A victim of NextGen Financial Group has received a payment from the CSLR after the company went into liquidation rather than pay a $270,000 determination from the Australian Financial Complaints Authority (AFCA).
In August 2016, WJ & V Drakoulis Super Pty Ltd (as trustee for the WJ & V Drakoulis Super Fund) received personal advice to establish an SMSF to purchase a residential investment property. However, there was a delay in the settlement of the investment property.
In the interim, the $175,000 that had been put aside for the property purchase was invested into Fund I for a one-year term, which meant the property purchase was unable to be completed.
The trustee complained to AFCA, and NextGen was ordered to pay $270,000 for inappropriate financial advice.
However, NextGen failed to respond to the AFCA determination or dispute the debt, and the case progressed to court. In the Federal Court, NextGen argued the debt was not due and payable as an AFCA determination does “not have the effect of creating a debt enforceable by the way of statutory demand”.
In September 2023, WJ & V Drakoulis Super Pty applied for NextGen to be wound up, and the firm was placed in liquidation in November 2023.
As a result, the individuals were forced to apply for the Compensation Scheme of Last Resort (CSLR) as their final hope in getting their money back. The CSLR can pay out up to $150,000 to consumers who have an unpaid determination.
Speaking to Money Management, Vicki Alexopoulos, who is one of the two SMSF owners, said the payment concludes a saga that has lasted six years.
“When the CSLR became available, we applied immediately to them. We were awarded the full amount allowed, I believe, because of the Federal Court decision and our previous application to AFCA.
“The entire payment from the CSLR to us (our SMSF) was $150k and $30k was paid out of that to legal and financial advice fees. We are out quite substantially from what AFCA and the Federal Court ordered NextGen to pay us, and we are out even more substantially if our initial investment had not been tampered with and our purchase was able to happen.
“Ultimately, ASIC could have helped us long before, however chose not to, costing us a great deal of money, (to add insult to injury), which had to be paid from our compensation amount.”
The AFSL of NextGen was cancelled by ASIC in February 2024, and it was announced in March that the firm no longer had any financial advisers on its books, having started 2023 with 46 advisers.
Earlier this week, Peter Daly, a former Linchpin director – where former NextGen owner Beacon was a subsidiary – lost his appeal against a $150,000 penalty for breaching his duties as an officer. He sought a lesser penalty of $40,000 and a disqualification of three years rather than five.
Linchpin collapsed in 2018 and Daly was banned in November 2019 from providing financial services for five years, alongside former directors Paul Raftery and Ian Williams, for failing to act in the best interest of investors in managed investment schemes under their control.
In June 2020, NextGen was acquired by US private equity firm Genesis Financial, a global financial services company focused on fintech-powered wealth management and D2C lending platforms.
