Financial planner's seven-year ban upheld

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The Administrative Appeals Tribunal has upheld ASIC’s decision to ban Mervyn Ross Tarrant of Albion Park, New South Wales, from providing financial services for seven years. 

In affirming ASIC’s decision, AAT found a banning order of at least seven years was appropriate because of numerous breaches of financial services laws.
“Those breaches have been serious and repeated. A consequence of the breaches has been significant loss to the retirement savings of investors…there is evidence of incompetence and negligent, if not wilful, breach,” AAT said.

Tarrant was the sole director and authorised representative of Tarrants Financial Consultants (TFC), a financial services firm in Wollongong which invested more than $23 million of its clients' funds in Astarra Strategic Fund – formerly known as the Alpha Strategic Fund – a managed investment scheme promoted by Trio Capital and Shawn Richard. 

On 25 November 2011, ASIC found Tarrant had not complied with various financial services laws and banned him from providing financial services for seven years. 

Tarrant subsequently applied to AAT for a review of ASIC's decision. On 7 December 2011, AAT ordered ASIC not issue any public announcement in relation to the banning order of Tarrant. 

On 20 December 2013, AAT affirmed ASIC's decision to ban Tarrant from providing financial services for seven years and revoked the publication order. AAT found the breaches by Tarrant were serious and included: 

· Failing to disclose in statements of advice the receipt of a marketing allowance from Shawn Richard for investing clients' monies in the Alpha Strategic Fund. From November 2008 to December 2009, an associate of TFC, Tarrants Finance, of which Tarrant was director, received more than $1.1 million in marketing allowance from Richard
· Making false or misleading statements about remuneration or benefits in statements of advice to clients
· Engaging in misleading or deceptive conduct by making various representations about remuneration or benefits to TFC's staff by including the representations in powerpoint presentations that TFC's staff delivered to clients
· Failing to have a reasonable basis for the advices he provided to eight clients. Each of the eight clients were recommended to borrow a significant amount of money, invest a high proportion of their investments in the ASF, and set up a self-managed superannuation fund to allow the superannuation funds to be invested in the ASF. 
“The seriousness of Mr Tarrant's behaviour – which was highlighted by the AAT as being incompetent and negligent – meant that ASIC took all the necessary steps to ensure he was removed from the industry for a substantial period of time,” deputy chairman Peter Kell said.
Since ASIC's Trio investigation started in October 2009, more than 11 people have either been jailed, banned from providing financial services, disqualified from managing companies or have agreed to remove themselves from the financial services industry for a total of more than 50 years.

Shawn Richard, former investment manager of the Astarra Strategic Fund, was sentenced to 3 years and 9 months jail in August 2011, and Eugene Liu, ASF's chief investment strategist, was permanently banned from providing financial services in March last year.

  • Pat on 13/01/2014 8:30:07 AM

    B two - I am not talking about non-disclosure, I am talking about the fact that the adviser took a "marketing fee" of $1.1 million to induce him to sell the product to his clients.

    There is no doubt that the primary loss was due to fraud, but if an adviser requires a marketing fee of that quantum to sell the product, then the adviser should be asking serious questions of that product. I would question whether Tarrant and other "advisers" who put their clients' money into such products did.

  • B two on 10/01/2014 3:55:44 PM

    Pat - you may want to consider the facts rather than jumping to assumptions.
    The tribunal found no commercial arrangement in place until after 511 interviews and the amount of non disclosure admitted to by Tarrant was $3,366. ASIC had 4 years to come up with 20 non disclosures, total of $42,075.
    Check the performance and characteristics of the fund at the time rather than relying on the benefit of hindsight.
    A fraud is a fraud is fraud.

  • Pat on 9/01/2014 5:21:54 PM

    B two - you may wish to focus on the issue of non-disclosure, but we can be pretty confident that Tarrant was induced to place $23 million of his client's money in one particular investment strategy - not in Astarra super as a whole, but one particular fund - by the payment of a $1.1 million marketing fee.

    Fraud aside, his clients would have been better off if they recevied unconflicted advice as I doubt any adviser would have recommended that fund without such an inducement.

  • Martin B on 9/01/2014 10:28:48 AM

    Simon, are you suggesting that there were no SMSF's investing into Trio or any other failed investment product during the GFC, before and after etc
    Just because an advisor uses an SMSF (and many of us do use them when appropriate) doesn't guarantee the quality of advice is any better or worse.
    The issue is how is the investor through an SMSF protected against a failed investment product. The integrity of the advisory firm with their own licence is critical. There is no second chance for the investor. Payment of a levy to protect investors is only an issue when looking at the overall costs of the ongoing relationship. Protection of clients capital is of utmost importance in an uncertain market place.

