ASIC has put financial planners and dealer groups well and truly on notice, placing compliance and risk management front and centre of their priority considerations.
In its latest enforcement action, ASIC secured an unprecedented enforceable undertaking from one of Australia’s biggest independent financial planning groups, Wealthsure.
The enforceable undertaking essentially involved:
1. the removal of Wealthsure’s Managing Director, Mr Darren Pawski;
2. the restructure of the entire board; and
3. the restriction of Mr Pawski’s rights as shareholder and limitation on the exercise of his shares to ensure that he had no involvement either directly or indirectly in the key operations of the business.
ASIC found that Wealthsure, which had more than 300 financial planners under its banner, had inadequate compliance systems and a business culture that gave insufficient priority to risk management. As a consequence, it created “detrimental outcomes” for consumers.
Wealthsure, ASIC said, had operated a “lite touch” approach to compliance which resulted in a failure to regularly or consistently review its representatives’ financial product advice. More particularly there had been:
The undertaking requires Wealthsure’s compliance regime to be reviewed by an independent expert and report the findings to ASIC for the next five (5) years, until 2018. The cost of the ongoing compliance and review will need to be met by Wealthsure.
If Wealthsure breaches the terms of the undertaking then ASIC will suspend its licence until it is satisfied that they should be allowed to continue.
In addition, ASIC’s investigation found that Mr Pawski was instrumental in Wealthsure’s multiple compliance failures and under a separate enforceable undertaking prohibits Mr Pawski from:
Each and every financial licensee must consider whether its compliance and risk management systems are robust enough to withstand the level of enquiry and interrogation required by ASIC.
If there was ever any doubt that compliance and risk management are ASIC’s number one priority, this enforceable undertaking has well and truly put that to rest.
Together with FoFA, ASIC is sending the strongest message possible that there is no place for a lite-touch approach to compliance.
There is simply no substitute for a robust, consistent and coherent compliance and risk management systems and financial planner oversight. ASIC has made it clear it will not hesitate to wield its very big stick against dealers who fail to comply.
For more information about your compliance and risk management systems contact: