FPA treads softly on potential breaches

Jo-Anne Bloch

The Financial Planning Association (FPA) is investigating whether any of its members received discounted margin loans from failed stockbrokers Lift Capital and Opes Prime, and if any of these breached its soft dollar code.

Chief executive Jo-Anne Bloch said the investigation was launched “in the light of concerns raised by recent reports that planners were offered a discounted rate on margin loans for their own purposes from the two brokers”.

It would seek to establish whether FPA members accepted these discounts and if there were grounds to investigate these members for breaches of the code, Bloch said.

“We’re aware of a small number of our members that are involved with Lift Capital (although not of any involved in Opes Prime), and we’re currently reviewing who may or may not have received these discounts.

“I need to emphasise that we’re as yet unaware of any of these discounts having been received by FPA members, and as such, we have nobody to investigate at this stage.”

She also emphasised that even if a FPA member received these discounts, it would not automatically mean they were in breach of its soft dollar code, which requires benefits of $300 or more to be disclosed.

“Receiving soft dollar benefits is not illegal in terms of our code if it amounts to $300 or more and an FPA member has disclosed it on their publicly available register, and it has not biased their advice to a client.

“However, if these discounts are determined to be a soft dollar benefit by the review and any of these are found to have biased advice to clients, then that would represent a clear breach of the code.”

The public register, which principal members are required to make available for inspection by the FPA, would form part of the investigation, she said.

“The first issue for the review will be to determine if the discounts constitute soft dollar under the code and then whether any members received applicable discounts and have disclosed these.

“The next step is to determine whether any of these discounts biased a member’s advice, which essentially involves us determining if appropriate advice was given on a reasonable basis.

“This is the hard part — because if there are many products offering discounts, and financial planners used a range of products, it would be difficult to assume any bias.”

Any inappropriate behaviour by advisers will be referred to the Conduct Review Commission, an independent body within the FPA’s disciplinary process to “determine the nature of the offence and the sanction”, she said.