Fuoco and Australian Securities and Investments Commission [2010] AATA 739 (28 September 2010)

Last Updated: 30 September 2010

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 739

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2010/0196

GENERAL ADMINISTRATIVE DIVISION		)
	Re		JOSHUA FUOCO

Applicant

And

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION

Respondent

DECISION

Tribunal

Mr G L McDonald, Deputy President

Date 28 September 2010

Place Melbourne

Decision

The Tribunal affirms the decision under review.

.......(sgd G L McDonald)..........
Deputy President

CATCHWORDS

CORPORATIONS LAW - Securities Industry - Financial Adviser - Non-Compliance with statutory requirements (including, inappropriate advice, failure to disclose relevant information, misleading conduct) - Banning order - Relevant considerations for exercising discretion to issue banning order and determining length of time of banning order - Protection of public interest - decision affirmed.

Administrative Appeals Tribunal Act 1975 (Cth), s 37

Australian Securities and Investments Act 2001 (Cth), ss 12DA and 19

Corporations Act 2001 (Cth), ss 766A, 766B, 920A, 920B, 944A, 945A, 946A, 946C, 947C, 947D, 953A and 1020A

Hayes v Australian Securities & Investments Commission [2006] AATA 1506; (2006) 93 ALD 494

REASONS FOR DECISION

28 September 2010

Mr G L McDonald, Deputy President

1. The applicant is applying for the review of the decision of a delegate of the Respondent made under ss 920A and 920B of the Corporations Act 2001 (Cth) (the Act) dated 8 January 2010, which bans him from providing financial services for a period of five years. The respondent alleges a number of contraventions of the Act, which aside from an allegation of misleading and deceptive conduct, are said to be against the consumer protection provisions in Chapter 7 of the Act. The applicant, who was an employee at the time the events under consideration occurred has since, though prior to the imposition of the ban, established a business as a financial adviser and has been operating under a stay granted by the Tribunal on 21 January 2010.
2. By s 920A (1)(e) of the Act, a person who has not complied with a financial services law[1] may be banned from providing a financial service. A financial service includes the provision of financial product advice.[2] “Financial product advice” is defined as meaning,

a recommendation or a statement of opinion, or a report of either of those things, that:
(a) is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or
(b) could reasonably be regarded as being intended to have such an influence.[3]

THE HEARING

3. At the hearing, the respondent was represented by Mr P Crutchfield SC, of counsel. The respondent filed 14 volumes of material to satisfy the requirements of s 37 of the Administrative Appeals Tribunal Act 1975 (Cth) (the T Documents and, in the case of Volume 14, the Supplementary Documents (ST Documents)). A further volume of documents, being extracts of ASIC company records and Regulatory Guides issued by ASIC, was also before the Tribunal (Volume 15). Contained in these documents were witness statements given to ASIC investigators by 20 of the applicant’s then clients together with Statements of Advice (SOA) issued by the applicant for those clients, 15 SOAs prepared by the applicant, which were not accompanied by statements from those who received the SOAs, and 3 witness statements for those whom the applicant provided advice without SOAs being produced.
4. There was no challenge on behalf of the applicant to the contents of the statements filed by the respondent. The respondent also tendered documents that were marked as exhibits. References in these reasons to s 19 examinations, filed as part of the T Documents, are references to compulsory examinations conducted by the respondent under s 19 of the Australian Securities and Investments Commission Act 2001 (Cth), involving the applicant (on three occasions), Mr Weerappah, Mr Deutsch, Ms Clegg and Mr Lewis. The Tribunal reopened the hearing to ensure that the applicant was extended the opportunity to clarify some issues which emerged during the course of the Tribunal’s deliberation of the evidence.
5. The decision in respect of which the applicant seeks review found that the applicant committed breaches of the following provisions (there is no particular significance in the order in which these are listed):

(a) that the applicant failed to:

(i) make reasonable enquires of, and determine the relevant personal circumstances of, clients to whom he provided financial advice;[4]

(ii) give consideration to, and conduct such investigation of, the subject matter of the advice, as is reasonable in the circumstances, having regard to the ascertained personal circumstances of the client;[5] and

(iii) provide advice which was appropriate to the client having regard to the consideration and investigation.[6]

(b) did not reveal in the SOAs issued to clients the remuneration or other benefits he was to be paid when recommending to a client to invest in a product in circumstances when that may reasonably be expected to be, or be capable of, influencing the advice given;[7]

(c) did not include information about relationships between the providing entity, or any associate of the providing entity, and the issuers of financial products which may reasonably be expected to be, or have been, capable of influencing the providing entity in providing advice;[8]

(d) a failure when recommending to clients to rollover investments in superannuation to another financial product to provide information, which is either known or could reasonably be found out about, including any charges to be incurred in the disposal, or any charges to be incurred in respect of the acquisition of the new product, or any pecuniary benefits which will, or may be lost, as the result of a client accepting the advice;[9] This breach was abandoned as a ground before the Tribunal.

(e) engaged in misleading or deceptive conduct;[10] and

(f) recommended to clients to invest in a managed investment scheme which needed to be, but was not, registered.[11].

The delegate, while he made a single finding that the applicant failed to issue clients with SOAs prior to the advice being given, or within the five day limit permitted in critical cases after the advice was given, made a finding that that non-compliance would be irrelevant. [12]

6. The applicant was represented by Mr S. Samargis, of counsel. The applicant gave oral evidence and called Mr Deutsch, who was the compliance manager at Elite Equities Pty Ltd (Elite) during the time the applicant was employed as an authorised representative by that company to provide the financial advice with which the Tribunal is concerned in this hearing. Since leaving Elite the applicant has established a financial advisory business, FP Investment Partners Pty Ltd (FPIP), which company has secured an Australian Financial Services License (AFSL). Statements from 15 of the applicant’s existing clients were admitted by consent and were marked as exhibits. It was not sought to cross-examine any of the former Elite clients in respect of whom the respondent had filed witness statements in this review.
7. In the Applicant’s Statement of Facts and Contentions dated 5 March 2010, and in concessions made by his barrister at the commencement of the hearing, all but two of the breaches of the financial services legislation found by the delegate were accepted. It was not accepted that the applicant had:

(a) provided inappropriate advice to clients;[13] alternatively, if so, then he had a defence in that he acted on information provided to him by the financial services licensee;[14] and

(b) engaged in misleading and deceptive conduct.

BACKGROUND AND ENTITIES INVOLVED

Dollarforce Financial Services Pty Ltd (DFS)

8. It is desirable that the Tribunal record a brief background. Prior to working for Elite, the applicant worked as a commission salesman for Dollarforce Financial Services Pty Ltd (DFS) between February and November 2004. Mr Clestus Weerappah was the sole director and shareholder of DFS between its incorporation on 11 December 2002 until it was placed in liquidation on 16 December 2008. During the period the applicant worked for DFS, it was the applicant’s role to promote and sell memberships to the Dollarforce Investment Club. Dollarforce Club members (Club members) paid an initial subscription fee and an annual fee. Club members acquired, as part of their membership, the right to receive legal, accounting and finance broking advice[15]. Prior to Elite securing an AFSL and commencing to give financial advice, the financial services advice was given by an unrelated and independent firm of financial advisers. When clients were referred from DFS to Elite, the information that DFS had gathered in respect of the client was also forwarded to Elite[16].
9. DFS used money raised through Club members investing in the Dollarforce Fixed Interest Program (DFIP) to fund commercial and residential property developments. During the period he was employed by DFS the applicant was paid a commission of $1000 for each Club member he introduced and who subsequently subscribed to the DFIP. The applicant continued to recommend to investors that they invest in the DFIP product after he became an authorised representative of Elite. One of the issues to be determined is whether the applicant continued to receive a commission for introducing investors to this product. The DFIP product is described in greater detail later in these reasons.
   

Elite Equities Pty Ltd (Elite)

10. From 16 February 2005 Elite held an AFSL. The applicant became an authorised representative of Elite on 23 February 2005 and remained in that position until 8 November 2008. Elite, was established by Mr Weerappah to provide Club members with financial services advice. DFS paid to Elite a flat rate fee per client for the giving of that financial advice. At the time that Elite was established, there were approximately 360 Club members who could utilise Elite’s financial advisory services. The applicant told the Tribunal that a timeframe was set up “to process all of these clients and provide them with opportunities to benefit from advice”[17]. Initially, there were only two authorised representatives appointed to carry out this work – the applicant and Mr Batt.[18] Elite’s clients were described as being either ”standard” or ”private”, depending on the value of their assets.[19]. Elite’s offices were located in the same building as those of Dollarforce.
11. Mr Weerappah, through a number of corporate entities with which he was associated, was an investor in, and developer of, commercial and residential properties. He was one of the directors of Elite from the time it was registered on 4 August 2004 and remained so until he resigned from that position on 10 September 2008.[20] Elite is a wholly owned company of Retail Treasury Pty Ltd (Retail Treasury). Mr Weerappah was the sole director of Retail Treasury between 19 June 2003 and 6 February 2006, after which Ms Hawkins became the sole director. At all times, DFS was a shareholder in Retail Treasury. Relevantly for this hearing, Mr Weerappah, as well as being a director of DFS, was associated with the Ivory Property Group Pty Ltd (IPG) (as Trustee for the Ivory Property Trust (IPT)), DFS, Altitude Property No 1 Pty Ltd, 107 Riversdale Road Pty Ltd (Riversdale Road properties), Alamanda Property Investment No 2 Pty Ltd (Alamanda), My Building No 1 Pty Ltd and Lewmac Investments Pty Ltd (Lewmac). The Tribunal will refer to these companies later in these reasons.
12. Elite’s management team consisted of:

• Mr Weerappah, who was the person responsible for establishing both DFS and Elite. The applicant regarded Mr Weerappah as his ‘boss’, something confirmed by Mr Deutsch.[21] Mr Weerappah was not an authorised representative of Elite.
• Ms L Murray (formerly Healy), who was the responsible officer or manager from the outset until approximately November 2008[22] but who only worked at Elite about 10 hours a month.[23]
• Mr R Deutsch, the compliance officer, who worked at Elite one day a week, and was mainly engaged in setting up procedures to ensure compliance, as well as being involved in determining the products to be included on the recommended products list (RPL). He also said that he was available to answer specific questions put to him by Elite’s financial advisers. Mr Deutsch was responsible for undertaking ad hoc compliance audits of the files of Elite’s authorised representatives.
• Mr S Lewis, an accountant, who was also a director of Elite between 4 August 2004 and 2 June 2008[24] and who worked part-time at Elite in a management capacity between February 2006 and June 2007.[25]
• Ms E Clegg, who was appointed a director on 21 September 2005, said that she assumed the role of running the office from August 2007 after Mr Lewis ceased in that position .[26]
• Ms A Hawkins, who was described as being in a relationship with Mr Weerappah,[27] also sometimes attended management meetings of Elite and subsequently, on 10 September 2008, she became a director.[28]

13. There are two principal products in relation to which the material and evidence before the Tribunal focussed on, specifically the IPT and the DFIP. The applicant recommended to Elite’s clients, among other recommendations, to invest in these products. In respect of the IPT, the applicant was the only financial planner at Elite who recommended to investors that they invest in the product.

