Adviser hit with 3 month suspension over ROA misuse

The Financial Services and Credit Panel (FSCP) has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.

It has suspended the registration of financial adviser Ian Reid for three months, effective 21 November 2024.

With this, Reid’s financial adviser registration will not be in force till February 2025, and he is not permitted to provide personal advice to retail clients in relation to relevant financial products.

Reid was referred to the FSCP by ASIC following a review that examined why some superannuation members continued to invest in persistently underperforming investment options under their choice superannuation products.

According to the FSCP, Reid had not complied with his obligations when providing advice to three clients, using records of advice (ROA) that relied on statements of advice (SOA) that had been given to the clients up to seven years ago.

“The FSCP was reasonably satisfied that the further advice exemption from giving an SOA in regulation 7.7.10AE of the Corporations Regulations 2001 did not apply to two of the three clients because there had been changes in those clients’ relevant personal circumstances which were significantly different from that in relation to the previous advice,” it said.

It said it was reasonably satisfied that the s961B and s961G obligations were not complied with for all three clients, explaining there was “not sufficient evidence” on the client files:

● That reasonable enquiries were made about the client’s relevant circumstances

● That, of the enquiries that were made, the results of those enquiries were taken into consideration and advice scoped appropriately

● That the clients’ strategic advice needs were taken into consideration

● demonstrating why the previous recommendations in the SOA remained appropriate, and

● that the relevant provider based all judgements in advising the client on that client’s relevant circumstances.

According to ASIC, an ROA is a simple record that confirms the advice provided by an advice licensee or an adviser, shorter and less formal than an SOA. It is often given to existing clients to confirm changes to, or implementation of, advice that has been provided in a previous SOA.

The three scenarios when an ROA can be used instead of an SOA are for further advice, when there is no buy or sell product advice, and for small investment advice regarding assets less than $15,000.

Previously, the FSCP issued a warning in August to a relevant provider for failing to provide a client with an SOA.

It issued a warning regarding advice provided to retail clients between February 2022 and November 2022, noting the relevant provider contravened the Corporations Act by failing to provide an SOA after giving personal advice to the client.

It marked the second time the panel had issued a warning since the panel’s introduction in early 2023.