The Australian Financial Complaints Authority has halted its work on completing InterPrac Financial Planning determinations while it manages court proceedings brought on by the licensee.
AFCA announced on Thursday afternoon it will continue to accept InterPrac complaints, continuing its investigation work and following through the normal process, but will stop at making a formal determination while the court proceedings are underway.
Professional Planner understands the authority had strongly considered continuing its normal procedure and the decision to halt went to board level.
InterPrac is suing AFCA over “fairness” concerns and jurisdictional coverage, arguing the complaints authority hasn’t factored in other parts of the value chain, particularly trustees.
AFCA rules only allow it to rule on the advice given out, meaning other parts of the chain aren’t held responsible for failures.
The decision comes after First Guardian investor and victim advocate Melinda Kee was dragged into proceedings and the licensee has delayed paying out any determinations approved by AFCA.
InterPrac parent company, ASX-listed Sequoia Financial Group, has previously called on trustees and the government to remediate investors.
Macquarie and Netwealth, both the branded trustee and platform to investors in Shield and First Guardian respectively, have settled with the regulator to remediate investors to their original starting investment position for a combined $421 million.
Equity Trustees and Diversa Trustees both decided to fight allegations of wrongdoing in court, but the latter has applied to the government for a $239 million bailout of First Guardian investors.
Most major platforms have blacklisted InterPrac advisers, triggering an attempted sale of the company which is in limbo.
The Financial Advice Association Australia has also called for AFCA rules to be changed to apportion loss along the advice chain.
AFCA acting chief ombudsman and CEO June Smith said the complaints authority will continue to engage with all parties involved and the regulator, and will review its position if circumstances change.
“We understand that investors want to have their complaints resolved as quickly as possible, and this decision has not been made lightly,” Smith said in a statement.
“AFCA is cooperating with the court process commenced by InterPrac. Impacted investors have been contacted directly by AFCA in relation to what it means for their individual complaints.”
AFCA lead ombudsman for advice Shail Singh and Compensation Scheme of Last Resort CEO David Berry will be speaking at the Professional Planner Licensee Summit on 10-11 June, with registration still open for eligible delegates, including CEOs, executives, managers of licensees and owners/principals of self-licensed advice boutiques.
ASIC has taken InterPrac to court over allegations that it failed in its oversight responsibilities of advisers involved in distributing the funds.
The regulator has alleged former InterPrac authorised representative Ferras Merhi, who has also been taken to court, signed 6000 Statements of Advice within a three-year period and used marketing companies to push potential clients to his financial advice businesses while receiving nearly $18 million in upfront advice fees and $19 million from entities associated with the funds to market them.
ASIC deputy chair Sarah Court told Professional Planner earlier this week, the regulator’s view was that InterPrac was still significantly responsible for the advice given and plans to hold the licensee to account through the court process.
“We were very concerned about the proposed sale of InterPrac and very concerned about what [that meant] for any of the liabilities that sat with InterPrac for those losses,” Court said.
“We took further action in relation to that proposed sale because of our concerns about… phoenixing [and] InterPrac’s liabilities being impacted and there being some impact on investors.”
Sequoia announced the resignation of chair Mike Ryan on Wednesday, and former ASIC Commissioner Danielle Press also recently quit a governance committee established by the group, seven months after she was recruited to help lift governance standards for the licensee.
Another seven advisers have departed InterPrac this week bringing the total to 161 and down from 282 at the start of the year, according to the latest figures from Padua Wealth Data.
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