The regulator has cancelled the Australian financial services (AFS) licences of a Sydney-based financial advice firm after finding it had repeatedly failed to comply with the Corporations Act 2001 and the its licence conditions.
The Australian Securities and Investments Commission (ASIC) said it was particularly concerned about the level of supervision of the representatives appointed by AAA Financial Intelligence and AAA Shares (presently in liquidation), their conduct and the advice they provided to retail clients.
AAA was a national financial planning business based in Sydney. It provided financial planning advice via its network of 186 authorised representatives.
An appalling record
Following a surveillance of the business starting in June 2010, ASIC found AAA had breached the majority of its licence obligations. Specifically, the regulator found that AAA had adopted a business model that only allowed it to increase cash flow by increasing the number of advisers it authorised. The fees charged did not maintain sufficient financial resources to comply with its general obligations. AAA also failed to maintain adequate human and technological resources to identify who its representatives were, the clients being serviced, the products being sold and to carry out supervisory arrangements.
Among a litany of other charges was that the licensee had failed to ensure that representatives had the necessary knowledge and skills prior to appointing them as authorised representatives.
Further, after representatives were appointed, AAA failed to ensure they were adequately trained and competent to provide financial services under the licence. “Licensees have a general obligation to do all things necessary to ensure they provide financial services efficiently, honestly and fairly,” said ASIC commissioner Peter Kell.
“AAA Financial Intelligence was found to have an appalling record that put at risk the quality of advice it provided to retail clients.
“ASIC uses a number of regulatory remedies to improve and enforce compliance with the laws it regulates, which includes cancelling an AFS licence.
“The cancellation of AAA’s licence demonstrates ASIC’s commitment to ensuring advice-industry participants are meeting their key obligations, including having adequate compliance measures in place.”
The cancellation of AAA Financial Intelligence’s AFS licence and AAA Shares’ AFS licence took effect on January 29, when the orders were served. The delay in publication of the AAA Financial Intelligence decision follows proceedings at the Administrative Appeals Tribunal (AAT).
AAA Shares has the right to seek a review in the AAT of ASIC’s decision.
