The Australian Securities and Investments Commission’s Federal Court action against RI Advice and former financial planner is looming as a test case of the extent to which a licensee can be held responsible for compliance and the actions of an adviser and how quickly it should act.
The Federal Court action has stemmed from a case-study aired during the Royal Commission and ASIC has raised with the court the due diligence entailed in RI Advice’s recruitment of the planner, John Doyle and its adherence to its own pre-vetting of advisers, including Doyle’s inability to complete a financial planning knowledge test or have client files pass pre-vetting without outside assistance.
The matters raised by ASIC in its notice of filing cover a litany of allegations with respect to RI’s handling of Doyle including maintaining him despite him receiving the worst possible rating in an Advice Quality Report and similar failures in successive reports and the issue of termination and suspension notices.
The filing also noted that RI Advice consistently recorded Doyle as one of its high revenue earners and that he continued to write substantial business even after the issue of the suspension notice.
Importantly for RI Advice, now owned by IOOF, AIS is seeking declarations from the court that the licensee did not take reasonable steps at various times between 1 November, 2013, and 30 June, 2016, to ensure that Doyle complied with key sections of the act.
It is also seeking a finding that RI Advice failed to do all things necessary to ensure that the financial services covered by its license were provided efficiently, honestly and fairly and that it failed to take reasonable steps to ensure that its representatives complied with the financial services laws.
ASIC is also seeking pecuniary penalties against RI Advice and orders with respect to compliance and remediation.
The ASIC filing said that the primary legal grounds upon which relief was being sought that RI Advice knew, or ought to have known that there was a substantial risk that Doyle was not complying with one or more sections of the act.
It is said that RI Advice “did not take reasonable steps to address that risk. Insofar as RI subject Doyle’s advice to pre-vetting, Doyle regularly bypassed this requirement, as RI knew or ought to have known”.
The ASIC filing also alleges that RI took too long to issue the suspension notice and to terminate Doyle’s authorisation.
