ASIC cancels AFSL of insolvent advice group

The Australian Securities and Investments Commission (ASIC) has cancelled the AFSL of NextGen Financial Group effective from 23 February 2024, following the Federal Court of Australia’s order that the group be wound up in insolvency on 17 November 2023.

The regulator said that under the Corporations Act, ASIC may suspend or cancel an AFSL without a hearing if the licensee is under administration or is being wound up.

Under the terms of the licence cancellation, NextGen Financial Group can, until 16 April 2024, continue to provide a financial service to a client if that person was a client immediately prior to the cancellation of the licence taking effect and if the financial service concerns the termination of an existing arrangement with the client.

NextGen Financial Group has a right to apply to the Administrative Appeals Tribunal (AAT) for a review of ASIC’s decision.

The Federal Court ordered that the group be wound up following a lengthy legal process which saw NextGen Financial Group and SMSF trustee WJ & V Drakoulis Super battle it out in the Federal Court.

Namely, in July, the Federal Court ruled in favour of WJ & V Drakoulis Super after NextGen failed to answer an Australian Financial Complaints Authority (AFCA) determination which said it owed WJ & V Drakoulis Super the sum of $270,523.67 in relation to an investment loss stemming from inappropriate advice.

The court date came as a result of NextGen’s application which followed a statutory demand issued by WJ & V Drakoulis, in which the SMSF insisted that NextGen settle the amount of $270,523.67.

Subsequently, NextGen sought relief from the Federal Court, aiming to have the statutory demand set aside. Its argument rested on the premise that the AFCA determination, in and of itself, could not be enforced through a statutory demand.

NextGen contended that Drakoulis must secure a court order before a legally recognised debt could be established and subsequently owed.

But the court dismissed NextGen’s application, while the statutory demand essentially served as a preliminary step for the SMSF and granted it the right to initiate winding-up proceedings against NextGen if the debt remained unpaid.