Court slaps $1m penalty on financial planner

The Federal Court has imposed a civil penalty of $1 million against a financial advice firm that sold its clients “costly, unsuitable” products.

NSG Services, currently known as Golden Financial Group, is the first company to be penalised for breaching the ‘best interests duty’, which was introduced in 2013.

“The penalty relates to financial advice provided to retail clients by NSG advisers on eight occasions between July 2013 and August 2015,” according to ASIC, the financial services regulator, which initiated legal proceedings in June 2016.

“The clients were commonly sold insurance and advised to roll over superannuation accounts that committed them to costly, unsuitable and unnecessary financial arrangements.

“The court found that the failures by NSG to ensure compliance by its representatives were systemic in nature, and in his reasons, Justice Moshinsky said, ‘I regard the contraventions as very serious ones.’”

NSG was also ordered to pay $50,000 in costs to ASIC, and will also pay $50,000 towards ASIC’s costs of its investigation into NSG.

ASIC puts industry on notice

NSG breached the Corporations Act by “failing to take reasonable steps to ensure that they provided advice that complied with the best interests obligations,” according to ASIC.

NSG was also guilty of “failing to take reasonable steps to ensure that they provided advice that was appropriate to its clients”.

ASIC said the court found the following deficiencies in NSG’s processes and procedures:

• Commission-only remuneration model
• Training on legal and regulatory obligations was insufficient
• Staff performance reviews were not regular or substantive
• Compliance policies were inadequate and were not enforced
• Issues identified by external audits weren’t adequately addressed

ASIC deputy chairman Peter Kell said this outcome makes clear to the financial services industry the “serious consequences” of breaking the rules.