An Australian financial services licensee has been hit with penalties of more than $11 million after it was found to have given inappropriate “cookie cutter” advice related to rolling super balances into SMSFs to buy property via a related entity.
The Australian Securities and Investments Commission (ASIC) stated DOD Bookkeeping, now in liquidation and previously known as Equiti Financial Services, was handed a penalty of $11,030,000 after the Federal Court found its authorised representatives provided inappropriate advice and breached conflicted remuneration rules.
Specifically, ASIC noted that Equiti Financial Services paid more than $130,000 in bonuses to three authorised representatives who gave template advice for clients to roll their superannuation benefits into an SMSF and then use those monies to buy property through Equiti Property.
The regulator pointed out that in the case of 12 clients who gave evidence to the Court the advice fit the “cookie cutter” definition and did not consider their individual circumstances or objectives and the bonuses paid to advisers for the property transactions breached conflicted remuneration laws.
In the judgment, Justice Goodman stated “little or no heed was paid to the particular circumstances of the clients”, and the individuals targeted were not given enough time to understand the advice provided which was aimed at “manoeuvring the clients into property purchases through SMSFs”.
ASIC deputy chair Sarah Court added misconduct which exploited superannuation savings was an enforcement priority and the penalty was consistent with that approach.
“In this case the court found bonuses paid to advisers influenced the advice they provided, resulting in poor financial outcomes for the consumers involved.
“Financial services licensees who employ advisers to provide personal financial advice need to ensure that they place their clients at the forefront.
“The size of today’s penalty demonstrates the seriousness of this misconduct.”
ASIC first commenced action against DOD Bookkeeping in May 2021 when the firm, trading as Equiti Financial Services, was part of a group of companies offering SMSF establishment and administration services, with Equiti Property and Equiti Finance providing real estate and mortgage broking services respectively.
The Australian financial services licence (AFSL) of Equiti Financial Services was cancelled on 7 November 2024 after it failed to pay a compensation determination handed down against it by the Australian Financial Complaints Authority (AFCA), which in turn was settled by the Compensation Scheme of Last Resort (CSLR).
In these events, ASIC is mandated under the law to cancel the AFSL of any organisation failing to respond to an AFCA determination that is in turn paid by the CSLR.
