Adviser banned for seven years – December 6, 2024
Former financial adviser Bruce Stuart Davis has been banned for seven years from providing, controlling or performing any services within financial services business, after multiple fitness and propriety failings.
Davis was the sole director, responsible manager, and financial adviser of Wise Investment Advisers Pty Ltd, and was, in relation to derivatives, found to be:
- providing unlicensed advice and dealing services;
- failing to act in clients’ best interests by providing inappropriate advice and not providing statements of advice;
- making misleading and deceptive representations regarding ‘the high returns’ clients would get from his recommendations and trading; and
- causing high financial losses for his clients.
Edisons Global AFS license suspended – December 4, 2024
The Australian financial services (AFS) licence has been suspended for fund manager Edisons Global Pty Ltd due to repeated compliance failures.
The company was found to have failed to lodge its industry funding metrics or its annual financial statement, auditor report, and audit opinion in time for the financial years ending June 30, 2022, and June 30, 2023.
Update for investors on the Shield Master Fund – December 3, 2024
From the second creditors’ meeting of Keystone Asset Management Ltd (where both receivers and managers, and administrators were appointed), the administrators thought it would not be in the best interest of creditors, unit holders or underlying investors in Shield for it to be wound up.
ASIC is also investigating whether ‘significant’ investor funds could have been dissipated.
Keystone Asset Management Ltd is the responsible entity for the Shield Master Fund. Earlier actions taken on the Fund:
- February 7, 2024: Interim stop orders were made on four product disclosure statements for classes of units of the Shield Master Fund.
- June 19, 2024: Interim orders to freeze the fund have been obtained from the Federal Court to protect investor funds while an investigation is ongoing.
- June 27, 2024: Independent party appointed to verify Shield payments.
ASIC news week 49
Key observations from inaugural IDR data publication
A first report under the internal dispute resolution (IDR) data reporting framework has been published – which ASIC is calling a “key milestone in the implementation of the framework.”
The IDR framework requires most licensed financial firms to report IDR data to ASIC on a six-monthly basis. Key observations from the over 4.7 million complaints reported between July 1, 2023 to June 30, 2024, include:
- most complaints related to general insurance products (33%), followed by credit products (22%), then deposit-taking products (15%);
- most of those complaints related to service (45%), charges (22%), and transactions (11%);
- most outcomes involved an explanation or apology only, or no remedy (43%), followed by a service-based remedy (39%), and a monetary remedy (13%);
- over three-quarters of all complaints were resolved within one day; and
- 623,555 complaints resulted in a monetary remedy, collectively over A$375m ($241m).
Yet, ASIC is concerned that the data does not fully reflect the reality, and that not all are reporting accurate data. Over 5,035 firms reported no complaints – a higher number than expected.
“The gaps we’ve identified suggest there may be inconsistent IDR reporting practices across the industry,” said Commissioner Alan Kirkland. “Our ongoing analysis of the IDR data will also inform our other regulatory activities, so industry can expect to hear more from ASIC on this issue.”
“We have undertaken extensive work to strengthen the operation of the reportable situations regime since the introduction of the October 2021 reforms, and ensuring that the objectives of the regime are met remains a priority area of work for us in 2024-25,” added Commissioner Kate O’Rourke.
The Commission is therefore encouraging all licensees to review its arrangements for complying with reportable situations against ASIC’s findings, and make necessary improvements where needed.
Insurers on notice for blind spots in complaints handling
After the findings of the IDR regime, ASIC is calling now on insurers to uplift their approach to complaints handling, and address other shortcomings.
The review disclosed that insurers are failing to identify one in six customer complaints, have inadequate communications to customers, and that close to half are failing to identify any systemic issues.
“Proactively identifying and addressing systemic issues is critical to preventing other consumers from experiencing the same problems,” said Commissioner Alan Kirkland, adding that the findings were disappointing. Especially since insurers were told to improve its IDR practices following an earlier review of claims handling in the aftermath of the Queensland and New South Wales floods in 2022.
“It’s time for insurers to step up and do what they should have done three years ago when these obligations commenced,” he said.
To make sure improvements are being made, ASIC will later ask the insurers to prepare an action plan explaining how issues have been addressed to better support customers.
Proposed updates to digital asset guidance
ASIC is seeking feedback to its digital asset guidance, and has published Consultation paper 381 Updates to INFO 225: Digital Assets: Financial Products and Services (CP 381) with proposed updates to Information Sheet 225 Crypto Assets (INFO 225).
It includes multiple updates and practical examples of how the current financial product definitions apply to digital assets and related products.
“Australia’s financial services regulatory regime is broad and technology neutral. Many digital assets and related products are financial products under the current law. Stakeholders have been calling for greater clarity and in response, we are releasing our draft updated guidance,” said Commissioner Alan Kirkland.
Feedback can be submitted until February 28, 2025, and a final version of INFO 225 is intended to be published mid-2025.
Updated guidance to help prevent insolvent trading
An updated version of Regulatory Guide 217 Duty to prevent insolvency trading: Guide for directors has been published after industry feedback, and includes now enhanced guidance on the safe harbor provisions for directors and their professional advisers.
The updated version also includes practical examples, and ASIC will update Information Sheet 42 Insolvency for directors to include guidance on safe harbor in mid-December.
November 2024 financial adviser exam results
Of the 289 people taking the 27th Financial Advisers Exam cycle exam:
- 77% (225) passed; and
- 71% (207) took the exam for the first time.
To date, 21,637 individuals have sat the exam, with over 20,060 (92%) people passing it. The next exam will be on March 6, 2025.
Suspected scam alert: Juhbz and Ptounx
ASIC is seeing an increase in a suspected investment scam for investing opportunities and tips on social media, and is now warning consumers to not invest in those ads where people are being added into WhatsApp groups. Two names to look out for are Juhbz and Ptounx, two unlicensed promotors whose names often appear in the website URL.
The Commission has received reports where consumers have invested and paid fees into the alleged scam, and are now unable to access their funds.
“When investors try to withdraw their funds, they are instructed to pay fees or taxes before withdrawals can be processed. Even if the investor pays the fees, the funds are not paid out. In fact, this is another tactic to get further money from victims,” ASIC said.
Speech
In a keynote speech at the Australasian Consumer Law Roundtable in Melbourne on December 6, Commissioner Alan Kirkland spoke about the Government’s proposed Unfair Trading Practices prohibition. A reform Kirkland said was “necessary to crack down on practices that result in significant harm to consumers,” and to address the growing gap between customer expectations and laws.
Yet, Kirkland added, the proposed reforms leave an important gap – unfair practices of firms in financial services will not be covered in this stage. He said this needed to be addressed, especially for the economic and psychological impact unfair practices can have on those customers who fall victim to them.
“With the digitisation of financial services, dark patterns are becoming increasingly common,” Kirkland said.
“These patterns distort, subvert, and undermine consumer choice. They make it deliberately difficult for consumers to access certain services, and all too easy to access others.” He specifically named buy-now-pay-later schemes. “There’s a reason why it takes just a few minutes online to sign-up for buy-now-pay-later, but you can’t easily find the button to cancel your account.”
