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16-305MR ASIC accepts enforceable undertaking to address compliance failures of Perth financial advice firm
ASIC has accepted an enforceable undertaking (EU) from Neo Financial Solutions Pty Ltd (Neo) following concerns about the adequacy and application of Neo’s risk management and compliance frameworks.
Under the EU, Neo will engage an independent expert to assess, report and make recommendations about Neo’s risk management and compliance frameworks.
NEO is based in Perth, Western Australia with approximately 160 individual and corporate authorised representatives.
The EU follows an ASIC surveillance of Neo's’s business. ASIC's surveillance focussed on Neo’s general obligations as an Australian financial services (AFS) licensee and included a review of its compliance and risk management framework including its programs, policies, procedures and controls. ASIC’s surveillance also tested financial product advice provided to retail clients and the internal advice audits and remediation reviews conducted by Neo.
ASIC's advice concerns included failing to address important client objectives, not making reasonable enquiries to determine all relevant client circumstances and not fully considering the consequences when replacing existing financial products.
ASIC's surveillance indicated that Neo failed to employ appropriate risk management and compliance frameworks having regard to the nature, size and complexity of its business, which had grown considerably since its inception. In particular, in ASIC's view, Neo had:
- inadequate resources to carry out monitoring and supervision;
- inadequate identification, recording and assessment of risks;
- audit and remediation programs which were not timely and effective in identifying and remediating advice conduct and deficiencies;
- vetting policies and procedures which were not consistently applied or adequate to manage compliance risks; and
- failed to take reasonable steps to ensure its authorised representatives complied with financial services laws.
ASIC Deputy Chairman Peter Kell said, ‘As this matter shows, inadequate risk management and compliance frameworks, combined with deficient application of a licensees' systems and controls can result in the provision of advice that does not serve the best interests of clients.
'ASIC is committed to raising standards across the financial services industry. We expect licensees to dedicate sufficient resources to appropriately monitor and supervise high risk and newly appointed authorised representatives and to remedy poor advice in a timely manner', Mr Kell said.
ASIC acknowledges the co-operation of NEO's management in resolving ASIC's concerns.
ASIC confirms that the EU entered into by Neo has now been finalised.
As a result of the EU, Neo has made a number of changes to its risk management and its compliance management frameworks and the independent expert has confirmed that these changes have been satisfactorily implemented. The two further recommendations made by the independent expert in its final report have subsequently been implemented by Neo.
ASIC acknowledges the positive approach taken by Neo during the course of the EU and its commitment to making necessary improvements.
A copy of the independent experts final summary report is available here.