ASIC bans NSW adviser for 5 years, cancels AFSL

The Australian Securities and Investments Commission (ASIC) has banned NSW-based adviser Christopher Edward Luff from providing financial services for five years and has cancelled the AFS licence of his business, Build Your Wealth Pty Ltd.

The corporate regulator said Luff was referred to an ASIC delegate in relation to concerns about “financial product advice he provided, his management of conflicts of interest, and for his involvement in a self-managed superannuation investment structure where clients subsequently invested in the Storehouse Residential Trust”.

ASIC’s review of a sample of Luff’s advice files identified that he did not act in the best interest of the clients and that the advice was not appropriate, given Luff:

• Limited the scope of the advice.
• Failed to make reasonable enquiries into the client’s relevant financial situation, objectives, needs and goals – therefore failing to base the advice on those circumstances.

ASIC said it established there was a conflict between the interests of Luff and those of his clients, due to the relationships between Build Your Wealth, the investment manager of the Storehouse Trust, Storehouse Pty Ltd (which was also an authorised representative of Build Your Wealth), and associated entities.

The regulator found that Luff failed to prioritise the interests of his clients when he recommended that his clients enter into an ongoing service program without assessing if the clients required the service or could afford the service.

According to ASIC, Luff failed to enquire of his clients as to why they wanted to invest in the Storehouse Trust and that the clients should have been made aware of the risks of investing in the Storehouse Trust; the potential risk of losing all their funds with such an investment; the risk to the security of their living arrangement; and the risks if the trust did fail.

“The law requires financial advisers to give priority to their client’s interests when giving advice and to provide advice that is appropriate to the client,” ASIC said.

“In circumstances where ASIC has found that Mr Luff’s advice to clients in relation to the Storehouse Trust was not appropriate or fit for purpose and that there were conflicts of interest of which clients were not informed. Investors with concerns in relation to their investment may wish to seek advice from a new financial adviser.”

ASIC further determined that Build your Wealth failed to ensure that the financial services it provided were done “efficiently, honestly and fairly and that it failed to take reasonable steps to ensure its representatives complied with financial services laws”.

The banning and cancellation order took effect from 9 April 2024. Luff and Build Your Wealth applied to the Administrative Appeals Tribunal (AAT) seeking a confidentiality order, a review and a stay of ASIC’s decision.

The AAT granted an interim stay, which ASIC said was in effect from 30 April 2024 to 24 July 2024. The AAT refused the substantive stay application and confidentiality orders on 17 July 2024. No hearing date has been set for the substantive review of ASIC’s decision.

ASIC made an interim stop order on the Storehouse Trust due to deficiencies in the target market determination on 1 September 2023. Following the interim stop order, the responsible entity of the fund, K2 Asset Management Ltd (K2), made amendments to the TMD that addressed ASIC's concerns.

The new TMD better defined the target market for the fund around investor risk tolerance, investment objectives, investors need to withdraw money and the investment time frame was amended. K2 also updated the distribution conditions in the TMD. As a result, on 15 September 2023, ASIC revoked the interim stop order and no final stop order was made.