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13-240MR ASIC accepts enforceable undertaking from Wealthsure Pty Ltd, Wealthsure Financial Services Pty Ltd and their former CEO
ASIC has accepted an enforceable undertaking (EU) from Wealthsure Pty Ltd (Wealthsure), Wealthsure Financial Services Pty Ltd (Wealthsure FS) and the former CEO of both companies, Mr Darren Pawski.
Wealthsure and Wealthsure FS are authorised under their Australian financial services (AFS) licence to offer financial advice. Wealthsure is authorised under its Australian credit licence to engage in credit activity.
Mr Pawski, of Sorrento, Western Australia, was the CEO of Wealthsure and Wealthsure FS and is currently the managing director of Wealthsure.
Wealthsure and Wealthsure FS
The EUs follow an ASIC investigation that started in December 2011. The investigation reviewed Wealthsure's compliance systems and identified recurring compliance deficiencies, despite previous regulatory intervention in 2006.
ASIC is concerned that Wealthsure's commitment to compliance is inadequate. This has resulted in a business culture that has not given sufficient priority to risk management, with consequent detrimental outcomes for consumers.
Wealthsure has demonstrated a failure to properly identify, assess and control compliance risks. In 2011, ASIC expressed concerns about licensees operating a ‘lite touch’ business model (refer 11-44MR).
ASIC is concerned that Wealthsure's ‘lite touch’ approach to compliance has resulted in:
a failure to regularly or consistently review its representatives' financial product advice
a failure to subject its representatives, with a higher risk of compliance breaches, given their compliance history, associations or business model, to more regular random audits
a failure to conduct robust investigations into non-compliant representative conduct or give appropriate consideration to breaches
a failure to systematically ensure appropriate sanctions or other consequences for non-compliant representative conduct
a failure to provide its representatives with robust documented policies and procedures, and
a failure to employ adequate processes for identifying and addressing the competence and training needs of its representatives.
The EU requires Wealthsure and Wealthsure FS to complete a program to address its failure to foster and maintain a proper commitment to its compliance obligations. The program will be reviewed by an independent expert, who will report to ASIC regularly until 2018.
Additionally, the EU requires Wealthsure and Wealthsure FS to restructure their board. Wealthsure must replace its managing director, Mr Pawski, and both Wealthsure and Wealthsure FS must maintain a majority of independent non-executive members on their boards.
If Wealthsure or Wealthsure FS breach terms specified in the EU, they must cease providing financial services and credit activities until ASIC is satisfied that they should be allowed to continue.
Mr Darren Pawski
ASIC's investigation found that Mr Pawski was instrumental in Wealthsure's multiple compliance failures. Under the EU, Mr Pawski must permanently refrain from:
exercising or attempting to exercise any influence over Wealthsure or Wealthsure FS's shareholders or new senior executives
providing financial services
having any involvement or exercising any influence in key decisions of an AFS licensee
taking part in the management of any AFS licensee
having any involvement or exercising any influence in any key decision-making by Wealthsure, as it relates to credit activities, and
taking part in the management of Wealthsure or Wealthsure FS, as it relates to credit activities.
ASIC notes Wealthsure, Wealthsure FS and Mr Pawski have fully cooperated and worked constructively with ASIC during its investigation. They have been proactive in their dealings with ASIC in proposing and implementing solutions to address our concerns.