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20-020MR ASIC bans Queensland-based financial adviser and cancels the AFS licence of Smart Solutions
ASIC has banned Queensland-based financial adviser Mr Timothy Shapter from providing financial services for a period of seven years, and cancelled the Australian financial services (AFS) licence of Smart Solutions Group (Aust) Pty Ltd (Smart Solutions). Mr Shapter was a director and an authorised representative of Smart Solutions.
ASIC’s review of a sample of Mr Shapter’s advice files found that he provided advice that was not in his clients’ best interests, was not appropriate to his clients, and that gave priority to generating fees for himself over the financial interests of his clients.
The review found that Mr Shapter provided inappropriate switching advice by recommending that clients switch out of their existing superannuation and insurance products, and into higher fee paying products. Mr Shapter also used a ‘layered advice’ strategy, whereby he provided his clients with a superannuation statement of advice first, followed by an insurance statement of advice a few weeks later. This process was found to be confusing for clients and, in some cases, resulted in lost insurance or policy exclusions. The review also found that Mr Shapter issued multiple statements of advice and provided inappropriate switching advice to generate fees for himself.
Mr Shapter obtained most of his clients under a referral arrangement with a third party engaged by Smart Solutions. The third party cold called potential clients and obtained limited details about their financial circumstances and their risk profiles. Mr Shapter then used this limited information to prepare his advice documents. He usually issued his superannuation statements of advice on the same day that the initial client enquiries were made by the third party. ASIC found that Mr Shapter could not have properly enquired about, or considered, his clients’ needs and circumstances, their reasons for wanting advice, or the most suitable options for their circumstances within such a short timeframe.
Financial advisers have a legal obligation to act in the best interests of their clients when providing personal advice. This includes taking reasonable steps to understand their clients’ personal circumstances and exploring existing financial products to ensure they are providing appropriate advice that meets their clients’ objectives.
ASIC has also cancelled the AFS licence of Smart Solutions because the licensee failed to ensure that financial services were provided efficiently, honestly and fairly. Smart Solutions also failed to adequately monitor and supervise its authorised representatives, and maintain competence to provide the financial services covered by its licence.
For example, Smart Solutions permitted some of its authorised representatives to audit their own advice files. It also provided false information in connection with the anti-money laundering customer verification requirements because it allowed its authorised representatives to falsely declare that they had sighted official identity documents.
AFS licensees must ensure that they have adequate resources and arrangements for monitoring and supervising their representatives. Individual advisers cannot audit their own advice.
Licensees who allow advisers to obtain their clients under a referral arrangement should ensure that advice provided by those advisers is based on the client’s circumstances and supported by adequate enquiries made by the adviser.
The banning of Mr Shapter and the cancellation of Smart Solutions’ AFS licence are part of ASIC's ongoing efforts to improve standards across the financial services industry.
ASIC advises consumers that they should not engage with cold callers and should report any suspicious activity to ASIC and/or the ACCC.
Mr Timothy Shapter was an authorised representative of:
- Smart Solutions Group (Aust) Pty Ltd from 7 August 2017 to 12 July 2019; and
- Sentinel Private Wealth Pty Ltd from 8 July 2013 to 7 August 2017.
Mr Shapter was the director and the responsible manager of Smart Solutions, which had offices in both Brisbane and Broadbeach on the Gold Coast. While he was the main operator of the company, he shared the director and responsible manager roles with other company representatives from November 2017 to June 2018, and from January 2018 to January 2019, respectively.
Smart Solutions’ licence cancellation was effective from 13 January 2020. Smart Solutions had held AFS licence 500218 since 27 July 2017. 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.
Mr Shapter and Smart Solutions have the right to seek a review of ASIC's decision at the Administrative Appeals Tribunal.