ASIC cracks down on unlicensed advice
15 December 2020
ASIC continues to crack down on unlicensed operators following reports about individuals and corporations providing financial product advice without an Australian financial services (AFS) licence.
Financial advice must only be provided by qualified and licensed financial advisers or financial counsellors, not by individuals or corporations who neither hold an AFS licence, nor are authorised representatives of an AFS licensee.
The Corporations Act imposes significant penalties for carrying on a financial services business without an AFS licence – it is a criminal offence under section 911A of the Act. For individuals the penalties can be a maximum of five years imprisonment and / or a fine of up to $133,200 (600 penalty units). For corporations the penalties are up to $1.33 million (6,000 penalty units). There are also civil penalties for a contravention of 911A: up to the greater of $1.11 million (5,000 penalty units) or three times the benefit obtained and detriment avoided for an individual; or the greater of $11.1 million (50,000 penalty units), three times the benefit obtained or detriment avoided, or 10% of annual turnover (capped at 2.5 million penalty units) for a body corporate.
ASIC’s focus on unlicensed conduct is driven by our vision for a fair, strong and effective financial advice industry where consumers can confidently access good quality, regulated financial advice.
Since March 2020, ASIC has seen a significant escalation in complaints about unlicensed conduct, including complaints about unlicensed financial advice being provided through websites, social media, cold calling and seminars. ASIC is concerned because consumers unknowingly receiving unlicensed advice do not have the same protections afforded to them under the law when they receive advice from licensed providers.
ASIC is undertaking a range of surveillances and investigations in relation to unlicensed individuals and corporations. In some cases, ASIC is writing to individuals and entities that may be engaging in unlicensed conduct, and may be unfamiliar with the law, to warn them of the potential consequences. In other cases, ASIC is continuing to investigate and pursue enforcement outcomes. Some recent enforcement actions related to unlicensed conduct include:
- In November 2020, following an application by ASIC, the Federal Court of Australia made interim orders against Maliver Pty Limited (Maliver) and its sole director, Melissa Louise Caddick (the defendant) to protect consumers while ASIC investigates concerns that Maliver may be providing financial services without an AFS licence, that the AFS licence of another company may have been used without authorisation, and that investor funds may be unlawfully dealt with. ASIC’s investigation is ongoing (refer 20-301MR).
- In November 2020, following an ASIC investigation and referral to the Commonwealth Director of Public Prosecutions, John Louis Anthony Bigatton was charged with providing unlicensed financial advice on behalf of another person, operating an unregistered managed investment scheme and making a false or misleading statement affecting market participation (refer 20-288MR). Previously, ASIC banned Mr Bigatton from providing financial services for seven years after finding he provided unlicensed financial product advice and engaged in conduct, in relation to financial products and financial services, that was misleading or deceptive or was likely to mislead or deceive (refer 20-206MR).
- In August 2020, ASIC obtained urgent injunctions from the Federal Court of Australia against Larry Dawson and PW Kitt Co Pty Ltd. ASIC was concerned the defendants obtained almost $7 million in investor funds by cold-calling Australian consumers using the AFS licence number of another company and without having an AFS licence or authority to provide financial services (refer 20-187MR).
ASIC is appealing to industry and consumers to report unlicensed activity to ASIC through https://asic.gov.au/complain or 1300 300 630 so that ASIC can take swift regulatory action.