Three years on from Royal Commission, former ANZ Bank subsidiary fined $6m, authorised representative fined $80,000

In civil penalty proceedings commenced by ASIC, the Federal Court has ordered RI Advice to pay a $6m fine for failing to take reasonable steps to properly supervise its Authorised Representative, John Doyle, who was fined $80,000.  

The failings

RI Advice, an Australian financial services licence (AFSL) holder and formerly owned by ANZ Bank, was found to have failed to ensure Mr Doyle:

• provided appropriate financial advice; 
• acted in his clients’ best interests; and 
• put clients’ interests before his own.

Mr Doyle was found to have inappropriately advised clients to invest in complex structured financial products.  Mr Doyle received upfront and trailing commissions from his advice to these clients, many of whom were in or approaching retirement and therefore the products were not suitable to them.

The failures occurred because RI Advice did not have adequate processes to identify when advisers such as Mr Doyle were circumventing internal quality control checks, or advising on financial products that were not on approved lists.  

Despite the company already paying compensation to impacted consumers, the Court nevertheless imposed the large fine due to the serious and sustained nature of the misconduct, and the fact it should have been aware of it.

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Lingering legacy of the Hayne Royal Commission

The misconduct was one of a number of “bad advice” case studies in the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, many of which have resulted in ASIC investigation and Court action.

This action demonstrates that the Court is likely to treat very seriously any failures of AFSL holders to properly supervise their Authorised Representatives’ conduct, notwithstanding that those representatives may have taken active steps to avoid such supervision.

This also shows that ASIC continues to pursue cases referred to it by the Hayne Royal Commission, despite the final report being tabled in Parliament [exactly 3 years ago] on 4 February 2019.  It comes 2 months after ASIC commenced its last case arising out of the Royal Commission, that case brought directly against ANZ for misleading customers and failing to provide promised benefits.

ASIC’s media release on the RI Advice / Doyle matter can be found here, and the Court’s order can be found here.

Disclaimer

The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such.  It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only.  You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.