The Ivory Property Trust (IPT)

14. The IPT was established on 30 August 2005, with Mr Weerappah’s related company, the Ivory Property Group Pty Ltd (IPG), as trustee.[29]. Until it went into liquidation on 12 March 2009, Mr Weerappah was the sole director and secretary of IPG[30]. The IPT was described in two undated information memoranda issued under Elite’s name[31] and one memorandum dated 31 August 2005 issued by the Trustee[32]. The undated memoranda were issued prior to the dated memorandum. The IPT was to be a seven year fixed unit trust, which invested in residential units. Twenty retail investors were to invest with the minimum subscription being $100,000 each. Investors were issued with units enjoying equal rights and priced at $1. Investors’ interests were to be secured by a second mortgage, with a first mortgage being held by a bank or other financier. Investors were advised that they could sell their units, but that the syndication program would not repurchase the units.
15. One of the undated memoranda stated that a manager for investors was to be appointed. The other undated memorandum contained a heading ”Manager for investors”, but no description of the role was supplied[33]. The dated memorandum contained no reference to the position. In the undated memorandum the role was described as: to receive investors funds; before settlement to hold interest in the first-ranking mortgage on trust for investors, and after settlement to hold the second-ranking mortgage for investors; to enter into a deed of priority between the first - and second- mortgagees and to account for the proceeds from the investors[34]. This description is confusing, for example it suggests that interest accruing on the money borrowed, and secured by the first mortgage, is to be held in trust for the unit holders, but it makes no mention of how those sums relate to the interest to be paid under the mortgage. Further, the role is unclear as there was no indication as to when ”settlement” would occur .

Dollarforce Fixed Interest Program (DFIP)

16. The DFIP was a private investment fund established by DFS to raise money to be applied to residential and commercial property developments[35]. The minimum subscription from investors was $50,000, with a total sum of $20,000,000 to be raised. A subscription could be redeemed by giving three months notice and paying a fee of $2,500. The term was to be for up to two years. Payments were to be made to the DFS, which was to act as the Fund Manager. The investors in the DFIP would, through the trust, hold a second mortgage over the properties to be developed. Additionally, funds, secured by a first mortgage, were also to be borrowed from a financial institution. Two undated information memoranda for the DFIP were published.[36] Neither of the memoranda stated the amount of fixed interest to be paid to the investors. Interest was to be paid to investors quarterly in arrears. The DFS was to be the manager of the DFIP. The investors’ interests were to be secured through the ”Trustee for Investors”. There was no information about the identity of the trustee and no apparent trust deed.

SHOULD THE APPLICANT HAVE RECOGNISED THAT THE IPT AND THE DFIP WERE REQUIRED TO BE REGISTERED WITH THE RESPONDENT?

17. Section 601ED (1)(b) of the Act requires a managed investment scheme promoted by a person in the business of promoting managed investment schemes to be registered with the respondent. Mr Weerappah was both a director of Elite at the time it issued the two undated memoranda in respect of the IPT (that is, prior to 30 August 2005) and the sole director of the IPG (after its formation on the 30 August 2005). Mr Weerappah was the sole director of the DFS, which both formed the DFIP and acted as its manager. The Tribunal is satisfied that investors contributed to pooled funds in both the IPT and the DFIP and that, after making their investments, they had no control over the way in which either scheme operated. Mr Weerappah, having regard to his directorships in both the DFS and the IPG, is properly described as a promoter of managed investment schemes.
18. Neither the IPT nor the DFIP was registered when both should have been. Section 764A (1)(ba) of the Act provides that, for the purposes of Chapter 7 of the Act, interests in a managed investment scheme which should be registered under s 601ED (1)(b) of the Act are ”financial products”. The applicant recommended both products to Elite’s clients, all of whom were retail clients, without mention of the requirement that the products needed to be registered. The applicant claimed in his second s 19 examination that, since only 20 investors were involved, the scheme did not need to be registered[37]. This is a reference to s 601ED (1)(a) of the Act, which requires a managed investment scheme with over 20 investors to be registered. That is only one of the statutory requirements and does not take account s 601ED  (1)(b) of the Act, which additionally requires a scheme promoted by a person in the business of promoting managed schemes to have the scheme registered.
19. On behalf of the applicant, it was submitted that it was Mr Weerappah who ”directed” the applicant to recommend investment in the IPT if appropriate to the clients’ circumstances[38]. The Tribunal is of the view that there would be no point in having people qualified as ”authorised representatives” if, regardless of the legal requirements, they could be directed by their employer to do something not permitted by the law. It was asserted in Elite’s promotional material that the applicant was experienced in, among other things, ”managed investments”. It is clear that he was not experienced sufficiently to know that the managed investments were being promoted by a person, whose business is the promotion of such schemes, and that the schemes needed to be registered before investment by retail clients could be recommended. The applicant, as a qualified authorised representative, albeit at the outset his qualification was at the basic level, could and should be expected to be aware of the provisions surrounding when registration of managed investments was required. Given his association with Mr Weerappah prior to the establishment of Elite, the applicant could hardly be in any doubt as to Mr Weerappah’s involvement in promoting both products. The Tribunal is satisfied that the applicant did not comply with the provisions of s 1020A of the Act.

WAS IT NECESSARY FOR THE APPLICANT TO DISCLOSE HE WOULD BE PAID A COMMISSION FOR SUCCESSFULLY RECOMMENDING TO ELITE’S CLIENTS TO INVEST IN THE IPT?

