Yesterday ASIC announced that it had accepted an enforceable undertaking from Spring Financial Group, an AFSL with offices in Sydney, Melbourne and Brisbane.
Spring has confirmed the EU, but says it intends to take legal action against former corporate authorised representative, Royale Capital, and its principals, as a result.
Royale was authorised by Spring to provide general financial product advice only in relation to limited classes of financial products from 11 October, 2011, until 12 June, 2012. Spring says that at no stage was Royale authorised by the licensee to provide any form of personal advice or to deal in any class of financial product.
In Federal Court proceedings earlier this year, ASIC alleged that Royale engaged in the unsolicited hawking of financial products, that it provided inadequate financial product disclosure, and that it provided misleading or deceptive information.
Spring’s legal action will focus on contractual, compliance and statutory breaches, and the licensee says that it will be seeking damages, costs and other orders. Spring also foreshadowed that the action may be broadened to include a Royale-affiliated company, Active Super and its principals.
Spring’s managing director Keith Cullen says that Spring will wait to see the outcome of ASIC’s proceedings against the companies, as a successful prosecution by them would add weight to Spring’s case.
The whole episode has been a bitter experience, says Cullen, and they have certainly learnt from it.
“I think it’s very challenging for a licensee to monitor an authorised rep in the face of someone frankly outright lying to you in what they’re doing,” he says.
“We’ve made the decision that we just won’t have any authorised reps. Our business model is one of having staff advisers and that’s what we’re going to do.
“You look around and see other licensees that have suffered the same fate…and it’s just not a path that we’ll ever be going down again.”
Under ASIC’s EU Spring must appoint an independent consultant to review its business and develop a plan to fix deficiencies in Spring’s monitoring and supervision of Royale, found by ASIC.
The independent expert will report to ASIC over the next 15 months on its findings, and on Spring’s implementation of the plan. Spring said it welcomed the review, and would work with the independent expert and ASIC to ensure its compliance, supervision, induction and training procedures were all best practice.
Further to the review, Spring has agreed to contact people who became clients of Royale between 11 October 2011 and 12 June 2012 to ensure that the information and any general advice provided to them by Royale was accurate, complete and appropriate.