CSLR payment leads ASIC to cancel another AFSL

The Australian Securities and Investments Commission (ASIC) has cancelled the Australian Financial Services (AFS) licence of DOD Bookkeeping Pty Ltd (in liquidation) following a payment by the Compensation Scheme of Last Resort (CSLR).

On 29 March 2024, the Australian Financial Complaints Authority (AFCA) made a determination against DOD, which DOD failed to pay. Subsequently, on 23 October 2024, the CSLR paid $64,860.05 to a person for the AFCA determination and notified ASIC.

As a result, the regulator said it cancelled DOD’s AFS licence on 7 November 2024.

Where the CSLR pays compensation to an eligible consumer in relation to an AFCA determination and notifies ASIC of the details of the firm that failed to pay the compensation, ASIC must cancel the AFS licence or credit licence of the firm.

In 2015, the financial firm advised the complainants to set up a self-managed superannuation fund (SMSF) and then purchase two residential properties, one inside and one outside of superannuation, using mostly borrowed funds. The properties purchased were recommended by the financial firm or by a related property investment arm of the financial firm, operating under the same corporate group.

In its determination, AFCA found that but for the inappropriate advice, the complainants would not have bought either property and would not have set up an SMSF.

“The complainants lost $112,730.35 because of the SMSF but gained $57,269.84 on the personal property. Overall, this is a net financial loss of $55,460.51. They also incurred a non-financial loss that warrants compensation of $3,000,” AFCA said.

The cancellation is not subject to discretion or merits review.

ASIC said the decision is not its first regulatory action in relation to DOD. On 17 May 2021, ASIC commenced proceedings against DOD for allegations of breaching the prohibition against conflicted remuneration and failed to provide appropriate financial advice and discharge its bests interests duty in relation to financial advice to selected clients. The matter was heard on 2 and 3 December 2021. The judgment has been reserved.

This is also not the first time that an unpaid AFCA determination and subsequent CSLR payment have led to an AFSL being cancelled, with the corporate regulator taking the action against Libertas in August.

Libertas, which was acquired by Sequoia Financial Group in August 2019, went into liquidation in May 2023. In a statement at the time, Sequoia said it planned to consolidate AFS licences, with management making the decision to transfer Libertas’ operations and customers to InterPrac Financial Planning and Sequoia Wealth Management.

The former dealer group is now managed by an external company.

An AFCA determination had previously been made against Libertas on 24 July 2023, but this was not paid by the firm. As a result, the CSLR paid an unspecific amount of compensation to the person on 24 July 2024 and notified ASIC, which prompted the cancellation.

In October, ASIC also cancelled the AFSL and Australian Credit Licence (ACL) of Ultiqa Lifestyle Promotions Limited on the back of a CSLR payment.