20. It is accepted by the applicant that he was paid a commission from Elite in October 2007, and that the payment was made as the result of him attracting 20 investors to invest in the IPT.[39] None of the SOA’s issued by the applicant recommending to clients to invest in the IPT stated that he was entitled to be paid a commission. The SOAs in fact stated that he was paid a flat salary along with a set plan fee charged to DFS (for example, in the SOA for Mr and Mrs Funke[40] and for Mr and Mrs Horton.[41]). The SOA for Mr and Mrs Kimpton stated that the applicant generally received a flat salary from Elite, and that he may receive a performance bonus at the year’s end.[42] In some cases, the fee disclosure stated that the applicant may receive other benefits from product providers without the source of the benefit being mentioned or whether the benefit may reasonably be taken to influence the advice given.[43]
21. Initially, in both the first and second s 19 examinations of the applicant, the applicant stated that he would receive a commission of 1% ($1,000 per client being $20,000 of the total raised) in respect of clients who accepted his advice to invest in the IPT[44]. He stated he could not recall whether he advised the clients orally or whether he included mention of the commission in the SOAs issued by him. The applicant maintained that he was assured by the directors of Elite that full disclosure of him being paid a commission was made to all clients, who had invested in the IPT, in an additional SOA issued by a paraplanner[45]. Subsequently, in the same examination, the applicant said that Mr Weerappah had assured him that the additional SOAs dealing with the payment of commission had been sent. The applicant did not see any nor did he seek to see the content of the additional SOAs[46]. In his second s 19 examination, conducted on 23 June 2009, the applicant stated that a 1% commission was only payable after the IPT investment quota had been met[47]. There was no mention in the applicant’s first and second s 19 examinations that the payment of the commission in respect of the IPT was at the discretion of Mr Weerappah.[48] None of the clients who invested in the IPT stated that they received any additional SOAs.
22. Mr Weerappah, in answer to questions posed to him in his s 19 examination, stated that there were commissions paid to finalise the investments in the IPT, but he stated that he was unaware of the payment details. The Tribunal finds difficulty in accepting what Mr Weerappah has said on this topic. Mr Lewis thought that the $20,000 payment, although paid from the Elite account, was for any outstanding commission owing to the applicant from the time he worked for DFS.[49] This would seem an unlikely explanation, as the applicant had not worked for DFS at the time the commission was paid in 2007 for over 2 years and Elite did not have the responsibility for paying commissions incurred by DFS. Mr Lewis also said that while it should never have happened, it would not shock him if the money had been paid as a commission while the applicant worked at Elite[50].
23. The applicant maintained in his first s 19 examination that the IPT was on Elite’s RPL.[51] Subsequently, he stated that he had directly asked the directors of Elite if he could recommend the IPT and they confirmed he could.[52] There was never any written confirmation of this. The applicant’s evidence does not accord with the evidence given by Mr Lewis or Ms Murray in their s 19 examinations, both of whom maintained that the IPT was not on Elite’s RPL.[53] It was Mr Deutsch’s evidence that he could recall mention of the IPT in the months following the establishment of Elite, at which time Mr Weerappah told him that there was no need to be concerned because the product was closed.[54] Mr Deutsch stated that the applicant told him that he (the applicant) had been paid a once-off commission, which had been a discretionary payment determined by Mr Weerappah.[55]
24. It appears that Mr Deutsch may have approved, in what he described must have been an oversight, the inclusion of the IPT in the SOA issued to Mr and Mrs Georgitsopoulos.[56] It also appears that Mr Deutsch provided advice in respect of the IPT and that he was forwarded a copy of one of the undated memoranda. In an email to Mr Deutsch dated 28 July 2005, Mr Weerappah stated that he had ”made a few minor changes to the document [information memorandum]”, before asking him whether he had ”any comments before we....start marketing via Elite?”[57]. Being one of the undated memoranda, the document disclosed that it had been issued by Elite. Despite these two circumstances, suggesting that Mr Deutsch was more involved with the IPT than he maintained in his evidence to the Tribunal, the Tribunal remains satisfied that Mr Deutsch’s involvement with the IPT product was minor. It also accepts his evidence that the product was never approved for inclusion on Elite’s RPL and that he did not at any stage, other than mistakenly in the case of Mr and Mrs Georgitsopoulos, give permission for it to be recommended.
25. The applicant strongly promoted investment in the IPT on the basis that it was an: “exclusive Ivory Trust property syndicate commissioned by Elite on behalf on [sic] Dollarforce clients” (for example, the SOA for Mr and Mrs Goundar[58]; for Mr and Mrs Makara[59]; for Mr and Mrs Parsons[60]; and for Mr and Mrs Pellen[61]). The premise that Elite commissioned the IPT is not supported by any evidence other than that of Mr Weerappah’s email to Mr Deutsch. The Tribunal is satisfied that it was wrong for the applicant to make the statement. The Tribunal is satisfied that he knew it was incorrect at the time he made it. The Tribunal is satisfied that the making of the statement is misleading.
26. The applicant exerted pressure on some clients to invest in the IPT suggesting that he was keen to secure the payment of the bonus. For example, he stated in an email to Mr and Mrs Funke, dated 26 August 2005, that the application for the investment needed to be completed by them by 31 August 2005, as the investment was ”currently oversubscribed so even the application and deposit [$10,000] doesn’t guarantee you a position...I cant [sic] recommend you do this strongly enough”.[62] This was followed by an email, dated 6 September 2005, stating that the applicant had taken the liberty of reserving a unit for them, and that,”...I didn’t think it appropriate for you to miss out on an outstanding opportunity“.[63]
27. The pressure applied to Mr and Mrs Funke occurred at a time of a close family bereavement. The latter fact was known to the applicant, but it did not stop him from inappropriately applying pressure on them. In addition to their bereavement, the approach was inappropriate as there was no mention of the IPT investment in the SOA issued to them. In fact the SOA, dated 27 July 2005[64], issued by the applicant to Mr and Mrs Funke contained a recommendation not to invest in a direct property investment “at this stage”. The applicant maintained in the hearing that Mr Weerappah had informed him, presumably before the 31 August 2005, that the IPT investment was full.[65] The Tribunal does not accept this. Even if it was said, then the applicant must have come to know shortly after that it was not true. Not only did he proceed with encouraging Mr and Mrs Funke to make the investment after the 31 August 2005, as evidenced by his email to them of 6 September, but he continued to recommend investments be made in the IPT until September 2007[66]. The applicant took no steps to correct the misinformation provided to Mr and Mrs Funke.
28. The manner in which the investment in the IPT for Mr and Mrs Funke was approached leaves the Tribunal satisfied that the applicant applied inappropriate pressure on them to commit to the investment. The Tribunal is satisfied that he was less then truthful in his representations to them concerning the need to invest immediately in the product or lose the opportunity. His actions are more consistent with those which may be expected from a salesman anxious to obtain a commission than they are from an authorised representative recommending a financial product to a retail client. In combination with the other factors mentioned in these reasons, the way in which the applicant dealt with Mr and Mrs Funke leaves the Tribunal satisfied that he was intent on selling the units in order to secure payment of a promised commission.
29. In his first s 19 examination, the applicant was asked about emails passing between him and Mr Weerappah concerning a desire by a client, Mr Oswald, to sell a $100,000 unit that the latter had purchased in the IPT. The applicant suggested that the unit be resold for $83,000, with DFS keeping $12,000 and the applicant keeping $5,000. In an email dated 24 September 2007, the applicant wrote, “[i]f nothing else, the extra 12,000 goes towards paying the commissions for me, which may help lessen the impact of the time taken to vend all the units”[67]. The applicant stated in that examination, that any commission which was to be paid by Mr Weerappah was discretionary and, in any event, that the exchange was a joke passing between him and Mr Weerappah.[68] He maintained this before the Tribunal. Regardless of whether it was jocular in nature or not, the exchange, in as far as it mentions the payment of commissions, is suggestive of the existence of an agreement or arrangement between the applicant and Mr Weerappah for the payment of commission. While the exchange does not disclose the terms of any agreement to pay the commission, the fact that the specified sum is mentioned, along with the implicit commitment that the commission would be paid after the units had been sold, lends weight to the proposition that terms had been pre-arranged and that payment was not discretionary.
30. The overwhelming weight of the evidence is that the IPT was never on Elite’s RPL. Nor does the evidence leave the Tribunal satisfied that the applicant obtained approval - whether written or oral - for the IPT to be recommended to Elite’s clients for investment. The fact that the applicant claimed to have orally discussed with clients the investment in the IPT, but he subsequently failed to refer to the product directly in many of the SOAs issued, demonstrates that he must have had some misgivings about recommending that particular investment. It is a basic requirement that a recommended investment product be identified in a SOA. If there was an agreement or arrangement between the applicant and Mr Weerappah, that the applicant was to be paid a commission and that this was not conveyed to the Elite management team, then the applicant is unlikely to raise the inclusion of the IPT on the RPL as it would draw attention to, and raise possible questions about, the terms on which the IPT was being recommended. Such an approach is consistent with there being an undisclosed arrangement or agreement between the applicant and Mr Weerappah concerning the applicant’s recommendations to invest in the IPT. It is only when the issue of commissions was raised that the applicant started to relate that Mr Weerappah told him that paraplanners had been engaged to notify clients.
31. While paraplanners may be able to prepare SOAs, their role is limited by the requirement that SOAs can only be given to clients by ”providing entities”, who are licencees or authorised representatives[69]. The applicant had the responsibility of not just taking Mr Weerappah’s word that paraplanners had notified the applicant’s clients that he had been paid a commission, but he should have checked that the advice had been sent. There is in fact no evidence from any of the clients, or from records which ought to have been retained by Elite, that any additional SOAs concerning commissions were sent. The Tribunal is satisfied that no such additional SOAs were sent. The applicant also accepted that this transpired to be the case, but he claimed that he had relied on Mr Weerappah’s assurance that additional SOAs had been sent.
32. The Tribunal notes that the applicant was the only Elite authorised representative who received a commission for recommending investment in the IPT. This is despite the applicant maintaining in his first s 19 examination that he was part of a team which recommended the product to investors. This is also consistent with there being some arrangement or agreement between the applicant and Mr Weerappah concerning attracting investors to invest in the IPT – otherwise, given the product was recommended over a two year period, it is likely that some of the other Elite authorised representatives would have recommended investment in the IPT. There is no evidence that this occurred. The only evidence available is that the applicant was the sole representative to recommend investment in the product.
33. The evidence of the applicant is unreliable to such an extent that the Tribunal is unable to accept his denial that the payment of a commission relating to investors in the IPT was a matter for Mr Weerappah’s discretion. The persistence displayed by the applicant in promoting the IPT investment, when it was not on Elite’s RPL and he had not received management consent to recommend the investment, along with the other factors mentioned, leaves the Tribunal satisfied that an agreement or arrangement existed between the applicant and Mr Weerappah for the payment of a commission. While the evidence is circumstantial and care must be exercised in reaching a decision on circumstantial evidence, the Tribunal is satisfied nevertheless that an arrangement was made between the applicant and Mr Weerappah whereby the applicant would, rather than may, be paid a commission for securing clients to invest in the IPT.
34. The fact that a commission was to be paid leads to a reasonable supposition that payment would influence the advice given. The impetus to secure a commission totalling $20,000 is a significant consideration such as to induce a person, in the applicant’s position, to recommend investment in a product. In these circumstances, the applicant ought to have disclosed when he advised investment in the IPT to Elite’s clients that a commission was payable. That he did not is a serious matter. The IPG went into liquidation with assets in excess of liabilities estimated to be $324,217[70]. It is evident that the investors, after payment of the principal mortgagee, would not recover their investment, much less receive a return on it.

WAS IT NECESSARY FOR THE APPLICANT TO DISCLOSE THE PAYMENT OF A COMMISSION FOR CLIENTS HE RECOMMENDED INVEST IN THE DFIP?

