The Financial Services and Credit Panel (FSCP) has delivered a written reprimand to an adviser that it said failed to ensure their client understood their CGT liability.
In a brief statement, the FSCP said it has provided a “written reprimand” to an adviser anonymised as “Mr W” over advice given in August 2022.
According to the FSCP, the relevant provider gave advice to a client in March 2022 that included a recommendation to make a tax-deductible contribution to superannuation to reduce the tax liability from expected capital gains from the planned sale of an investment property.
“The relevant provider was advised of the sale of the property in July 2022, and in August 2022 the relevant provider confirmed the contribution could be made,” it said.
“However, the contract of sale for the property was signed in the 2021–22 financial year and the client did not have taxable income in the 2022–23 financial year to get the benefit of the tax deduction.
“The relevant provider did not explain to the client that the capital gains tax liability arises when the contract of sale is signed, or take steps to confirm when the contract was signed before implementing the advice.”
The sitting panel determined that it “believed that the relevant provider contravened sections 961B(1), 961G and 921E(3) [of the Corporations Act] specifically they did not demonstrate compliance with Code of Ethics’ values of diligence and competence and Standard 5”.
Standard 5 of the Code of Ethics details that all advice and financial product recommendations that you give to a client must be in the best interests of the client and appropriate to the client’s individual circumstances. You must be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products that you recommend, and you must have reasonable grounds to be satisfied.
Other than taking no action, a written reprimand is the lowest level of action available to the FSCP.
The reprimand will not be published on the Financial Advisers Register; however it is provided to the adviser’s AFSL.
Financial Services Minister, Stephen Jones, recently announced that the government has reappointed 24 members to the FSCP for a three‑year period beginning on 1 January 2025.
Departing member, Nick Hilton, was recently named as an executive general manager for advice delivery at Entireti following the acquisition of the AMP advice division, having previously held the same role at AMP since January 2022.
ASIC is responsible for convening individual panels to consider disciplinary matters. Each panel must consist of a chair (an ASIC staff member) and at least two other members, which ASIC must select from a list of eligible persons appointed by the minister.
“The candidates bring with them a range of knowledge and experience across the fields of business, administration of companies, financial markets, financial products and financial services, law, economics, accounting, taxation and credit activities and credit services,” Jones said.
