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A company previously known as Equiti Financial Services Pty Ltd that is now in liquidation has been fined more than $11 million for breaching conflicted remuneration rules, after it was found that 12 clients were given inappropriate “cookie cutter” advice by three financial advisers who were incentivised to recommend they purchase properties through a related entity.
Court documents did not reveal the names of the financial advisers concerned.
The Federal Court found that DOD Bookkeeping Pty Ltd, under its previous name Equiti Financial Services, paid $130,250 in bonuses to the advisers who provided template advice to clients to roll over their super into self-managed super funds (SMSFs), and use those funds to buy property through Equiti Property Pty Ltd.
The court found that the bonuses paid to the three advisers, which were paid when the clients settled on a property offered through Equiti Property, influenced the advice they provided and breached conflicted remuneration laws.
Equiti Property itself received more than $300,000 in relation to the transactions concerned. The case related to advice given between May 2015 and April 2018.
In his liability judgment, Justice Goodman noted that some of the clients concerned purchased property in the Blue Haven development, with Circle Holdings as the vendor.
"The shareholder of Circle Holdings was Travolta Holdings Pty Ltd, of which Mr Danny Assabgy (the founder of the Equiti group of companies) was the sole director and also, together with his wife, Julie Assabgy, a shareholder," Goodman said.
Travolta Holdings is also the ultimate parent company of Hudson Homes, which was founded and is currently led by Danny Assabgy, who it should be clarified is not listed as a defendant in the case.
In his judgments, Justice Goodman observed that “little or no heed was paid to the particular circumstances of the clients”, who were not given sufficient time to understand the advice given to them with advice focussed on “manoeuvring the clients into property purchases through SMSFs”.
"The contravening conduct was plainly deliberate and extended over a period of several years," he said.
The Australian Securities and Investments Commission (ASIC) had pursued the case against DOD Bookkeeping and Equiti FS, cancelling the latter's financial services licence in November last year.
Its investigation of the company began in October 2018, issuing notices to Equiti Financial Services that it produce documents in relation to its concerns, with the defendant providing files relating to its clients. This was used as evidence in the case, comprising more than 41,000 pages.
In October 2020, prior commencement of this proceeding, the defendant entered into a members’ voluntary winding up and Steven Nichols was appointed as liquidator.
"The defendant has not formally appeared in this proceeding. ASIC prosecutes this proceeding for the purposes of general deterrence," Justice Goodman said in his penalty judgment.
ASIC Deputy Chair Sarah Court said the size of today's penalty demonstrated the seriousness of the misconduct.
"Misconduct exploiting superannuation savings is an ASIC enforcement priority. In this case the Court found bonuses paid to advisors influenced the advice they provided, resulting in poor financial outcomes for the consumers involved," Court said.
"Financial services licensees who employ advisers to provide personal financial advice need to ensure that they place their clients at the forefront."
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