35. Mr Lewis was adamant that the DFIP was not “a commercially rated product; ...it wasn’t a product I wanted on our [Elite’s] recommended product list; ...[and] our professional indemnity insurance specifically excluded... expressly provided for cover only to products recommended with PDS or prospectus”.[71]. Mr Lewis maintained that he advised staff that they were not to “cross the boundaries” by recommending investment in non-RPL products.[72] The first that Mr Lewis heard about the applicant advising investment in DFIP was in June 2007, at which time he restated his direction that products not included on the RPL were not to be recommended.[73] In an email to Ms Clegg dated 11 September 2008, the applicant advised that he had told Mr Lewis that Mr Weerappah was “desperate for cash” and that Mr Lewis had endorsed the applicant recommending investments in DFIP, provided that no mention of it was made in any SOA.[74] The applicant repeated this during the course of his cross-examination before the Tribunal.[75] In his s 19 examination Mr Lewis denied saying this.[76]
36. In the SOA issued to Mr and Mrs Mollard dated 9 May 2006, under the heading of “managed investment” the applicant recommends that $140,000 be retained for investment in an unlisted commercial property trust or investment company. Mr Mollard inherited this sum of money. The SOA does not identify the investment vehicle.[77] An email from the applicant to Mrs Mollard, predating the SOA by seven days, confirms the advice that the investment for the $140,000 in My Building No 1- My Building No 1 is part of the DFIP. Mrs Mollard, in her statement to an ASIC investigator, claims that the applicant did not provide any documentation relating to My Building No 1[78].
37. The applicant, in his evidence to the Tribunal, claims that he explained the investment in detail to Mr and Mrs Mollard.[79] The applicant agrees that he received a commission for placing them in the My Building No 1 investment and that this was not disclosed to them in the SOA he issued, because whether or not the commission was paid remained at the discretion of Mr Weerappah.[80] Further he claims that, as with the other SOAs, Mr Weerappah informed him that the advice would be given in a subsequent SOA prepared by a paraplanner. The applicant conceded that the subsequent SOA was never issued.
38. The Tribunal acknowledges that it has not heard directly from Mr Lewis and that care must be exercised in any determination of whether or not it accepts the sworn evidence he gave at his s 19 examination, rather than the oral evidence given by the applicant before the Tribunal. Setting aside what Mr Lewis said, the Tribunal remains troubled by the applicant’s explanations. On the one hand, supported by the evidence of Mr Deutsch, he claims that there was no need for him to disclose the possibility of a commission being paid, because of the discretionary nature of the payment. On the other hand, he claims that he was assured by Mr Weerappah that this advice was conveyed to the clients by a paraplanner. The applicant did not see, and did not ask to see, the subsequent advice said to be given by any paraplanner. The applicant stated that he relied on Mr Weerappah’s word that an arrangement had been made for the advice to be given. Mr Deutsch told the Tribunal that advice about commissions should be in the SOA, rather than being provided by a paraplanner.[81]
39. The disclosure requirements relating to a representative receiving a commission in s 947C (2)(e) of the Act require the representative to form his or her own opinion about whether the receipt of a commission “might reasonably be expected to be or have been capable of influencing” him or her in the giving of advice. This is clearly not a function which can be carried out by a paraplanner. It is also inconsistent with, and renders nugatory, the provisions of s 947C (2)(e) of the Act, that the information about the payment of a commission be given after the client has invested. If that was to the case then, consistent with the intention explicit in the section, the client should be offered the opportunity of reconsidering his or her investment, otherwise the giving of the information after the making of the investment amounts to a hollow gesture.
40. The Tribunal is satisfied that with respect to both the IPT, and at least some of the recommendations that clients invest in the DFIP, the applicant failed to disclose the commission which Mr Weerappah undertook to pay to him in circumstances where it was incumbent on him to do so.

DID THE APPLICANT ADVISE ABOUT ASSOCIATIONS AND INTERESTS IN RESPECT OF THE IPT AND DFIP PRODUCTS?

41. Section 947C (2)(f) of the Act provides that associations and interests which might reasonably be expected to be, or have been, capable of influencing the applicant in recommending a product must be disclosed. It is, as argued in the Respondent’s Statement of Facts, Issues and Contentions an objective test that must be applied when considering this section of the Act[82]. Retail clients cannot be expected to be aware of any associations or interests existing between products unless they are informed about them. Mr Weerappah was a director of Elite and the sole director of DFS; DFS was the manager of the DFIP. For example, when advising Mr and Mrs Nikoloc-Paterson to invest in the Dollarforce Fixed Interest Fund (investors in DFIP lent funds to DFIF[83]), Mrs Nikolic-Paterson stated to ASIC that, Fuoco “said that he and Elite Equities were totally independent of Dollarforce”[84]. It was clearly misleading for the applicant to give this advice. The applicant told them that he would send a SOA to them, “which Fuoco said was essential in order that he meet all legal requirements as a financial planner working for Elite Equities, independent of Dollarforce”[85]. The SOA did divulge that, “[i]t should be noted that there is a common directorship between Elite Equities Pty Ltd and Dollarforce Financial Services”[86]. The applicant’s verbal advice did not tally with the statement in the SOA, which did not detail the dual roles of Mr Weerappah. Since the applicant did not challenge the statements of the witnesses relied on by the respondent the Tribunal accepts that the applicant give different oral advice from the advice contained in the SOA. Additionally the advice contained in the SOA provided insufficient information to permit the client to understand the nature of the relationship.
42. Mr Weerappah was the sole director of IPG, the trustee of the IPT. He was stated to be the vendor of the Riversdale Road properties to the IPT (in the dated memorandum[87]. However, no disclosure was made in the SOAs issued by the applicant when investment in the IPT was recommended about any possible conflict which may arise by the one person occupying both positions. This is of importance when, as in the case of the Riversdale Road properties, the trustee is to be the purchaser of the properties in which he is said to have an interest on behalf of the investors. Mr Weerappah was the sole director of Lewmac, which company became the registered proprietor of the Riversdale Road properties in December 2005.
43. The applicant did not disclose the common directorships to those clients to whom he recommended investment in the IPT prior to the issuance of the dated memorandum. For example, the SOA for Mr and Mrs Buck was dated 28 July 2005, that is, prior to the issue of the dated memorandum, so there was no mention at all of any possible conflict as neither of the undated memoranda contained reference to Mr Weerappah’s interest as vendor of the Riversdale Road properties[88]. Nor was there disclosure in the SOAs issued after the 31 August 2005, when typically the statement is made that the applicant knows of no interests between Elite and any associate which may be capable of influencing him in the giving of the advice[89]. The Tribunal notes that some of those clients who received post-31 August 2005 advice may have been alerted by the statement contained in the dated memorandum that Mr Weerappah was associated with the vendor of the Riversdale Road properties[90]. That, however, does not obviate the need for the applicant to disclose this in the SOA.
44. Section 947C of the Act is couched in broad terms and requires any interests to be notified which might reasonably be capable of influencing the advice given. It could be reasonably expected that when the same person has an interest as the stated vendor of a property to be purchased by a trustee company, and the same person is sole director of that trustee company, that that circumstance ”might reasonably be capable of influencing” the provision of advice by the providing entity. It is also reasonable to conclude that when Mr Weerappah was both a director of Elite and of DFS, and the manager of DFIP, that that may be capable of influencing the investment advice given. There was a need for that information to be disclosed in the SOAs issued by the applicant. The Tribunal is satisfied that non-disclosure results in the applicant breaching the Act.

THE ADEQUACY OF INFORMATION COLLECTED BY THE APPLICANT OF THE CLIENTS’ PERSONAL CIRCUMSTANCES.

45. Section 945A (1) of the Act provides that a financial planner must only provide advice after he or she has determined the relevant personal circumstances of the client and, against that background, conducted such investigation of the subject matter of the advice as is reasonable in all the circumstances in order to give the appropriate advice.
46. Mr Deutsch conducted ad hoc file checks two or three times a year to ensure compliance was occurring.[91] On 26 April 2006, Mr Deutsch informed Mr Lewis that he had undertaken a random sampling of the applicant’s advice files. His description of what he found was that, ”[t]he results were, as expected, pretty rank”.[92] Mr Deutsch reported that the applicant’s fact finding in respect of ascertaining the personal circumstances of clients, upon which investment recommendations would in part be based, were found to be incomplete or hardly filled in at all.[93] He mentioned the likelihood of the requirements of s 945A of the Act being breached by Elite and recommended that updates be undertaken by the in-house paraplanners as a matter of urgency. Mr Deutsch concluded by stating, ”I can not stress enough how important this is - we’re talking about losing ether [sic] the RO or the licence if this is not dealt with properly!”[94].
47. It is clear that Mr Deutsch regarded this failure as being extremely serious. The Tribunal is satisfied that it is too late after advice has been given then to ascertain a client’s personal circumstances. That information is a necessary part of assessing a client’s level of risk tolerance and the types of investments with which the client would be most comfortable. While an update on a client’s personal circumstances is useful in reviewing his or her portfolio, the obtaining of that information, post the initial investment advice being given, simply serves as a façade of compliance when in fact there has been no, or insufficient, compliance with the legislative requirements found in s 945A(1)(a)(i) of the Act. The applicant accepts that he breached in this regard and the Tribunal accepts that the breaches were not of a trivial nature.

INFORMATION ABOUT PRODUCTS RECOMMENDED FOR INVESTMENT.

