ASIC has said it has commenced proceedings against Melbourne-based NSG Services Pty Ltd (formerly National Sterling Group Pty Ltd) (NSG) for breaches of the ‘best interests duty’ introduced under the ‘Future of Financial Advice’ (FOFA) reforms.
This is the first civil penalty action ASIC has taken against a licensee alleging breaches of the best interests duty and is seeking declarations of breaches and financial penalties.
Since 3 April 2008, NSG has been licensed to provide personal advice on risk insurance and superannuation products to retail clients. NSG employs advisers to provide financial services advice on its behalf as its representatives and authorised representatives (NSG advisers).
ASIC alleges that:
- NSG failed to take reasonable steps to ensure that its advisers complied with the best interests obligation when providing advice to clients; and
- as a result, on numerous occasions, NSG advisers did not act in the best interests of their clients.
In addition, ASIC alleges that:
- NSG has not provided appropriate training to its advisers to ensure clients receive advice in their best interests. Instead, ASIC contends that NSG has trained its advisers that it is almost always in a client’s best interest to take out some form of life risk insurance, regardless of a client’s financial situation;
- NSG’s written policies relating to legal and regulatory compliance and risk management have been inadequate, and in any event, not followed or enforced;
- since 1 July 2013, on eight specific occasions, and because of advice provided by NSG advisers, clients were sold insurance and/or advised to rollover superannuation accounts that committed them to costly, unsuitable, and unnecessary financial arrangements; and
- regular and or substantive performance reviews of advisers have not been conducted, and disciplinary action against advisers who do not act in compliance with their obligations under the Corporations Act has not been taken.
