Investments Commission’s (ASIC) fourth FSCP finding relates to an adviser known only as “Mr K”. The FSCP has provided a written reprimand to Mr K, marking the first time it has used its lowest level of action available to it.
The reprimand will not be published on the Financial Advisers Register (FAR), however, it is provided to the adviser’s Australian Financial Services (AFS) licensee.
According to ASIC, Mr K recommended in a statement of advice (SOA) that the clients switch their superannuation from one fund to another and transfer their life and TPD insurance (through super) to another provider.
“Upon discovering that the full amount of cover could not be transferred without further underwriting, the relevant provider did not revisit the advice but instead recommended in a record of advice (ROA) that the clients apportion their cover between the new and existing provider up to the maximum amount allowed without underwriting,” ASIC said.
“Although the clients held life and TPD insurance in their existing superannuation fund, the relevant provider failed to consider their existing insurance or conduct an insurance needs analysis.
“The advice was also inappropriately scoped being limited to superannuation products only when the clients were also seeking retirement planning advice.”
The FSCP determined that in giving the advice, the relevant provider contravened s961B(1), s961G, s961J(1), and s921E(3) of the Corporations Act 2001. It also found that Mr K failed to demonstrate the Code of Ethics’ values of competence and diligence and breached Standards 2 and 5 of the Code of Ethics.
Commenting on the FSCP decision, Michael Miller, a director at Capital Advisory, said: “It’s somewhat along the lines of saying ‘You didn’t get this right, do better next time’, and likely implies that the impact for the client was very low or non-existent.”
Mr Miller added that due to the small amount of detail that is being published, it is difficult to fully assess the impact of Mr K’s conduct.
“The lack of detail means that there is a large degree of assumption and reading between the lines, but some of the lessons that can be taken from this are similar from that of the FSCP’s third decision on the topic of layered advice, which had more substantial actions applied,” he said.
“You can scope advice; the decision to scope advice must be made with the interests of the client in mind, not the adviser’s business strategy; an adviser must consider the risks of what is excluded from that advice, which may include that excluding an area would be inappropriate; and the presence of group risk insurance with automatic acceptance means a client’s superannuation and insurance needs are often closely linked, and trying to address one without the other is high-risk scoping/scaling of advice.”
The FSCP kicked off at the start of last year, with its 31 part-time members being appointed in February.
The FSCP published its first finding on the outcomes register in June, with that decision concerning an adviser known only as “Mr S”, who was found to have impersonated a client during two telephone conversations with a bank in an attempt to facilitate a transaction.
Speaking at an FAAA roadshow event in Sydney in May, Leah Sciacca, a senior executive leader for financial advisers at ASIC, confirmed that neither the register nor the press release would typically disclose the name of the financial adviser involved in a particular matter unless the outcome is required to be displayed on the FAR.
Of course, with this wonderful new “single” disciplinary body system, the adviser now just has to go through the penalty process again with ASIC, AFCA, FAAA etc