48. The delegate concluded that whatever the personal circumstances of the client, the applicant should not have recommended investment in the either the IPT or the DFIP as there was no reasonable basis for making the advice in breach of s 945A(1)(b) of the Act[95]. The delegate set out a large number of deficiencies in the memoranda of advice issued with respect to both products, which were indicative of the products being high risk investments. There are many criticisms that can be made of the inadequacy of the information contained in the descriptions of the products, which support the conclusions reached by the delegate. Given the Applicant’s acceptance of the breach, it is not necessary to address them all in detail. The Tribunal considered some of the deficiencies in the information provided, which made it inappropriate for the applicant to recommend the products to investors.
49. The applicant claimed that the memoranda were prepared by reputable accountants and solicitors and so he should not bear any responsibility for their shortcomings. It was also submitted that s 945A (2) of the Act provided him with a defence as he relied on the information provided to him by the licensee. The Tribunal does not accept that s 945A (2) of the Act has any relevance to administrative proceedings, as it relates only to ”proceedings against an authorised representative ....for an offence”. These proceedings are not concerned with whether any ”offence” has been committed. In any event, given the conflicts of interest inherent in Mr Weerappah’s various roles, it would not have been reasonable for the applicant to rely on information or instructions given to him by Mr Weerappah. An instance of this is found in the Tribunal’s finding of the inappropriate agreement whereby Mr Weerappah agreed to pay the applicant a commission for recommending investment in the IPT.
50. The IPT memoranda were somewhat confusing on their face. At one point, it was stated that there were to be no income payments with the profit anticipated from capital gains at the conclusion of the seven year period.[96] While at another point, a benefit of making the investment is stated to be a ”[s]hare of rental income payable on a quarterly basis”.[97] While the two statements may be read as being compatible, there is a lack of clarity which left some investors thinking that they may have an entitlement to receive a share of rent paid to them on a quarterly basis for example, Mr Funke[98],and Ms Fyffe[99]. These two clients drew the applicant’s attention to the confusion in emails dated 12 September 2005 and 28 April 2006, respectively.
51. The applicant told the Tribunal that he notified Mr Weerappah of the concerns expressed by some of his clients concerning the confusion arising from the wording of the memoranda. In his first s 19 examination, the applicant maintained that he drew the clients’ concerns to Mr Weerappah’s attention, and that Mr Weerappah said he would change the wording[100] and confirmed in an email that this had been done.[101] The applicant did not check to see if the wording had been changed. The applicant told the Tribunal that he concluded from the fact that the wording was not changed, that Mr Weerappah must have taken advice that no change was needed.[102] The applicant did not clarify the circumstances that gave rise to the confusion in the SOAs issued after this had been drawn to his attention, with the exception of the SOAs issued to Mr Kay and Ms Creet.[103] Relaying the confusion expressed by his clients to Mr Weerappah is a reasonable course for the applicant to take. However, it was also incumbent on him, whatever the result of his discussions with Mr Weerappah, to either at least check that the wording had been changed or include clarification in the subsequently issued SOAs. With the exceptions mentioned, this was not done. The fact that he considered it necessary to do so in respect of two clients is at least indicative of the applicant appreciating that there was a need to clarify what was being conveyed to clients.
52. Another instance, which demonstrates inadequate investigation by the applicant, relates to four of the properties included in the IPT product. There were nine properties to be acquired by the IPT, four of which were situated in Riversdale Road, Hawthorn (the Riversdale Road properties). Those properties, which are home units, were to be acquired from Mr Weerappah or interests associated with him.[104] There were three memoranda issued describing the IPT portfolio - two issued prior to the establishment of the IPT on 31 August 2005 and one on that date. The dated memorandum, which was issued by the trustee of the IPT, stated that the vendor of the Riversdale Road properties was Lewmac.[105] In his first s 19 examination, the applicant described the properties (including the Riversdale Road properties) as being “blue chip”, which he explained meant the properties were located in “quality suburbs with high rental yields”.[106] The applicant’s view of the values attributable to the properties was based on what he had been told by Mr Weerappah, who could not be regarded as independent.
53. However, as at 31 August 2005, the Riversdale Road properties were registered in the name of 107 Riversdale Road Pty Ltd, a company in which Mr Weerappah had been a director and secretary until he ceased holding those positions on 28 June 2005. An extract from the respondent’s company register reveals that from 27 February 2005, action was being taken to deregister 107 Riversdale Road Pty Ltd. The four units proposed as part of the IPT were part of a development of 11 units being constructed on the site. The balance of the units were to be sold through other entities associated with Mr Weerappah. It was not until 1 December 2005, that a caveat over the property protecting the interests of DFS was withdrawn, a mortgage to the St George Bank discharged and the property transferred to Lewmac.[107] There was no disclosure in any SOA issued prior to 1 December 2005 of the existence of the caveat or the mortgage, the amount the latter secured, what arrangements, if any, at that time had been put in place to arrange for it to be discharged and no indication of when it would be discharged. For all the investors were aware, the mortgagor may have been in default and penalty interest and costs owing on the mortgage increasing. No information was provided with respect to any relationship between the registered proprietor of the properties (107 Riversdale Road Pty Ltd) and the IPT. Nor was there any information provided as to solvency of 107 Riversdale Road Pty Ltd.
54. From 1 December 2005, Mr Weerappah was the sole director, secretary and shareholder in Lewmac.[108] As at 31 August 2005 there was no evidence of any purchase agreement signed by the IPG (the trustee for the IPT) and 107 Riversdale Road Pty Ltd. There was no security documentation (for example, a caveat) evidencing any protection for the IPT in respect of the purchase of the properties. The Tribunal is satisfied that the memorandum was incorrect in describing Lewmac as the vendor of the Riversdale Road properties as at 31 August 2005. Further, there was no information provided as to solvency of Lewmac at the time, or subsequent to its purchase, of the Riversdale Road properties in any SOA issued by the applicant.
55. At no stage was any information provided as to what agreement or arrangement existed between the four units being built for the IPT and the balance of the units in the event of the failure of the builder, Buildcorp Pty Ltd.[109] This assumes some importance given that, according to the applicant[110], the construction was not completed until 2008 by which time all of the investors in the IPT had been secured. The applicant told the Tribunal that, aside from having confidence in the builder as the result of its past performance, he had been assured by Mr Weerappah that one of Mr Weerappah’s entities would complete the development if the builder failed.[111] He did not enquire at the time which entity that would be, but he relied on Mr Weerappah’s oral undertaking. The applicant told the Tribunal that given DFS was marketing the balance of the units, and that deposits would have been obtained from purchasers who would have signed unconditional contracts to purchase the units, he felt confident in the overall security[112].
56. In fact, the Tribunal is satisfied that no action was taken to execute any agreement so that the IPT’s interest was notified on the titles to the Riversdale Road properties in the period post-1 December 2005 until 2009[113]. Clearly, both the provision of inaccurate information followed by a lack of information concerning the security of the IPT interest in the Riversdale Road properties is relevant to prospective retail investors as it represents risks for them. The applicant, as an authorised representative, had a duty to enquire and make basic checks as to the identity of the registered proprietor of the properties and to check documentation to ensure the trust’s interest was secure. Oral assurances and other information provided by Mr Weerappah do not satisfy the due diligence requirements imposed under the Act. If they did then there would be no distinction between someone holding themselves out to be an authorised representative and a salesman. The Tribunal is satisfied that the applicant did not meet the responsibilities required of him by ss 945A and 947C of the Act.
57. Further, the 2005-2006 accounts for the IPT notify that sums surplus to the needs of the trust had been invested in other entities, specifically the sum of $546,673 to Alamanda and the sum of $261,608 to DFS.[114] At the time the investments were made, Mr Weerappah was the sole director and secretary of both the DFS and Alamanda.[115] No information is provided in any of the SOAs issued by the applicant at, about or subsequently to 11 December 2006, being the date of the financial accounts, of the commonality of directors between Alamanda, DFS and the IPG (for example, in SOAs issued to Mr and Mrs Buck[116], Mr and Mrs Buttigieg.[117]) Further, there is no mention of the solvency of Alamanda or DFS, the term of the investments and how the money invested was secured in any SOA issued by the applicant. In circumstances when money is being loaned from a trust to companies controlled by the one director, who is also a director of the trustee company, that might reasonably be expected to be capable of influencing the providing entity (Elite) in the giving of that advice.[118] The applicant must be taken to be aware of the distribution of the financial statements at a time when he was still recommending to clients to invest in the IPT. The failure to provide sufficient detail in subsequently issued SOAs satisfies the Tribunal that the applicant has not met the requirements of s 945A (1) of the Act and additionally of s 947C (2)(f) of the Act.

NO SOAS OR ADDITIONAL SOAS ISSUED.

58. A number of detailed issues to be addressed in an SOA issued by an authorised representative are set out in s 947C of the Act, including the basis on which the advice is given, information about remuneration and conflicts of interest. Sufficient detail is to be provided in a SOA to permit a retail client to decide whether to act on the advice.[119] Section 946C (1) of the Act further provides that if advice is given other than by the issue of a SOA, then a SOA must be given as soon as is practicable. Clearly the aim of the provisions is to place retail clients in a position to consider and then make an informed investment decision. By undertaking due diligence to ensure the statutory requirements are met, an authorised representative is expected to undertake some checking of information about investments he or she advises clients to invest in.
59. Mr and Mrs Cropley became DFS members in November 2004.[120] In December 2004, the applicant obtained personal details from them for the purpose of devising their financial plan.[121] It was not until the 8 August 2005 though, that Mr and Mrs Cropley were shown the plan by another representative at the offices of Elite Equities. They decided not to proceed with any of its recommendations.[122] Mr Cropley stated that the applicant had contacted him in early July about a good investment opportunity in the IPT.[123] On the 26 July, the Cropley’s received an email together with one of the undated memoranda about the IPT from the applicant. He recommended that they purchase two units in the IPT. The Cropleys decided to invest in one unit and did so on the 12 September 2005.[124]
60. The applicant prepared a SOA for Mr and Mrs Cropley dated 8 November 2005. In relation to direct property investment recommendations, it states that “Elite initially recommended the Ivory Trust syndicate which you have already implemented.”[125] Section 946C (2) of the Act provides that,

“[i]f the Statement of Advice is not given to the client when the advice is provided, the providing entity must, when the advice is provided, give the client a statement that contains the information that would be required to be in a Statement of Advice “.

While the Tribunal accepts that one of the undated memoranda was forwarded, this is no substitute for the requirement to issue a SOA. The Tribunal is satisfied that no SOA, or amended SOA, was issued to Mr and Mrs Cropley prior to, or within, the time permitted after their investment in the IPT addressing the recommendation to invest in the IPT.

