This wasn’t in the script…

Fraud, deception, solicitation: it sounds more like the plot of a Tarantino film than the summary of a year in financial planning.

Alas, 2007 had it all, with the fallout from the Westpoint collapse and other financial planner mis­demeanours triggering a number of enforcement actions by the Australian Securities and Invest­ments Commission (ASIC).

Some 30 financial advisers were banned by the regulator in 2007, with Westpoint-related sanc­tions accounting for one-third of the total bans, as at January 8, 2008.

Yet planners fared slightly better than in 2006 when ASIC issued 33 banning orders.

The year’s worst offenders included a former financial adviser jailed for almost five years over a $1.3 million fraud and an ex-investment adviser from Adelaide jailed for 18 months over fraud charges resulting in a $1.2 million loss of investors’ funds.

The former, Matthew David Leech, now of Mathoura, New South Wales, pleaded guilty in September 2007 to 19 fraud-related charges con­cerning his previous role as a financial adviser at an accounting practice in Kyneton, Victoria.

Meanwhile the latter, Mark Alan Taylor, who was formerly investment adviser and principal of Golconda Resources in South Australia, was charged in August 2007 regarding the promotion of investments in the failed Queensland-based Wattle Group.

But arguably the event that wreaked most havoc amongst financial planners was the melt­down of Westpoint.

At the time of writing, 10 financial planners who advised on the collapsed property giant’s products had been banned by the financial services regulator, with a further eight under consideration.

The majority of ASIC’s Westpoint-related enforcement actions concerned inappropriate advice, misleading or deceptive statements and poor disclosure.

Most recently, ASIC banned a Perth financial adviser on January 8, 2008 from providing financial services for three years.

According to a statement from the regulator, in 2002 and 2003 Edward William Eikelboom of Maddington in Western Australia provided inappropriate advice to clients about investing in Westpoint products. During this time he was an authorised representative of both Brighton Hall Securities and EAS.

In late December two former Sydney financial advisers were also banned from providing financial services over advice given to clients recommending investment in Westpoint products.

Tina P C Fung of Bellevue Hill, NSW, and Terrence Roy Stone of Seaforth, NSW, both authorised representatives of Strategic Capital Management, were banned for four and five years respectively.

An ASIC investigation established that be­tween March 11, 2004, and January 31, 2005, Fung and Stone recommended the group’s products to clients of OnLine Super, which is now in liquida­tion, and arranged for them to acquire these prod­ucts for their self-managed superannuation funds.

The number of bans enforced by ASIC in 2007 may be less than in 2006 but is nonetheless signifi­cant, given the growing wealth of retail investors and the expanding market for financial advice.

It is also worth noting that the quantity of banning orders is not the sole indicator of financial planner behaviour.

In 2007 ASIC initiated and completed numer­ous court proceedings against former planners who had previously been banned from providing financial services.

According to ASIC, retail investors had $2.139 trillion invested in a range of financial assets at the end of 2006, compared to $1.25 trillion in 2001.

The top 100 dealer groups have been calculated to account for 15,252 financial advisers, who col­lectively managed $316.7 billion as at March 31, 2007.

In a speech to the Financial Planning Associa­tion (FPA) in late November, ASIC chairman Tony D’Aloisio said the regulator believed there was an imbalance between supply and demand in the financial advisory market.

“There has been a rapid growth in funds look­ing for investments and a shortage of qualified financial planners and advisers and a shortage of advice,” he told the FPA.

“Ordinarily if supply and demand were more balanced, we could leave it more to competition in the market to push for innovation, lift the quality of advice, open up new markets for advice and so on.”

As a result ASIC has set up a retail investor taskforce to tackle this and other key issues facing retail investors.

“We would like to encourage investors to ob­tain advice and, for example, to use financial plan­ners and advisers more to assist them with their decisions,” D’Aloisio said. “We can only do that if investors have trust and confidence in advisers and value the service they provide.”