ASIC has commenced civil penalty proceedings in the Federal Court against Diversa Trustees Limited (Diversa).

ASIC alleges that between March 2019 and December 2020, Diversa, a superannuation trustee, or its representatives:

• were aware that ASIC was investigating a business run by financial adviser Mr Nizi Bhandari for contraventions of the law;
• despite its knowledge of these matters, did not take adequate action and continued to allow Mr Bhandari to put clients into Diversa’s superannuation product; and
• continued to allow the payment of fees from the superannuation fund to Mr Bhandari.

Diversa, which operates as a professional superannuation trustee, relies on ‘promoters’ or third parties to run many of the day-to-day operations of its fund. ASIC alleges that the OneVue company group acted on behalf of Diversa and facilitated Mr Bhandari putting clients into Diversa products via Mr Bhandari’s company, The Australian Dealer Group Pty Ltd.

ASIC also alleges that Diversa did not act efficiently, honestly and fairly because it failed to provide proper oversight of the activities of OneVue nor take appropriate action regarding the activities of The Australian Dealer Group and Mr Bhandari involving its superannuation fund.

This is the second case taken by ASIC against a professional trustee for conduct by outsourced service providers following enforcement action against Tidswell (21-190MR).

ASIC is seeking declarations and pecuniary penalty orders from the Federal Court.

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Originating Process (PDF 431 KB)

Background

Mr Bhandari has been permanently banned by ASIC from providing financial services and engaging in credit activities, controlling a financial services or credit business, or performing any function in relation to carrying on a financial services or credit business (21-046MR).

As conduct regulator for the superannuation industry, ASIC is committed to ensuring superannuation trustees deliver on their commitments to members and treat them fairly. ASIC aims to deter any future misconduct and prevent consumer harm by taking appropriate action against wrongdoing.

Poor trustee oversight practices could enable inappropriate behaviour by service providers. Trustees need to implement appropriate risk management practices to ensure members are not adversely impacted. In making payments out of a superannuation fund, trustees are expected to have processes in place to ensure the expenditure is appropriate. ASIC and APRA have previously provided guidance for trustees on appropriate oversight practices in relation to advice fee payments from member accounts.

Editor's note 1:

A case management hearing was held on 18 November 2021. The matter has been listed for a further case management hearing on 18 March 2022.

Editor's note 2:

The matter has been listed for a further case management hearing on 3 June 2022.

Editor's note 3:

At a case management hearing on 3 June 2022, the court made a number of timetabling orders. The next case management hearing has been set for 18 November 2022. Both parties were ordered to undertake mediation prior to this date. The matter has also been listed for hearing on liability on 31 July 2023.

Editor's note 4:

Between 31 July and 2 August, the hearing on liability proceeded before Button J in the Federal Court. Judgment has been reserved.

Editor’s note 5:

On 24 October 2023, Her Honour Justice Button Court handed down her judgment in relation to the hearing on liability (23-283MR).