61. There were similar failures to issue SOAs in respect of Mr Marzouk, who invested in the IPT on the applicant’s recommendation on or before 29 August 2005. The only SOA issued to Mr Marzouk is dated 8 November 2005. The SOA states that, “...earlier this year Elite availed and recommended to you the exclusive Ivory Trust Property Syndicate... [r]ightly so you embraced this opportunity...”.[126]
62. The SOA from the applicant to Mr and Mrs Beluszar, dated November 2005, makes no mention of investing in the IPT.[127] Subsequent statements of additional advice prepared by other representatives of Elite also make no mention of investing in the IPT. The applicant sent an email to the Beluszars together with an information memorandum on 13 September 2007, which suggested that they purchase one unit in the IPT. All communication between the applicant and the Beluszars was by email or by telephone about this investment. On 22 September, the applicant requested that the Beluszars decide whether to invest in IPT by the 24 September 2007. The Beluszars proceeded to make the investment on 25 September 2007.[128] No SOA was issued to them concerning their investment.
63. Mr and Mrs Mollard were advised by the applicant to invest in a “Property Trust” in early April 2006, and they were only told by him the name of the investment when informed how to make out the cheque.[129] Specifically, they invested $140,000 into the investment called My Building No 1, which the Tribunal accepts to be part of the DFIP. The investment was made on 31 May 2006.[130] A SOA prepared by the applicant for Mr and Mrs Mollard, dated 9 May 2006, states in relation to this investment that, “Elite regularly reviews a number of these products [unlisted commercial property trust or investment company] each year and will make a specific product recommendation to you in a separate advice as and when a suitable investment becomes available.”[131] There is no evidence of any additional SOA being issued to Mr and Mrs Mollard. Mrs Mollard stated, in her witness statement, that that at no time was a SOA or additional SOA issued with respect to investment.[132] The Tribunal is satisfied that no SOA or additional SOA was issued by the applicant to Mr and Mrs Mollard.
64. In respect of the advice given to Mr and Mrs Mollard to invest in My Building No 1, the applicant claimed to be advised by Mr Lewis that he could make the recommendation provided he did not mention it in any SOA.[133] Mr Lewis denied giving this advice to the applicant.[134] Even if, which the Tribunal doubts, the applicant was directed as he claimed by Mr Lewis, the applicant was bound by the requirements of the Act to disclose the proposed investment in a SOA. The requirement cannot be satisfied by the applicant saying that he provided extensive oral advice, with respect to the proposed investment product, prior to the issuance of the SOA and that, ergo, there was no need to provide anything further in the SOA. Nor can it be satisfied by him saying he was directed not to disclose the name of the product or its detail in the SOA by his or her manager.
65. Mr Gardner and Ms Cairns were verbally advised by the applicant that “the My Building No 1/ DFS FIF [Dollarforce Fixed Interest Program] was going to be a property development company that raised capital to build houses and then sell them.”[135] They invested $150,000 on 2 November 2005 into My Building No 1.[136] The SOA dated 19 October 2005 makes only passing mention of the investment in the DFIP with the confusing statement that,

[t]here a [sic] too many variables within the property market for me to absolutely recommend that DFS property division offers the best value in the marketplace. What is relevant to you however, is whether or not the DFS property division represents the best value for you.[137]

The SOA made no recommendation for investing in a managed fund,[138] and Mr Gardiner stated that the applicant did not provide them with a SOA or additional SOA “for his recommendation that we invest in a fixed interest fund made available by Dollarforce Financial Services Pty Ltd known as My Building No. 1 Pty Ltd”.[139]

66. The evidence leaves the Tribunal satisfied that the applicant did not always follow up oral investment recommendations in the SOAs he issued, and that on occasions he did not issue any SOAs for the investment advice he provided. The provision in the Act mandates what a client must be advised in a SOA. The SOA forms an important and integral part of what a retail client considers when making an investment decision. The applicant’s failure to adhere to the requirements is a serious matter when considering the outcome of this case.

THE APPLICANT’S CIRCUMSTANCES.

67. The applicant was born on 24 January 1975. Before the events considered in this determination happened, he had completed a degree in human movement from Deakin University. While the applicant was employed by the DFS, he completed a PS 146 qualification, which is the minimum qualification for a financial planner. Between 2005 and 2007, he completed a Masters of Financial Planning at RMIT.[140] At no time was the applicant a director or in a management position at either the DFS or Elite.
68. The applicant worked in the above described capacity for the DFS between February 2004 to July or August 2004. He left full-time employment at DFS and worked, in a business development role, for PS146 Pty Ltd from approximately July or August 2004 before commencing as a full-time employee of Elite in November 2004. During the period the applicant worked for PS146 Pty Ltd, he continued to work part-time as a salesman for the DFS in the evenings. The applicant did not sign a contract of employment with Elite, as the terms could not be agreed – the applicant wanting to take an equity share, which was resisted. After joining Elite he was, until approximately the end of 2005, paid a salary as well as a $200 commission in respect of each SOA he issued.[141] The applicant also received commissions sourced either from DFS or from Elite.[142]
69. The applicant has a conviction dated 28 August 2006 for extortion. He was sentenced to a period of 18 months imprisonment suspended for two years, during which time he was to be of good behaviour, and fined $5,000[143]. The circumstances related to an attempt by the applicant to recover moneys he claimed to be owing to him. His conviction and sentence are not relevant to, and have played no part in, the Tribunal’s consideration of whether a ban under the Act should be applied and, if so, the length of the ban.
70. The applicant also has a past history with ASIC in unrelated proceedings concerning the raising of finance for film productions. This evidence was led by the respondent to illustrate that the applicant must be taken to be aware that there are legal formalities involved in seeking public investment and that, although only new to the financial advisory business, he was not inexperienced in attracting investments and must be taken to have been aware that there were legalities which must be satisfied. The Tribunal accepts that the applicant, while new to the financial advisory industry when he joined Elite in 2005, was not inexperienced in knowing that there were formalities associated with the raising of money from the public. This aspect, however, has not been of assistance in determining the outcome of this review. The Tribunal has not relied on this evidence, but rather it has had regard to the minimum statutory requirements expected of an authorised representative.
71. Currently, the applicant is the general manager, a director, a major shareholder in and an authorised representative of FPIP, which holds an AFSL. No complaints have been registered about the applicant in respect of work conducted for the FPIP. As is evident from the statements filed on behalf of the applicant, a number of the FPIP clients have voiced their satisfaction with the financial advice given by the applicant, their confidence in his ability and honesty and attested to his work ethic. Some of those clients were also clients of the applicant when he was employed by Elite, for example, Mr G Bebe,[144] Ms A Healy, [145] Ms J McRae and her husband Mr G Cameron,[146] Mr R Evans,[147] Mr S Scata,[148] Mr D Walmsley,[149] Ms A Wynne.[150] Others have consulted him since he established FPIP, and they expressed their confidence in the service he has provided, for example, Ms M Cremer.[151] Another client, Ms A Cavallo, who, as well as having professional contact with the applicant, has been assisted by him with her business operating to address indigenous housing shortages in the Northern Territory.[152]
72. The FPIP employs a small number of people who rely on it for their income. If the applicant’s appeal is unsuccessful, the FPIP may have to cease operations and the employees would lose their employment. This is a relevant consideration which the Tribunal has taken into account.
73. The applicant has an infant daughter for whom he provides financial support, and a banning order would be likely to cause a reduction his capacity to meet the maintenance payments. There would be likely to be an adverse affect on the support the applicant may be able to provide for his daughter, which is relevant to the Tribunal’s decision and has been taken into account.
74. This case involves, among other things, a consideration of the loyalties owed by the applicant to his effective employer (Mr Weerappah) and the duty owed to his clients in undertaking his role as an authorised representative. The duties imposed on an authorised representative under the Act are designed to place the client in the position of being able to make an informed investment decision. An informed decision can only be made by a client who has had his/her circumstances ascertained and has received independent advice unclouded by potential conflicts, or has been notified of the existence of potential conflicts, so that he or she can take that into account when making a decision. In order that the client is seen to be properly informed, the representative is required to commit their client assessment, product information and analysis, recommendations and disclosures in writing in the form of a SOA.
75. There are four main aspects to the giving of financial advice. They are as follows:

(a) the first is that the advice must be based on a proper assessment of the client’s personal circumstances. This extends to consideration of the client’s tolerance for risk, the level of understanding of financial products, the current financial position including, age, income, current investment portfolio and taxation circumstances and the objectives the person wishes to achieve from investing;[153]

(b) the second aspect is that the representative must consider and investigate the types of product most suitable for the client to invest in having regard to his or her personal circumstances. It is reasonable for the adviser to rely on advice from external research houses, provided ‘’reasonable steps to ensure that the research is accurate, complete, reliable and up-to-date” are taken.[154] There is no evidence that the applicant acquired or used any external research with respect to either the IPT or the DFIP products. Instead, he relied on the advice of Mr Weerappah that such advice had been taken without checking to confirm what he was told.

(c) the third aspect involves the representative notifying the client of areas of potential conflict. This requires the disclosure of commissions which are to be paid, for having clients invest in a particular product, and of interests, or relationships, in associated entities involved with the product being recommended when that commission or those interests or associations may reasonably be capable of influencing the advice given;[155] and

(d) the final aspect is that the client must not be given information, or information known to the representative should not be withheld, which results in the client being misled or deceived.

