Following a December 2013 review of retail structured products, ASIC has released the details about the actions taken and continued monitoring of 10 advice licensees.
ASIC identified problems at IOOF-aligned Consultum Financial Advisers, CBA-aligned Count Financial, AMP-aligned Genesys Wealth Advisers, HSBC Bank Australia, NAB-aligned Meritum Financial Group, Westpac and MASU Financial Management.
Independently-owned groups Sentry Financial Services, Madison Financial Group and FSS Advisory also came under scrutiny.
An ASIC statement said surveillance and regulatory actions led to:
“Licensees commencing a wider review of relevant advisers and clients to determine whether breaches of disclosure or conduct requirements had occurred, the extent of those breaches, and whether client, adviser and licensee remediation was required;
“Two of the licensees submitting notifications of significant breaches to ASIC one licensee terminating the authorisations of a corporate authorised representative and two individual authorised representatives, after identifying systemic breaches by those representatives, and;
“Other remedial actions by licensees including client compensation, fee or commission refunds, corrective or improved disclosure, increased supervision and monitoring of advisers, and changes to licensees’ systems and procedures for providing advice on complex products.”
Looking at specific licensees, ASIC identified “conduct and disclosure concerns in the [authorised] representatives’ structured product advice”.
“[Consultum] committed to measures to address these concerns, including the pre-vetting of all statements of advice (SOAs) when structured products are recommended, and improved disclosure to address deficiencies identified by reviews by ASIC and the licensee,” ASIC said.
At CBA-aligned Count Financial, ASIC was concerned that some client files reviewed did not contain “all necessary evidence of a reasonable basis for the advice”.
As a result of ASIC’s review of the Count Financial advice, some relevant clients are being provided free advice reviews; additional risk controls are in place at the licensee; and Count Financial has communicated with its authorised representatives on the topic, said ASIC.
At AMP-aligned Genesys, ASIC’s concerns stemmed from the fact that advisers from a corporate authorised representative of the licensee had not adequately disclosed the risks, features or costs of the products recommended.
Genesys has since arranged meetings with affected clients to review their position; provided clients with corrective or improved disclosure; increased its supervision and monitoring efforts; and introduced new adviser training.
At NAB-aligned Meritum, ASIC’s review indicated “potential breaches of the requirement to make enquiries of clients’ relevant personal circumstances and to provide a statement of advice in the required time-frame”.
As a result of ASIC’s concerns, Meritum identified systemic breaches by two representatives and an authorised corporate representative and subsequently terminated all three authorisations; wrote to affected clients to notify them of these termination; and lodged a breach notification to ASIC.
At Westpac, ASIC’s concerns related to the appropriateness of advice, disclosure of product risks, scoping of advice, fee disclosure and commission disclosure.
Westpac then conducted a wider review of its representatives’ advice on structured product which led to fee refunds and other “remedial actions”; determined that one recommendation of a ‘Protected Equity Loan’ was inappropriate; and made changes to its systems and policies to improve advice on structured products.
