ASIC cancels Sydney AFSL over unpaid AFCA determination
ASIC has cancelled a Sydney AFSL for failing to pay an AFCA determination which was then paid by the Compensation Scheme of Last Resort (CSLR).
DOD Bookkeeping of Parramatta, NSW, which is in liquidation, saw its AFSL cancelled following a CSLR payment. It was formerly known as Equiti Financial Services.
The Australian Financial Complaints Authority (AFCA) made a determination against DOD in March 2024 which the firm failed to pay.
As a result, the payment of $64,860 to an individual was paid by the CSLR, and ASIC was notified to cancel DOD’s AFSL.
The determination related to inappropriate advice to a couple regarding setting up a self-managed superannuation fund and purchasing two residential properties. AFCA determined the firm did not provide appropriate advice or act in the complainants’ best interest in relation to the personal investment property or the start of an SMSF, and the complainants were not experienced investors.
The strategy advised by the firm was also overexposed to growth assets, undiversified, over-levered and not stress-tested, which made it inappropriate for the complainants’ financial circumstances.
“But for the inappropriate advice, the complainants would not have bought either property and would not have set up an SMSF. The complainants lost $112,730.35 because of the SMSF but gained $57,269.84 on the personal property. Overall this is a net financial loss of $55,460.51. They also incurred a non-financial loss that warrants compensation of $3,000.
“This determination is in favour of the complainants, who have 30 days to accept this determination. If accepted, the financial firm must pay $55,460.51 plus interest into the complainants’ SMSF within 21 days. It must also pay $3,000 to the complainants directly.”
Under CSLR rules, ASIC is required to be notified if a firm fails to pay compensation and the licence must be cancelled.
In May 2021, ASIC commenced proceedings against DOD for allegations of breaching the prohibition against conflicted remuneration, and failing to provide appropriate financial advice and discharge its bests interest duty in relation to financial advice to selected clients.
The matter was heard in December 2021 and the judgment was reserved.
Earlier this year, the AFSL of Libertas Financial Planning was cancelled following a CSLR payment, one of four cancellations for this reason this year.
AUTHOR
Laura Dew
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