ASIC has commenced civil penalty proceedings in the Federal Court against DOD Bookkeeping Pty Ltd (in liquidation), which was previously called Equiti Financial Services Pty Ltd (Equiti FS). ASIC alleges Equiti FS breached the prohibition against conflicted remuneration and failed to provide appropriate financial advice and discharge its best interests duty in relation to financial advice to selected clients.
Equiti FS was part of a group of companies called the Equiti Group, which offered:
- Self-managed superannuation fund (SMSF) establishment and administration services through Equiti FS;
- real estate services through Equiti Property Pty Ltd (Equiti Property); and
- mortgage broking services through Equiti Finance Pty Ltd.
ASIC alleges that, between 26 October 2015 to 27 August 2018, Equiti FS paid three advisers bonuses totalling $164,750 upon settlement of property purchases those advisers recommended their clients make through either an existing SMSF or an SMSF to be established. The bonuses applied to purchases arranged by Equiti Property.
ASIC alleges that these bonus payments breached the ban on conflicted remuneration under the Corporations Act 2001 because they could reasonably be expected to influence the financial product advice provided, or the choice of financial product recommended, by Equiti FS advisers to retail clients.
Additionally, ASIC alleges that, between 18 May 2015 and 13 February 2018, Equiti FS breached the Corporations Act when its employed advisers gave financial advice on 12 occasions that was not in their clients’ best interests and was not appropriate for their clients.
Each advice contained a recommendation to establish an SMSF, purchase a property through the SMSF and borrow funds in order to do so.
ASIC is seeking civil penalties and other orders against Equiti FS.
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Background
ASIC’s Report 575 SMSFs: Improving the quality of advice and member experiences was published in June 2018. It identified property one-stop shops tended to promote the purchase of geared residential property through an SMSF. ASIC was concerned with conflicts of interest that can arise in such models, including from representative remuneration structures.
ASIC updated its guidance on conflicted and other banned remuneration (RG 246) in December 2020.
Editor's note 1:
For the avoidance of doubt, Equiti Group, Equiti FS, Equiti Property and Equiti Finance are all corporations registered in Australia and which have no known connection or affiliation to entities outside of this jurisdiction.
Editor's note 2:
The matter has been listed for a case management hearing on 5 August 2021 in the Federal Court.
Editor's note 3:
On 3 August 2021, the Federal Court ordered that the first case management hearing listed on 5 August 2021 be vacated and that the proceedings be listed for a two day hearing commencing on 2 December 2021.
Editor's note 4:
The hearing listed for 2 December 2021 has now been listed for three days.
Editor's note 5:
The hearing took place on 2 and 3 December 2021. Judgment has been reserved.