  • B two on 8/01/2014 3:42:56 PM

    If anyone bothered to read the detail Tarrant prepared 511 Statements of Advice and has admitted to 6 non disclosures. On hearing the appeal the tribunal found non disclosure on 20 occasions. Small bananas compared to the media accusations of secret commissions which has ruined a Financial Services business employing 70 people and a life time work. An international crime gang caused the losses not administrative non disclosure issues

  • Simon Makeham on 8/01/2014 2:40:29 PM

    Martin B - are you aware that APRA regulated superannuation funds also invested in Trio and lost their members money. The difference is that now all members of the APRA regulated super funds will be hit with a levy to repay those who lost money. At least in an SMSF you dont pay for others losses.

  • GAB on 8/01/2014 1:48:21 PM

    Agree with you Pat regarding accepting undisclosed payments labelled as "marketing" allowance. Mind you, I'm pretty sure my current dealer group was accepting these sorts of payments from various fund managers (not Trio) and I'm pretty sure it was an industry norm. Maybe it still is...who would know. Advisers cant disclose what they don't know. Different case for Tarrant though as they had their own AFSL.

    As for "know your product"...doesn't work too well when fraud or non-disclosure is involved. I vaguely remember when BT went crazy on Onetel shares and burned their investors. How well can an adviser really know a product? In fact, we're not even qualified to analyse managed funds.

  • Martin B on 8/01/2014 1:09:42 PM

    Actually Simon I have never made such a comment relating to a licensee making a complaint go away. Either I made the statement or I didn't. Which is it? Making the further suggestion that you are not sure that I actually made the comment hardly provides you with any real credibility. The main reason I haven't used my last name is to ensure I don't draw the wrath of ASIC for any comment that I may have made that they might take offence with. They wield a large stick. As a SMSF advisor I assume, you have taken some offense at my comments. Not intended. You will be aware of the risks of investors going to the wrong advisor with his or her own licence and promoting SMSF. As I said I have no problems with some firms having their own licence. Just more scrutiny to ensure the wrong ones don't get into your space.

  • Pat on 8/01/2014 1:07:55 PM

    James, I presume you mean Tarrant cared about taking undisclosed remuneration from his clients? Good financial planners abide by the "know your product rule", in its various guises.

  • James Boehm-Carter on 8/01/2014 12:50:08 PM

    Ross Tarrant cared about his clients like all financial planners do! Good financial planners don't set out to put their clients money into a fraudulent investment. If ASIC had done their job in the first place when Astarra Strategic fund didn't send in their quarterly reports and the red flags went up, then no-one would have had approval to use this fraudulent fund. While the king pin Jack Flader sits in Thailand protected, with $170M and our government continue to do nothing to track him down. Fraud in a product is not the adviser's fault. When will ASIC and all the powers that be realize this.

  • alleycat on 8/01/2014 12:46:24 PM

    Dear Merve,
    Correct, FDS is new and unnecessary legislation.
    I'm not sure what everyone else does but fee disclosure at inception including ongoing and at review is required to be disclosed.

    If advisers don't do any of this, then surely it would be picked up at Licensee audits.

    You did however make me smile.

  • Simon Makeham on 8/01/2014 12:32:19 PM

    Come on Martin B (why not disclose your full name - what are you worried about). You forgot to mention that a financially secure licencee in your opinion is one who can pay to make a complaint go away. At least I think this is what you told me once.

  • Merv Gay on 8/01/2014 11:29:03 AM

    Dear alleycat - Fee disclosure may have been, but fee disclosure notices is new legislation to commence 1st July 2013 onwards for new business. Why pick on the poor lawns? Surely someone should have its best interests at heart. Merv Gay

  • alleycat on 8/01/2014 11:19:51 AM

    Dear Merve,
    Fee disclosure has been in place since the introduction of FSR in the year 2000.

    If advisers choose not to comply with the law, they deserve to get all that they receive from regulators.
    I still can't understand why we have to legislate "in clients best interest".
    If you don't do something in the clients best interest whether you're a risk writer or a financial planner, then go and mow lawns for a living.

  • Martin B on 8/01/2014 11:04:30 AM

    And I agree that bad advisers don't take any notice of what legislation is in at the time. If they don't complete paperwork correctly in the first place what chance is a Fee Disclosure Statement or Best Interest Duty going to be after the horse has bolted. Having a reputable and financially secure licensee behind the planner will go someway towards protecting investors. Sadly some on the fringe pushing SMSF with their own licence are where ASIC should concentrate. ASIC were asleep when they were personally responsible for monitoring Storm directly. Sometimes its too easy to target the large bank backed groups with enforceable undertakings of little real substance. Having said that, I believe there is a place for some firms to have their own licence but it does require another level of compliance testing by ASIC to weed out the ones that should not be in that space. Can we trust them to do that along with all the other nit picking ASIC feels it needs to do to substantiate the ever increasing level of Government funding it receives.

  • Merv Gay on 8/01/2014 10:46:05 AM

    Yes, well - If only the Fee Disclosure Notice legislation was in place then along with the Best Interests Duty this would have all been avoided, wouldn't it. Merv Gay

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