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13-019MR ASIC cancels licences of national financial planning business
ASIC has cancelled the Australian financial services (AFS) licences of AAA Financial Intelligence and AAA Shares (in liquidation) (AAA) after it found it had comprehensively and repeatedly failed to comply with the Corporations Act 2001 and the conditions of its AFS licence.
ASIC was particularly concerned about the level of supervision of the representatives AAA appointed and, in effect, their conduct and the advice they provided to retail clients.
AAA was a national financial planning business, based in Sydney. It provided financial planning advice via its network of 186 Authorised Representatives.
Following a surveillance of the business starting in June 2010, ASIC found AAA had breached the majority of its licence obligations.
adopted a business model that only allowed it to increase cash flow by increasing the number of advisers it authorised. The fee charged did not maintain sufficient financial resources to comply with its general obligations
failed to maintain adequate human resources and technological resources to identify who its representatives were, the clients being serviced and the products being sold and to carry out supervisory arrangements
failed to ensure that representatives had the necessary knowledge and skills prior to appointing them as authorised representatives and after they were appointed, failed to ensure that they were adequately trained and competent to provide financial services under the licence
failed to implement adequate supervision and compliance measures, including advice audits. AAA outsourced its advice audit program to an external party without adequate supervision, failed act in accordance with its own audit policy and failed to remediate advice and conduct issues when they were identified
failed to ensure that its representatives complied with relevant financial services laws when providing financial advice to retail clients
failed to identify and manage conflicts of interest, and
failed to act efficiently, honestly and fairly in respect of the templates and guidelines it provided to its representatives, representative audit reports, complaints handling and record keeping.
ASIC Commissioner Peter Kell said: ‘Licensees have a general obligation to do all things necessary to ensure they provide financial services efficiently, honestly and fairly.
‘AAA Financial Intelligence was found to have an appalling record that put at risk the quality of advice it provided to retail clients.
‘ASIC uses a number of regulatory remedies to improve and enforce compliance with the laws it regulates, which includes cancelling an AFS licence. The cancellation of AAA’s licence demonstrates ASIC’s commitment to ensuring advice industry participants are meeting their key obligations, including having adequate compliance measures in place.’
ASIC has put in place a communication strategy for the representatives of AAA, including asking all representatives of AAA to communicate the consequences of the licence cancellation to their clients.
The cancellation of AAA Financial Intelligence’s AFS licence and AAA Shares’ AFS licence took effect on 29 January 2013 when the orders were served. The delay in publication of the AAA Financial Intelligence decision follows proceedings at the Administrative Appeals Tribunal (AAT).
AAA Shares has the right to seek a review in the AAT of ASIC’s decision.