ASIC cancels Wealth & Risk Management’s AFSL
The Australian Securities and Investments Commission (ASIC) has cancelled the Australian financial services licence (AFSL) of Wealth & Risk Management (WRM), following a finding by the Federal Court in February that the company had breached numerous financial services laws and obligations.
The Federal Court found that WRM, alongside Yes FP and Yes FC, engaged in unconscionable conduct by operating a business model based on giving cash payments to financially vulnerable clients in connection with the provision of financial advice.
WRM was the AFSL holder in the business setup, and Yes FP employed its authorised advisers to provide personal financial advice to retail clients referred to them by Yes FS.
The business:
- Advertised 'fast cash' to consumers with poor credit histories seeking loans;
- Required consumers to receive and implement financial advice that recommended switching their superannuation and taking out 'high end' insurance;
- Charged advice fees that were paid out of consumers’ superannuation funds and received upfront and trailing insurance commissions; and
- Used the upfront insurance commission generated by the financial advice to provide a 'cash rebate' to clients.
The court found that this conduct meant WRM breached its AFSL licensee obligations, as it did not take reasonable steps to ensure its authorised representatives acted in clients’ best interests or did all things necessary to ensure its financial services were provided efficiently, honestly and fairly.
It also ruled that a former director of the companies, Joshua Fuoco, was knowingly involved in the breaches. He was fined $650,000 and agreed in a settlement to an order restraining him from providing financial services for a decade.
As part of its ruling, the Federal Court ordered that WRM be restrained from carrying on a financial services business for 18 years. It also fined the three companies a total of $7,150,000.
WRM’s AFSL cancellation by ASIC was effective from 14 May, 2018.
AUTHOR
Hannah Wootton
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