76. While the Tribunal is satisfied that the applicant embraced his new role as an authorised representative of Elite with enthusiasm, there was both a lack of proper management evident in Elite’s operation and inexperience on the part of the applicant which led to failures to comply with the requisite standards. Manifestation of the lack of proper management is found in what Mr Deutsch stated was an unrealistic expectation that the applicant would be able to generate a higher level of fees than could be fairly expected when he was newly qualified and lacking financial planning experience. While there was access to more highly qualified and experienced people, they, however, worked part-time for Elite and were then engaged more in deciding which products would be approved for the advisers to recommend, deciding business structures and manuals and determining investment strategies. There was no-one who had any direct day to day supervisory role over the advice the applicant, as an inexperienced representative, was providing.
77. A second manifestation of the lack of proper management is evidenced in the applicant being given the title of ”senior” financial planner almost from the outset. He was neither qualified nor experienced enough to warrant this description of his position. This misdescription was circulated in the Elite promotional material, which both inaccurately described the applicant as having had experience in areas when he had little or none, as well as embellishing what limited experience he had.[156] Among other things, the applicant is described as having over six years experience in financial services and tax law, neither of which the Tribunal accepts as being a truthful disclosure. He claims to have drawn this to the attention of management. However, nothing was done by management to correct this description nor did the applicant take steps to correct this when clients consulted him for advice.
78. A lack of experience on the part of the applicant is demonstrated by the following facts found by the Tribunal. These facts are that: often he did not undertake any, or any proper, investigation of clients’ personal circumstances; he did not independently and adequately investigate the products he recommended that clients invest in; he failed to disclose any actual, or potential, conflicts of interest both arising from his being paid a commission and of directorships and potential conflicts of interest associated with Mr Weerappah; and he exceeded his authority by recommending products which were not on Elite’s RPL. The applicant either failed to provide, or to provide in a timely manner, SOAs, and the SOAs, when prepared, were deficient in risk disclosure, inaccurate in not disclosing commission which was to paid in respect of the recommendation of the IPT investment, and provided little or no advice in respect of some of the products he was recommending (particularly, investments in the IPT and the DFIP).
79. Despite the above findings the Tribunal has, however, taken into account the employment circumstances of the applicant. It accepts that he was only newly qualified as a financial planner; that he was improperly influenced by the unrealistic expectations that Elite had for him; and that he may have been flattered into thinking he was more experienced than was the case by the employer’s inaccurate elevated description of his experience contained in the promotional material. The Tribunal is satisfied that Elite was poorly managed and the applicant, particularly given his inexperience, insufficiently closely supervised. These factors, whether considered individually or in combination, do not however outweigh the responsibilities of an authorised representative to retail clients to comply with the consumer protection provisions of the Act.
80. The applicant had proved to be a successful salesman when he was employed with DFS. The Tribunal is satisfied that the evidence demonstrates that the applicant’s position as an authorised representative at Elite became confused with his previous role as a salesman when employed by DFS. Mr Weerappah, as the ultimate employer, must bear considerable responsibility for allowing, indeed placing, the applicant in the position of an authorised representative without ensuring that the applicant had adequate training and experience to undertake the role and insufficient day to day supervision to ensure compliance requirements were implemented. On top of that, the Tribunal is satisfied that Mr Weerappah improperly encouraged the applicant to continue to pursue a salesman’s role by agreeing to pay commissions for attracting investors to products when that role should have been terminated. The extent of the mismanagement is indicated by Mr Weerappah endorsing the commission payments to the applicant, without apparent reference to the management team of Elite, and in respect of the management team, without apparent question, accepting that it was Elite’s responsibility to pay the commission to the applicant.
81. The Tribunal is mindful of the applicant’s personal circumstances and his conduct since leaving Elite’s employment while self-employed. The positive testimony from his current clients as to his abilities and honesty, the fact that there have been no complaints concerning the applicant since establishing his own financial advisory business over a three year period and the fact that he must be taken to have achieved a better understanding, among other things, of the regulatory requirements by successfully completing further academic studies are also factors which the Tribunal takes into account. He is a young and ambitious man, who works hard to achieve his goals. The applicant has no doubt learnt and appreciated from this experience with the regulatory authorities. He has continued to engage Mr Deutsch to act in an advisory capacity. The applicant he has taken steps to employ a financial planner to better manage that part of his business which emanates from Sydney.
82. One of the submissions made on the applicant’s behalf is that he would be unlikely to engage in similar conduct in the future, and that is one of the elements which the Tribunal should take into account when determining whether or not to impose a ban. The respondent rejects this submission on the basis that the applicant has sought to blame others for his own failure to comply with the provisions of the Act, that he appears unwilling to accept a banning order of any period and that he displays insufficient comprehension of the significance of his breaches of the Act[157]. While the likelihood of any future breaches is matter which can be taken into account, it alone is not determinative of the outcome of a review. Where there are serious circumstances, it may be appropriate to consider a ban even if there is little or no likelihood, of future breaches being committed. Among the purposes to be achieved by the imposition of a ban is to deter others who may be minded to breach the standards set by the Act.

CONSIDERATION INCLUDING THE PUBLIC INTEREST.

83. The matters personal to the applicant must be weighed against the protection of the public interest. The latter is a somewhat elusive term and eschews any attempt to be provided with a definitive meaning. The ambit of what is in the public interest must be viewed in the context in which it appears. The consumer protection aspects of the Act are designed to see that minimum standards surrounding the giving of financial advice to retail investors are implemented and maintained. As stated earlier in these reasons, the provisions are enacted in order to ensure that the public are enabled to make informed decisions about their investments. Many of the statements made by Elite’s customers were to the effect that the deponents trusted the applicant. In broad terms, the Tribunal takes that to extend to trusting him to act honestly and impartially and provide them with advice uncluttered by conflicts of interest (or at least declare those conflicts to them) when making recommendations as to how their money should be invested.
84. Accreditation under the Act is designed to give the public confidence that a person accorded authorised representative status will act in accordance with the standards set out in the Act. In Hayes v Australian Securities and Investments Commission,[158] Deputy President Purvis agreed with the view of ASIC that, “when a person is licensed as an authorised representative ASIC effectively endorses that person to the public as reliable, and a person in whom consumers can place trust and confidence.”[159] The regulatory scheme concerning accreditation has been introduced by Parliament to ensure that specified standards in respect of the giving of financial advice are met. A substantive disservice occurs to both those financial advisers who comply, and to the public at large, when a financial adviser fails to meet the requisite basic standards.
85. The consumer protection provisions are also there, among other things, to counteract any improper pressures which may be placed upon representatives by their employers or anybody else. The authorised representative’s paramount duty is to the consumer whose money is to be invested. While an employee can expect to trust his or her employer, that trust is not unconditional. It must be combined with at least a minimal amount of independent checking to ensure the information being provided to the client is in fact accurate. The responsibility of ensuring this rests with the authorised representative and he or she cannot avoid responsibility by passing blame to the employer. The provisions of the Act relating to the protection of consumers are there to ensure a minimum standard is adhered to by authorised representatives when giving advice to investors.
86. It was submitted on behalf of the applicant that the public are no longer at risk from any financial advice given by him. He has learnt his lesson, he has successfully completed a higher degree in financial planning, and he is now more experienced. It is submitted that there is little or no likelihood of the applicant repeating any of the errors of his past in the future. The public can, therefore it is submitted, be adequately protected by the applicant entering into an enforceable undertaking for the regular auditing of his practice for a period of two years.[160] The terms of a proposed enforceable undertaking were contained in the submission made on behalf of the applicant. Substituting an enforceable undertaking would permit him to continue to give financial advice to his clients.
87. The Tribunal is satisfied that the factors favourable to the applicant along with the practical reasons advanced for him doing so, which suggest he should be permitted to continue in the financial services industry, are not such, either individually or collectively, that the Tribunal would be persuaded that, in the circumstances as found by it, an enforceable undertaking should be accepted. The Tribunal agrees with the view expressed by Deputy President Purvis in Hayes v Australian Securities and Investments Commission[161] that,

[a]n enforceable undertaking is no more than a restatement of legal obligations and does not satisfy the needs of a deterrent. It is necessary to ensure that the public is protected from conduct that may be contrary to the requirements of the Act. This... is effectively assured as best it can be by a banning order[162].

The Tribunal also endorses the Deputy President ‘s statement that a banning order, as well as protecting the public, provides both personal and general deterrence, and that it may be appropriately imposed even when there is no question as to whether a person is fit and proper now or in the future.[163].

88. The decision whether or not to impose a banning order is discretionary. In determining whether or not a ban is to be imposed, the Tribunal is mindful of the objectives of having a consumer protection regulatory regime for the giving of financial advice. A ban may be permanent or for a specified period.[164] The approach adopted by ASIC to enforcing the financial services law,[165] while not binding on the Tribunal, makes a positive contribution to ensuring that there is some consistency in the application of penalties. It provides that for breaches of the type of regulatory behaviour committed by the applicant, a penalty of between three and 10 years is appropriate[166]. On behalf of the respondent, it is submitted that, not only should a ban be imposed, but the five year term should be increased towards the upper level of 10 years. The Tribunal regards any increase in the period of the ban would be as excessive and amount to punishing the applicant. That is not a valid approach for an administrative decision maker to take. The Tribunal is satisfied that a five year ban provides a sufficient period for the adequate protection of the public, and it reflects a fair deterrent to others who may be minded to breach the terms of the Act.
89. For the reasons expressed, the decision under review is affirmed.
    

I certify that the 89 preceding paragraphs are a true copy of the reasons for the decision herein of

Mr G L McDonald

Signed: ..........(sgd. D De Andrade)..............

