ASIC has suspended the Australian Financial Services (AFS) licence of Financial Technology Securities Pty Ltd (FTS) following concerns it had provided inappropriate advice to some clients.
Following a surveillance of the Queensland-based advice firm, ASIC found up until August 2012 FTS had a policy of recommending double gearing strategies to some clients regardless of their personal circumstances.
FTS ceased the practice as a result of ASIC’s investigation of the matter.
ASIC Deputy Chairman Peter Kell said: ‘FTS’s one size fits all, high risk strategy regardless of personal circumstances was completely at odds with providing appropriate financial advice.
‘Advice provided must always be focused on the client and their specific needs and circumstances.’
FTS’s licence has been suspended for six weeks, effective from 30 June 2014. FTS is unable to provide advice to new or existing clients in this period.
ASIC has put in place a comprehensive communication strategy for clients, representatives and related product providers of FTS.
Financial Technology Securities has the right to seek a review of ASIC’s decision at the Administrative Appeals Tribunal.
Background
FTS’s head office is located in Toowong, Brisbane.
Double gearing involves a person borrowing against the equity in their home, and then using the money borrowed (the margin loan) to invest in the sharemarket. The risk with margin lending is that if the sharemarket falls, the loans can exacerbate losses.
Gearing may be an appropriate strategy in many cases. However, gearing increases risk, and ASIC considers advice that involves gearing, and certainly double gearing, as a complex type of advice. Advisers need to regard it as such in making enquiries of a client and ensuring suitability of the advice for clients.
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