Court Imposes $11 Million Penalty on Advice Firm for Breaching Remuneration Rules

4

DOD Bookkeeping, now in liquidation, had previously incentivized three financial advisers by paying them a total of $130,250 in bonuses. These advisers were found to have improperly encouraged clients to roll over their superannuation into self-managed superannuation funds (SMSFs) and subsequently purchase properties through Equiti Property, a related entity. Each bonus payment ranged from $750 to $1500, with advisers receiving multiple bonuses each year.

Equiti Financial Services offered a suite of services, including financial advice, SMSF establishment and administration, real estate recommendations through Equiti Property, and mortgage broking via Equiti Finance. However, its Australian financial services licence was revoked by ASIC in November 2024, following a payment from the Compensation Scheme of Last Resort.

During the court proceedings, testimonies from 12 clients surfaced, highlighting the firm's failure to tailor financial advice to personal circumstances. Evidence showed that two advisers earned almost $240,000 annually, with nearly 40 percent of their income stemming from bonuses—heightening concerns of conflicted advice.

The court's judgment emphasized the detrimental influence the bonus payments had on the advisers' recommendations, violating the conflicted remuneration laws introduced in 2013 under the Future of Financial Advice reforms. These laws aim to prevent financial advisers from receiving incentives that could bias their advice or product recommendations.

This ruling underscores the rigorous standards expected in Australia's SMSF sector and highlights the legal responsibilities of financial advisers to act in clients' best interests. ASIC's commitment to enforcing these standards seeks to uphold the integrity of financial advice and protect consumers from biased product promotions.

As part of its ongoing efforts to enhance accountability within the financial sector, ASIC plans to ramp up scrutiny of SMSF advice. This includes conducting comprehensive reviews, with the findings due in late 2025. The sector faces mounting pressure to raise operational standards and restrict access to SMSFs to suitable candidates, particularly as more claims may implicate the Compensation Scheme of Last Resort.

ASIC Deputy Chair Sarah Court highlighted the significance of the penalty, emphasizing the need for financial service licensees to prioritize client interests above all. This judgment serves as a stern warning to firms that exploit contractual loopholes for financial gain at consumers' expense.

Published:Friday, 2nd May 2025
Source: Paige Estritori

Share this news item:

Finance News

Clear

Global Central Banks Intensify Focus on Gold Reserves 18 Jun 2025: Paige Estritori Recent data from the 2025 Central Banks Gold Reserve Survey indicates a renewed focus on gold among the world's central banks. As these financial institutions adapt to the changing economic landscape, their strategies increasingly involve boosting their gold reserves. - read more

Navigating Private Credit Risks for Australian Retail Investors 17 Jun 2025: Paige Estritori Investment in private credit is not a contemporary innovation; its roots trace back to ancient times. The evolution of direct lending, particularly in the UK, Europe, and the US, intensified across the 18th to the 20th centuries, serving as a crucial alternative during frequent banking crises. The current surge in private lending originated in the 1990s amidst burgeoning internet startups, and was further propelled by tighter banking regulations and historically low interest rates post the Global Financial Crisis. - read more

AFCA Caught in Scam Operations, Urged to Strengthen Protocols 17 Jun 2025: Paige Estritori The Australian Financial Complaints Authority (AFCA) finds itself inadvertently entangled in sophisticated scamming operations. The Stockbrokers and Investment Advisers Association (SIAA) has identified a tactic whereby fraudsters use AFCA's complaint system to lend credibility to their scams by taking over victims' accounts and falsely lodging complaints. - read more

Sydney Property Market Rebounds with Strong Auction Performance 16 Jun 2025: Paige Estritori The Sydney property market showed signs of revival as the latest auction results indicated a resurgence in buyer enthusiasm. Last weekend, the city recorded a preliminary auction clearance rate of 70.5%, marking a notable rebound from the previous week's low of 58.1%. The recent performance also represents Sydney's first clearance rate above 70% in three weeks and only the second instance in the past thirteen weeks. - read more

Overseas Investors Target Australian Real Estate Debt 13 Jun 2025: Paige Estritori The Australian commercial real estate debt market is garnering attention from international investors, with the Canada Pension Plan Investment Board (CPP Investments) making significant inroads. In partnership with Nuveen, a global asset manager, a substantial investment strategy targeting Australian real estate debt has closed its second round. The total commitment exceeded $650 million, with CPP Investments contributing $300 million through their CPPIB Credit Investments Inc. - read more

ASIC Cracks Down on Risky Financial Influences 12 Jun 2025: Paige Estritori The Australian Securities and Investments Commission (ASIC) has issued warnings to 18 social media influencers actively promoting high-risk financial products without the necessary licence. The move is part of a broader initiative to curb unlicensed financial advice in the online sphere, where influencers often lure young audiences with glamorous lifestyles while dispensing questionable investment tips. ASIC has identified these so-called 'finfluencers' as operating in breech of the Corporations Act by promoting complex financial products like derivatives without proper authorisation. - read more