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Thursday 28 February 2019

19-046MR AAT upholds ASIC decision to refuse an application for a limited AFS licence

The Administrative Appeals Tribunal (AAT) has affirmed ASIC’s decision to refuse to grant a limited Australian financial services (AFS) licence to Superannuation Warehouse Australia Pty Ltd (SWA).

On 31 January 2019, the AAT found that the sole director and nominated Responsible Manager of SWA, Mr Johann Heinrich Preller, failed to demonstrate:

  • an adequate understanding of the general obligations that would apply to a licensee; and
  • failed to disclose matters that the AAT considered were materially relevant; including a failure to disclose past breaches of other laws to ASIC.

The AAT’s decision took into account information referred to ASIC from the Australian Taxation Office about the audits of self-managed superannuation funds (SMSF) undertaken by Mr Preller. This information was provided to ASIC after the hearing closed but before the AAT had made its decision. The AAT agreed with ASIC’s view that this information was relevant to the AAT’s consideration of whether a licence should be granted or refused.

This decision follows an earlier AAT ruling affirming ASIC’s decision to refuse Mr Michael David Watson a limited AFS licence (19-003MR).

ASIC Executive Director of Assessment and Intelligence, Mr Warren Day, said, ‘These decisions reinforce the importance of providing full and frank disclosures to ASIC and the weight placed on an applicant’s past conduct in financial services or under other legislation in determining a licence application.

‘Applicants, and anyone else involved in preparing and lodging applications with ASIC, are on notice that a failure to disclose all relevant information runs the risk of the application being refused.

‘While some applicants may be relatively new to the licensing regime, we emphasise that granting a licence is a privilege and not a right and that making a false or misleading statement in a licence application may result in a criminal prosecution. Further, if we find out after we have granted a licence, we may cancel it, or seek other remedies’, Mr Day said.

Background

On 30 April 2014, SWA applied for a limited AFS licence to provide financial product advice in relation to self-managed superannuation funds. After assessing the application and providing SWA with a right to make submissions and be heard, on 17 June 2016, an ASIC Delegate determined that SWA’s application must be refused.

SWA appealed ASIC’s decision to the AAT on 15 July 2016. A copy of the decision of the AAT to affirm the decision of the ASIC Delegate to refuse the application for the AFS licence is available here.

SWA had 28 days from the day of this decision to appeal the AAT’s decision to the Federal Court of Australia.

ASIC has previously taken action against SWA, preventing “FREE SMSF SETUP” advertising in 2015 (15-095MR) which resulted in a SWA paying a penalty of $25,000 as ordered by the Federal Court of Australia (15-322MR). For further information on ASIC’s work to stop potentially misleading SMSF social media advertising, refer 16-041MR.

Other examples of ASIC taking action against applicants and licensees for misleading ASIC include:

  • ASIC taking criminal action against Mr Andrew Law who made false and misleading statements in a document submitted to ASIC in an licence application (refer: 18-353MR);
  • ASIC cancelling a licence held by IMS FX Services Pty Ltd due to a materially misleading statement made in the application for the licence (refer: 16-284MR); and
  • ASIC accepts enforceable undertakings from two directors (Mr Frank Tearle and Mr Justin Epstein) involving a $200,000 community benefit payment, governance and conduct related training, and removal from engagement as responsible managers for a period of time (refer: 18-048MR).
Last updated: 28/02/2019 12:00