D De Andrade, Personal Assistant

Date/s of Hearing 29, 30 and 31 March 2010; 27 July 2010

Date of Decision 28 September 2010

Counsel for the Applicant Mr J Samargis

Solicitor for the Applicant Mr S Ostroburski

Counsel for the Respondent Mr P Crutchfield SC

Solicitor for the Respondent Ms F Forsyth,

Australian Securities & Investments Commission

---

[1] Defined in s 761A as including the provisions of Chapters 5C, 6, 6A, 6B, 6C, 6D, 7and 9 of the Act, a provision of Division 2 of _Part 2 of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act), and any other Commonwealth or State law that covers the provision of financial services. This extends to conduct which is misleading or deceptive under s 12DA of the ASIC Act.
[2] Section 766A (1)(a) of the Act.
[3] S 766B (1) of the Act.
[4] S 945A (1)(a) of the Act.
[5] S 945A (1)(b) of the Act.
[6] S 945A (1)(c) of the Act.
[7] S 947C (2)(e) of the Act.
[8] S 947C (2)(f) of the Act.
[9] Ss 947C (5) and s 947D (2) of the Act.
[10] S 12DA of the ASIC Act and s 953A of the Act.
[11] S 1020A of the Act.
[12] Ss 946A, 946C and 944A of the Act. T Documents, Vol 1 Tab T2 p 35
[13] S 945A (1) of the Act; Applicant’s Statement of Facts and Contentions, paras 22-26, and Transcript p 4.
[14] Under s 945A(2) of the Act.
[15] T Documents, Vol 3 Tab 1 p 960.
[16] S 19 examination of Mr Deutsch, T Documents, Vol 4 Tab 31 p 1570.
[17] Transcript of Proceedings, p 150.
[18] Evidence of Ms Murray, s 19 examination, T Documents, Vol 5 Tab 49 p 1976.
[19] Ms Murray, s 19 examination, T Documents, Vol 5 Tab 49 p 1992.
[20] T Documents, Vol 1 Tab 15 p 403.
[21] S 19 examination, T Documents, Vol 4 Tab 31 p 1567.
[22] T Documents, Vol 5 Tab 49 p 1947.
[23] Ms Murray, s 19 examination, T Documents, Vol 5 Tab 49 p 2010.
[24] T Documents, Vol 1, Tab 15 p 403.
[25] Mr S Lewis, s 19 examination, T Documents, Vol 4 Tab10 pp 1334-1345.
[26] Ms E Clegg, s 19 examination, T Documents, Vol 4 Tab 32 pp 1627-1628 and 1650; Mr Lewis, s 19 examination, T Documents, Vol 4 Tab10 p 1334.
[27] T Documents, Vol 5 Tab 49 p 1960.
[28] T Documents, Vol 1 Tab 15 p 403.
[29] T Documents, Vol 2 Tab 21 p 518.
[30] T Documents, Vol 1 Tab 19 p 462.
[31] T Documents, Vol 1 Tab 4 pp 155-183 and pp 184-204; Vol 3 Tab 3 pp 1066-1094 and pp 1095-1115 (issued by email in PDF format and by hard copy).
[32] T Documents, Vol 1 Tab 5 pp 205-227; Vol 3 Tab 4 pp 1116-1138.
[33] T Documents, Vol 1 Tab 4 p 192.
[34] T Documents, Vol 1 Tab 4 p 166.
[35] T Documents, Vol 1 Tab 9 p 330.
[36] T Documents, Vol 1 Tab 9 pp 325-360 and pp 361-395.


[37] T Documents, Vol 1 Tab 7 p 276.
[38] T Documents, Vol 13 Tab T5 p 5105 (original emphasis).
[39] S 19 examination, T Documents, Vol 1 Tab 2 p 99.
[40] T Documents, Vol 7 Tab 60 p 2609.
[41] T Documents, Vol 7 Tab 66 p 2980.
[42] T Documents, Vol 8 Tab 69 p 3147.
[43] For example, the SOA for Mr Marzouk, T Documents, Vol 9 Tab 73 p 3510.
[44] T Documents, Vol 1 Tab 2 p 67 and Tab 7 pp 240-241 respectively.
[45] S 19 examination, T Documents, Vol 1 Tab 2 pp 115-117.
[46] Ibid, p 121.
[47] T Documents, Vol 1 Tab 7 p 240 and again p 272.
[48] T Documents, Vol 1 Tab 2 p 122.
[49] S 19 examination, T Documents, Vol 4 Tab 10 p 1359.
[50] Ibid, p 1360.
[51] T Documents, Vol 1 Tab 2 p 64 and confirmed at p 74.
[52] Ibid, p 74.
[53] T Documents, Vol 4 Tab 10 p 1345 et seq and Vol 5 Tab 49 p 1980, respectively.
[54] Statement of Evidence, Exhibit A1, para 19.
[55] Ibid, para 33.
[56] Statement of Evidence, Exhibit A1, paras 45-47.
[57] Transcript, cited at p 201.
[58] T Documents, Vol 7 Tab 63 p 2813.
[59] T Documents, Vol 8 Tab 71 p 3326.
[60] T Documents, Vol 10 Tab 78 p 3953.
[61] T Documents, Vol 10 Tab 79 p 3987.
[62] ST Documents, Vol 14 p 5177.
[63] Ibid, p 5178.
[64] T Documents, Vol 7 Tab 60 p 2603.
[65] Transcript, pp 54-55.
[66] The last being for Mr and Mrs Georgitsopoulos.
[67] T Documents, Vol 1, Tab 2 p 102.
[68] Id.
[69] Ss 946A and 947C of the Act.
[70] ASIC form 564: Liquidator’s report pursuant to s 476 Corporations Act 2001 (Cth), dated 03/06/09: T Documents, Vol 4 Tab 17 p 1418.
[71] T Documents, Vol 1 Tab 16 p 419.
[72] T Documents, Vol 1 Tab 16 p 425.
[73] Id.
[74] ST Documents, Vol 14 p 5383.
[75] Transcript, p 70.
[76] S 19 examination, T Documents, Vol 4 Tab 10 p 1362.
[77] T Documents, Vol 11 Tab 85 pp 4396-4397.
[78] Ibid, p 4362.
[79] Transcript, p 70.
[80] Ibid, p 72.
[81] Transcript, p 24.
[82] Respondent’s Statement of Facts, Issues and Contentions, para 5.6.22.
[83] T Documents, Vol 1 Tab 9 p 330.
[84] T Documents, Vol 11 Tab 86 p 4432.
[85] Id.
[86] Ibid, p 4446.
[87] T Documents, Vol 1 Tab 5 at p 217.
[88] T Documents, Vol 6 Tab 54 p 2132.
[89] For example, in the SOA for Mr and Mrs Manley: T Documents Vol 19 Tab 72 at p 3448.
[90] T Documents, Vol 1 Tab 5 p 217.
[91] According to Ms Murray; T Documents, Vol 5 Tab 49 p 1971.
[92] ST Documents, Vol 14 p 5335.
[93] Id.
[94] Id (original emphasis).
[95] T Documents, Vol 1 Tab T2 p 20 et seq.
[96] T Documents, Vol 2 Tab 23 at pp 577, 582 and 589.
[97] Ibid, p 576- being the memorandum issued by the Trustee.
[98] ST Documents, Vol 14 p 5181.
[99] Ibid, p 5193.
[100] T Documents, Vol 1 Tab 2 p 96.
[101] Ibid, p 98.
[102] Transcript, p 51.
[103] T Documents, Vol 8 Tab 67 p 3032.
[104] According to the applicant: T Documents, Vol 1 Tab 2 p 75, and Transcript, p 122.
[105] T Documents, Vol 1 Tab 4 p 181.
[106] T Documents, Vol 1 Tab 2 p 80.
[107] T Documents, Vol 5 Tab 43 pp 1915-1916.
[108] T Documents, Vol 2 Tab 61 pp 893-901.
[109] T Documents, Vol 1 Tab 9 p 349.
[110] Transcript, p 230.
[111] Transcript, p 235.
[112] Id.
[113] T Documents, Vol 5 Tab 45 pp 1923-1930.
[114] ST Documents, Vol 14 p 5145.
[115] T Documents, Vol 1 Tab 1 p 45 and Vol 15 Tab 3, respectively.
[116] T Documents, Vol 6 Tab 54 p 2139.
[117] T Documents, Vol 6 Tab 55 p 2187.
[118] S 947B (2)(e)(ii) of the Act.
[119] Section 947C (3) of the Act.
[120] T Documents, Vol 6 Tab 56 p 2246.
[121] T Documents, Vol 6 Tab 56 p 2248.
[122] Ibid, p 2249.
[123] Ibid, p 2249.
[124] Ibid, pp 2249-2251.
[125] Ibid, p 2309.
[126] T Documents, Vol 9, Tab 73 p 3506.
[127] ST Documents, Vol 14 pp 5228-5229.
[128] T Documents, Vol 11 Tab 91 pp 4554-4557.
[129] T Documents, Vol 11, Tab 85 pp 4360-4362.
[130] T Documents, Vol 11 Tab 85 p 4423.
[131] Ibid, p 4397.
[132] Ibid, p 4364.
[133] First s 19 examination, T Documents, Vol 1 Tab 2 p 133.
[134] Section 19 examination, T Documents, Vol 4 Tab 10 p 1362.
[135] T Documents, Vol 11 Tab 84 p 4307.
[136] Ibid, pp 4307-4308.
[137] Ibid, at p 4330 (original emphasis).
[138] Ibid, p 4335.
[139] Ibid, p 4307.
[140] T Documents, Vol 1 Tab 2 p 54.
[141] T Documents, Vol 1 Tab 2 p 71.
[142] T Documents, Vol 1 Tab 2 p 72.
[143] T Documents, Vol 1 Tab 7 p 295.
[144] Statement of Evidence, Exhibit A7.
[145] Statement of Evidence, Exhibit A13.
[146] Statements of Evidence, Exhibits A15 and A8, respectively.
[147] Statement of Evidence, Exhibit A11.
[148] Statement of Evidence, Exhibit A17.
[149] Statement of Evidence, Exhibit A20.
[150] Statement of Evidence, Exhibit A21.
[151] Statement of Evidence, Exhibit A10.
[152] Statement of Evidence, Exhibit A 9.
[153] ASIC Licensing: Financial product advisers- Conduct and disclosure, Regulatory Guide 175 (May 2009), paras RG 175.117- 175.118.
[154] Ibid, para RG 175.130.
[155] S 947C (2) (e) and (f) respectively of the Act.
[156] T Documents, Vol 5 Tab 47 p 1935.
[157] Respondent’s Statement of Facts, Issues and Contentions, paras 5.10.1-5.10.3.
[158] (2006) 93 ALD 494.
[159] [2006] AATA 1506; (2006) 93 ALD 494, p 513.
[160] Applicant’s Statement of Facts and Contentions, p 15.
[161] (2006) 93 ALD 494.
[162] Ibid, p 508.
[163] Ibid, p 510.
[164] S 920B (2) of the Act.
[165] As set out in its publication, Licensing: Administrative action against financial services providers, Regulatory Guide 98 (ASIC, April 2006).
[166] Table 2: Factors and examples of conduct relating to specific periods of banning, ibid, p 12.