ASIC has commenced Supreme Court proceedings against a Sydney financial planning firm, First Capital Financial Planning Pty Limited (First Capital)*.

First Capital provides financial advice, including advice about superannuation, and many of its clients are teachers in New South Wales.

Under the Corporations Act, people or organisations providing personal financial advice must give a potential client a Statement of Advice (SOA). These statements are intended to help a consumer make an informed decision about whether or not to follow the advice provided by their financial adviser, and should be tailored according to the consumer’s specific needs.

Between December 2004 and September 2005, First Capital advised more than 180 teachers to switch from their state government superannuation to a superannuation fund recommended by First Capital.

ASIC alleges that:

• the SOA did not properly explain the differences in fees between the state government fund and the recommended fund;
• the SOA did not contain a comparison of the fees to be paid;
• the SOA did not contain details about insurance, including the associated costs, which was available to clients in their existing funds; and
• some of the SOAs contained misleading or deceptive statements about fees and about the past performance of the recommended fund.

ASIC Deputy Chairman, Mr Jeremy Cooper, said ASIC took action in this case because it was concerned that consumers had not been given the required information about the new superannuation fund recommended to them.

‘Superannuation is a long term and important consideration for people, and it’s vital that consumers are given certain key information about the impact of switching so that they can make a fully informed decision’, Mr Cooper said.

ASIC is seeking declarations that First Capital breached the law, as well as orders restraining First Capital from engaging in such conduct in the future.

ASIC is also seeking orders that require First Capital to write to affected clients outlining the case brought by ASIC, the outcome of the proceedings and options about returning to their previous superannuation fund and getting compensation.

The case is next before the Court on 24 February 2006.

*First Capital Financial Planning, which is based in North Sydney, is not associated with First Capital Securities Limited and First Capital Finance Pty Ltd, which are based in Brisbane, or First Capital Corporate Limited, which is based in Perth.