ASIC has cancelled the Australian financial services (AFS) licence of Sydney-based Jade Capital Partners Pty Ltd (Jade Capital), which provided managed discretionary account (MDA) services, and banned one of its directors, James Clinnick, from providing financial services.
Jade Capital's licence cancellation took effect on 11 January 2019. Mr Clinnick will be banned for a period of four years.
ASIC has taken this action because an ASIC surveillance uncovered widespread non-compliance with financial services laws at Jade Capital. As a result, ASIC concluded that Jade Capital had failed to provide financial services efficiently, honestly and fairly, and Mr Clinnick was involved in Jade Capital's breach of a financial services law by engaging in misleading and deceptive conduct.
Jade Capital contravened financial services laws by advertising misleading returns, fees and costs, performance history and results relating to MDA strategies. Jade Capital also failed to maintain the competence to provide financial services and to ensure its representative was adequately trained and competent.
Jade Capital advertised returns for its MDA strategies on its website and in a video presentation, which included 'back tested' [1] returns. ASIC found the advertised MDA returns were likely to mislead potential investors into believing the returns were based on actual returns when this was not the case.
ASIC also found the advertised fees and costs could lead investors to believe Jade Capital would only receive income if an investor made profits when, in fact, Jade Capital received transaction fees from trading on behalf of clients under an MDA arrangement. Furthermore, claims about performance in the video presentation were also likely to mislead investors into thinking the MDA strategies managed by Jade Capital had been generating consistently good results.
ASIC Commissioner Danielle Press said 'AFS licensees must comply with financial services laws or risk losing their licence. Licensees must not mislead consumers when marketing their services. ASIC will not hesitate to take action when licensees or their representatives don’t comply with the law. I also advise all consumers considering MDAs to evaluate the risks and benefits of an MDA. Consumers should ensure they have a good understanding of all the fees and charges, and carefully consider the scope of authority they are giving to their adviser.'
The cancellation of Jade Capital's AFS licence is part of ASIC's ongoing efforts to improve standards across the financial services industry. Under the terms of the licence cancellation, Jade Capital can continue operations until 30 April 2019 to facilitate the termination of existing arrangements with clients.
ASIC expects AFS licensees to ensure the information provided to consumers via advertising or disclosure documents is accurate. Licensees are responsible for the conduct of their authorised representatives and should ensure they have the necessary training and skills to provide the financial services covered by the licence. ASIC expects licensees to take reasonable steps to ensure that their representatives comply with the law and meet the best interests duty when providing financial product advice to consumers.
The banning orders for Mr Clinnick have been recorded on ASIC's publicly available Financial Advisers Register, which consumers can access to check the qualifications and credentials of financial advisers.
ASIC provides information and guidance for people whose financial advisers have been banned as well as tips on choosing an adviser on the MoneySmart website.
Background
Jade Capital Partners Pty Ltd have held AFS licence 425895 since 8 October 2012. Under the Corporations Act, ASIC has the power to suspend or cancel an AFS licence if a licensee does not comply with its obligations under s912A.
Jade Capital and Mr Clinnick have the right to seek a review of ASIC's decision at the Administrative Appeals Tribunal.
[1] Backtesting assesses the viability of a trading strategy by discovering how it would play out with historical data. (https://www.investopedia.com/terms/b/backtesting.asp)
Editor's note:
On 11 February 2019, James Clinnick applied to the Administrative Appeals Tribunal (AAT) for a review of ASIC's decision.
Editor's note 2:
On 29 June 2019 the AAT advised ASIC that it had received written notification from Mr Clinnick that he wanted to withdraw his review application. As a result, Mr Clinnick's application for a review of ASIC's decision was dismissed by the AAT with an effective date of 1 July 2019.