ASIC roundup: A$12m penalty for misleading representations, fee disclosure failures

Permanent ban on former insurance broker – November 24, 2023

Renato De Maria, the sole director of Melbourne-based Alliance Management Group Pty Ltd (formerly Alliance Insurance Broking Services Pty Ltd), has been permanently banned from providing any financial service or from controlling an entity within the financial business.

The company’s Financial Services (AFS) licence has also been cancelled.

A$12m penalty for misleading representations and fee disclosure failures – November 23, 2023

Mercer Financial Advice (Australia) Pty Ltd has been ordered by the court to pay a A$12m ($7.9m) penalty after admitting to failing in its fee disclosure obligations, and charging customers it was not entitled to charge.

The company was found to be breaching both the Corporations Act and ASIC Act over a three-year period between July 2016 and June 2019 by:

failing to invite more than 800 clients to its annual review meetings;
failing to provide fee disclosure statements to over 500 clients,
issuing over 3,000 non-compliant fee disclosure statements to more than 2,000 clients, and
charging 761 clients more than A$4.7m ($3m) in fees for services they did not receive.

Mercer has also previously commenced a remediation program for more than 3,400 customers who were charged fees for financial advice that may not have been provided between 2012 and mid-2019, which resulted in compensation of around A$45m ($29.5m).

“Contraventions in the present case were extremely serious. They were large in number, many clients were affected, large sums were involved, and they continued over a long period of time.”
Justice McEvoy

Similar penalty proceedings had earlier been taken against:

Westpac and related entities within the Westpac group, A$40m penalty ($26.2m);
AMP Limited Group, A$14.5m penalty ($9.5m);
National Australia Bank, A$18.5m penalty($12.1m); and
Aware Financial Services, A$20m penalty ($13.1m).

Court orders companies to apply for AFS licence – November 23, 2023

The court has found that iExtend Holdings Company Pty Ltd and iExi Pty Ltd need to apply for an AFS licence to continue to operate as financial services businesses.

After an investigation by ASIC, it was revealed that the companies were operating without the AFS licence, and were offering to pay people’s life insurance premiums in exchange for a portion of the benefit if a claim is made. They also acquired interests in life insurance policies by entering into a co-ownership deed with policy holders.

Former Magnolia Group Capital director disqualified – November 22, 2023

The former director Mitchell Atkins of Magnolia Capital Group has been disqualified from managing corporations for five years, and banned from providing financial services and engaging in credit activities for 10 years.

He was a director of all companies in the Magnolia Capital Group, including 13 that were found unable to pay their unsecured creditors more than 50 cents in the dollar.

The Magnolia Capital group of companies operated between 2018 and 2022, and collapsed in 2022 owing unsecured creditors millions of dollars. According to ASIC, Atkins put investor funds at risk, created false documents, co-mingled investor funds and displayed a lack of competence, professionalism and financial management.

Between September 19, 2018 and October 7, 2022, Atkins was also an authorized representative of Australian financial services licensee Guildfords Fund Management Pty Ltd. – but was found not fit and proper to engage in credit activities, or to deal with investor complaints and to respond to requests. He was also making misleading and deceptive statements to investors about their funds, and dishonestly retaining funds which were due to be repaid to investors.

On March 2, 2023, Atkins was declared bankrupt, and in June, he was restricted by the Federal Court from leaving Australia for six months.

The investigation into Magnolia Capital Group is ingoing – liquidators have reported a deficiency to creditors of between A$40-A$50m ($26-$33m).

Suspended licence of Suetonius Wealth Management – November 22, 2023

The AFS has been suspended for Suetonius Wealth Management Pty Limited until February 28, 2024, over failings to lodge its financial statements and audit reports for FY ending June 2021 and June 2022.

If the company has not lodged the missing statements and reports by the end of the suspension period, ASIC might cancel the AFS licence altogether.

Director convicted of obtaining a financial advantage – November 20, 2023

Company director Louise Angela Medley has been found guilty and convicted of two counts of dishonestly obtaining financial advantage by deception. Between December 16, 2016 and March 13, 2018, Medley was found to have been dishonestly remunerated A$28,016.81 ($18,397) for collecting on customer credit debts even though Black Collections Pty Ltd was fraudulently acting as a debt collector.

In June 2021, Black Collections was convicted and fined A$8,800 ($5,778) for engaging in unlicenced credit activity and A$4,400 (2,889) for claiming to hold a licence that would authorise collecting debts.

Medley was sentenced to an 18 months community corrections order after earlier pleading guilty of two counts of contravening S192E(1)(b) of the Crimes Act 1900 (NSW).

Black Collections was convicted of breaching s29(2) and s30(3) of the National Consumer Credit Protection Act 2009.

ASIC news weeks 47

ASIC Annual Forum

ASIC held its Annual Forum on November 21-22 in Melbourne, under this year’s theme Navigating disruption.

In his keynote opening, ASIC Chair Joe Longo spoke about how regulation and enforcement are key to navigating disruption, and how the Commission takes a strategic approach to respond to emerging risks and harms. Longo also highlighted the geopolitical uncertainty which affects the global market – which require effective regulatory responses.

“This is why ASIC is so conscious of the need for effective regulatory responses to the changing world around us. Especially since the reality is, while ASIC has a clear direction, experience tells us that the need for change is constant. And so too with regulation, it too needs to evolve alongside change, adapting, and responding to the environment,” Longo said.

Other talks from the forum included:

Next year’s Annual Forum is to be held in Sydney.

New Commissioners

The new Commissioners Simone Constant and Alan Kirkland began their five-year terms last week.

For Constant, the initial regulatory focus will be on markets and superannuation, and for Kirkland, insurance, credit and financial advisers and investment management. Kate O’Rourke, who started in September, will focus on banking and payments, audit, insolvency and registers.

Announcement

ASIC and the Reserve Bank of Australia has acknowledged ASX’s announcement of a solution design to replace CHESS. The product-based solution and vendor is said to be “a foundational step in getting the CHESS replacement program back on track”.

“This is an important decision by ASX, but there is still a long way to go to deliver a CHESS replacement. It will be critical for ASX to now focus on engaging with the market on the detailed design of the CHESS Replacement program with a realistic and achievable timeline for implementation,” said ASIC Chair Joe Longo.

Consultation

ASIC is proposing to remake the ASIC Class Order [CO 13/721] Relief to facilitate quotation of exchange traded funds on the AQUA (ASX Quoted Assets) Market.

The class order is due to expire on April 1, 2024, and the proposal is to continue the relief with an amendment to extend the relief to a broader class of exchange traded funds (ETFs).

Feedback can be submitted until January 5, 2024.

ASIC roundup: A$12m penalty for misleading representations, fee disclosure failures

ASIC news weeks 47

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