ASIC takes action on deficient advice on complex structured investment products

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ASIC concerns about financial advice relating to complex products has led to 10 licensees undertaking corrective action.

ASIC released a report in December 2013 which looked at advice provided by 10 licensees in relation to retail structured products. These are investments whose value is based on the movement of underlying assets such as a share index, generally using derivatives arrangements. The report also looked at advice on limited recourse (or ‘protected’) loans that are used to buy shares.

ASIC’s report had a particular focus on structured products described as ‘capital protected’ or ‘capital guaranteed’ because these labels tend to attract consumers who are after lower risk products. However, the complex nature of these products meant that some consumers did not understand what, if anything, was protected. Too often advisers promoting these products were not adequately considering the consumer’s needs and circumstances.

The report identified a range of conduct and disclosure concerns and set out that ASIC would be taking follow up action with licensees involved in the review.

ASIC is providing a public update on actions since the report was released. ASIC’s  subsequent surveillances and regulatory actions led to:

  • licensees commencing a wider review of relevant advisers and clients to determine whether breaches of disclosure or conduct requirements had occurred, the extent of those breaches, and whether client, adviser and licensee remediation was required
  • two of the licensees submitting notifications of significant breaches to ASIC
  • one licensee terminating the authorisations of a corporate authorised representative and two individual authorised representatives, after identifying systemic breaches by those representatives, and
  • other remedial actions by licensees including client compensation, fee or commission refunds, corrective or improved disclosure, increased supervision and monitoring of advisers, and changes to licensees’ systems and procedures for providing advice on complex products.

Almost 1,000 clients who received advice will either have their files reviewed, or be contacted by the licensee to offer a review.

ASIC finalised five of the actions in 2014. We are continuing to monitor the outcome of several other matters. Where inappropriate advice was provided, we are considering whether to take further enforcement action, such as bannings of individual advisers.

Consumers who have concerns about financial advice may lodge a complaint with the licensee’s internal dispute resolution process, or contact the relevant external dispute resolution scheme, such as the Financial Ombudsman Scheme or the Credit Ombudsman Scheme Limited.

ASIC acknowledges the cooperation of the licensees involved in this matter:

  • Consultum Financial Advisers Ltd
  • Count Financial Ltd
  • FSS Advisory Pty Ltd
  • Genesys Wealth Advisers Ltd
  • HSBC Bank Australia Ltd
  • Madison Financial Group
  • MASU Financial Management Pty Ltd
  • Meritum Financial Group Pty Ltd
  • Sentry Financial Services Pty Ltd
  • Westpac Banking Corporation

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