FSCP makes independent supervision order against adviser

Advice failures related to two retail clients have led to a relevant provider, anonymised as “Mr G”, being directed by the Financial Services and Credit Panel (FSCP) to receive specified supervision.

The FSCP sitting panel determined that the relevant provider “failed to accurately identify the clients’ goals, failed to make reasonable inquiries to obtain complete and accurate health information for one client, failed to consider the insurance information in relation to one client, and failed to consider the risk profiles of the clients”.

It also found the statements of advice (SOA) did not address all of the clients’ goals and did not “ensure that the clients kept their existing insurance until their new insurance was in place”.

Additionally, the relevant provider failed to ensure that the SOAs they provided set out the “potential benefits, pecuniary or otherwise, that may be lost by implementing the advice”, as well as any “significant consequences of implementing the advice”.

The failures listed, the FSCP said, constituted contraventions of s961B, s961G, and s947D of the Corporations Act.

The adviser was also reprimanded for prioritising “his and his associates own interest in generating commissions over the clients’ interests in maintaining their insurance cover and keeping their costs low”.

The FSCP added that the relevant provider failed to demonstrate the Code of Ethics’ values of competence, fairness and diligence, and breached Standards 3 and 5 of the Code of Ethics.

As a result, the panel ordered that the relevant provider receive specified supervision from an independent compliance professional at their own cost and audit the next 10 pieces of advice that they intend to present to a retail client, as well as the next five pieces of insurance advice if there is no insurance advice included in the first 10.

The relevant provider is then required to provide the independent compliance professional’s findings to the Australian Securities and Investments Commission.