With the corporate regulator stating it is proactively reviewing its financial advisers register (FAR), further bans on individuals and rising conflicts of interest among small licensees could be likely, according to Wealth Data.
Most recently, a Sydney-based adviser was banned by Australian Securities and Investments Commission (ASIC) for changing the result of his financial adviser exam.
Todd Karamian was found to have changed his financial adviser certificate from a fail result to a pass and sent the altered certificate to his licensee, Bluepoint Consulting.
ASIC had identified Karamian’s conduct through a proactive review of individuals listed as current financial advisers on the FAR despite not having passed the Financial Advisers Exam (FA Exam) by 1 January 2022 (or 1 October 2022 where the financial adviser qualified for the extension), per professional standard requirements.
ASIC also said relevant AFS licensees, or ASIC itself where necessary, would correct the authorization status or cease dates of over 1,300 individuals as a result of this review.
Such reviews would continue to put advisers’ credentials and licensee compliance under what could be a much-needed microscope, according to Wealth Data founder Colin Williams.
He told Money Management, “As we were working through each release of the [Financial Adviser Standards and Ethics Authority] exam results we were able to ‘forecast’ expected numbers into the future (ie post FASEA) when FASEA published a list of advisers who had passed.
“As we [progressed] and reached vital dates such as 31 Dec 2021, it became very clear that a large swathe of financial advisers were not on track to pass.
“However, when the numbers came out through January on the ASIC FAR, it was obvious to me that some licensees were not reporting failures to pass the exam.”
Through 2022, ASIC began additional checks and large amounts of small licensees began to close, going down to zero advisers. Most of the resignation dates were backdated to 31 Dec, Williams observed.
“The vast majority of the licensees affected were working in small accounting-based licensees working under a restricted ‘SMSF’ AFSL. For example, in that sector of restricted SMSF AFSLs, we saw 215 go to zero advisers between Dec 30, 2021 and Jan 3, 2022. Many were backdated after being investigated during the first half of 2022.
“I had asked ASIC what would become of the licensees and ‘advisers’ who remained operating but now had been caught out but I did not get a response. I’m guessing quite a few clients would have got advice from advisers who should not have been giving advice.”
In the unique case of Karamian’s falsified exam result, ASIC did not appear to take action against his licensee Bluepoint Consulting, of which he was a founder.
“I have noticed that ASIC stated he provided advice through to September 2022 but when you now check his details, he ‘officially’ resigned on Jan 1, 2022 – this would now have been backdated,” Williams highlighted.
“This matter may well raise the bigger issue in that the licensee is responsible for updating the ASIC FAR. This does create a conflict of interest for many, if not all small licensees.
“For example, a ‘one adviser licensee’ will often have an adviser who is also in charge of the entire business including compliance and submitting info to ASIC. Therefore, when the adviser does something wrong, he/she has to ‘dob’ themselves in.”
Yet ASIC makes it so easy for these under-capitalised, under-resourced and conflicted one-man bands to get their own licence.