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The Financial Advisers Disciplinary Committee (FADC) has today published its decision regarding a case brought by the FMA. The case relates to alleged breaches of the Code of Professional Conduct for Authorised Financial Advisers.
It says that "this is a case about breaches of the Code". It is not about the integrity of the financial adviser. "There is no suggestion that she has improperly benefited at the expense of her clients, or that any client has been disadvantaged."
"But, the provisions of the Code are fundamental and adherence to them is always required."
The financial adviser still has interim name suppression, but the decision says she registered as an AFA on the FSPR in 2011. She offers a range of services including financial advice, financial planning, investments, mortgage broking, KiwiSaver, retirement planning, residential property management and personal and small business tax advice (as a tax agent) through her business. She trades under three businesses, one of which is registered on the FSPR from 2011 as an employer or principal of a financial adviser and/or Qualifying Financial Entity.
After an unrelated complaint in January 2018, the FMA took an interest in the AFA, which culminated in a monitoring visit to the premises in May 2019, and a desk based review in July 2019.
As a result of these two visits, the FMA began an investigation on August 23, 2019.
The investigation found that the AFA breached standards 12 and 15 of the Code, which relate to keeping information about personalised services for retail clients, and the requirement to have an adequate knowledge of Code, Act and laws.
The court briefing says that "The breaches are established in respect of three clients, whose identities are permanently suppressed; it consists of the adviser having failed:
a. to record in writing adequate information about a personalised service provided to a retail client
b. to demonstrate adequate knowledge of the relevant legislative obligations which result from the term ‘personalised service’."
There are three alleged breaches of Code Standard 15, relating to financial advice, personalised services, and client relationship management. Relating to these the court concluded that "the Respondent had a somewhat idiosyncratic approach to record keeping and generally did not respond to the requirements of the Code with sufficient rigour".
The picture of the proceedings that the documents paint is illustrated when the FADC documents state, "As the oral hearing progressed, and we were able to get beyond the avalanche of words, it became apparent that the Respondent was of the view that she was not providing financial advice by a personalised service unless and until she had received and documented the entire circumstances of a client.
"The Respondent’s records were less than straightforward. The task for us is whether in each of the individual circumstances which have been put under the microscope a personalised service was being provided on a sensible objective basis. The perception of the Respondent of what she was doing is not conclusive. The records which she is required to maintain must in and of themselves provide a comprehensive picture of the relationship and what was occurring. They are not merely for her benefit, but have a wider purpose under the Code."
The FADC reviewed four separate client files in which failure to establish adequate records was established.
No penalties have been handed down at this stage and the committee has asked for dispositions from the parties.
Good Returns covered the hearing, you can read our report here.
Opinion: What's the point of the FADC?
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ASIC prosecuted them over 15 cases.
Westpac won at Federal Court. ASIC appealed and Full Court agreed. Westpac appealed that decision but have just lost.
Will be interesting to see the penalty there - a "swingeing fine" or a wet bus ticket? Time will tell..