Raid On Advisers
Sun Herald
Saturday July 15, 1995
AN investigation by the Australian Securities Commission (ASC) into securities dealers and investment advisers prompted by public complaints has found 65 per cent of a targeted sample needed retraining or their licence conditions amended.
The ASC investigated 173 dealers after complaints and found 113 breaches ranging from poor advice and deficient training to serious conflicts of interests and fraud.
As a result 11 were banned from the industry and 77 authorised advisers were ordered to retrain.
Richard Cockburn, a director of corporate regulation at the ASC, said most of the offences were "based on procedure problems" but the need for retraining revealed by the investigation was a concern.
"I suppose if we looked hard enough we could find problem issues with many operators, it's rather like getting a tax audit," Mr Cockburn said.
He said "the industry has come a long way but has just as far to go."
The executive officer of the Financial Planning Association, Ken Breakspear, said: "Most of the remedial action has been minor rather than major.
"We have not seen too many cases of fraud or licence revocations, but these instances are serious," he said.
The surveillance program resulted in two advisers having their licences revoked, 15 licences surrendered after an ASC visit, eight having their licences amended and 96 ordered to undergo some retraining.
"To be revoked there would have to be some fairly serious malpractice," Mr Breakspear said.
"It would have to be some sort of reckless conduct like engaging in a scheme without revealing a conflict of interest or a company breaching their solvency conditions."
Other financial advisers said they did not believe unethical practices were commonplace in the industry today.
"It is very competitive and financial advisers invariably check each other out," one adviser said.
Mr Breakspear said the financial planning industry welcomed the ASC scrutiny as it made its 6,500 members more accountable.
It also helped to build the reputation of financial advisers and planners.
Mr Breakspear added "there are a number of instances where market intelligence has worked and the ASC does some monitoring of advertising."
Assyat David, of financial planners Bleakley's, warned customers to check the credentials of securities dealers and financial advisers.
A dealer must hold a licence, be a member of the Financial Planning Association and hold a proper authority.
The FPA said an adviser's qualifications and accreditation should be clearly visible on the office wall.
If in doubt consumers should check with the ASC or the FPA.
"If they don't have the technical knowledge and the training and they are not aware of legislative changes it could have serious implications," Ms David said.
"There are a whole range of requirements which a financial planner must satisfy," she said.
"Putting mums and dads or retirees into the wrong investment may lead to a number of investment losses when taking social security repayments into account."
© 1995 Sun Herald