Risk Regulatory Update

Select AFSL, BlueInc Services and Insurance Marketing Services in Federal Court for unconscionable conduct

Three companies have been found to have engaged in unconscionable conduct by the Federal Court when selling insurance. Select AFSL, BlueInc Services and Insurance Marketing Services were selling life, funeral and accidental injury insurance over the phone, with the mis-selling applying to 14 consumers, 10 of which were living in remote communities and whose first language was not English. Some didn’t understand the products being sold to them, and sometimes didn’t know they had been sold insurance at all.

Select AFSL was a Royal Commission subject in 2018 with the financial regulator finding harm to consumers by poor sales practices, of which Select AFSL’s was ‘one of the most egregious'. Russell Howden, sole director, secretary and managing director of Select AFSL and BlueInc Services, was found to have breached his duty of care and diligence as a director. Conflicted remuneration to the salespeople was provided, including a cruise to the Gold Coast, a Vespa, and trips to Las Vegas and Hawaii.

Salespeople commonly used pressure tactics (talking quickly, rushing through calls despite objections), harassing some consumers (repeat contact, seeking payment for insurance they didn’t want), misrepresenting the insurance, and failing to act efficiently, honestly and fairly in providing financial services. A penalty hearing is yet to be listed.

Lanterne in ASIC proceedings for failing to meet AFSL obligations

Wholesale licensee, Lanterne Fund Services, is alleged to have failed to meet its Australian financial services licensee obligations after the Australian Securities and Investments Commission (ASIC) commenced civil proceedings. Allegations include multiple failures by Lanterne to meet obligations including meeting organisation competence requirements, having adequate risk management systems and resources in place and others. Lanterne is authorised to provide advice and other financial services to wholesale customers and has over 200 authorised representatives and 60 corporate authorised representatives under its licence.

TAA and ARA to merge

The Adviser Association (TAA) and the Authorised Representatives Association (ARA) are to merge after members voted to close the ARA. The ARA is 40 years old and has about 90 charter financial planning advice businesses and around 250 advisers. The merger is effective at 1 July 2022. The ARA members are joining TAA.

Mercer in court over fees for no service and fee disclosure

Mercer Financial Advice is being sued by ASIC for allegedly misleading customers regarding fees for no service and fee disclosure statement issues. Allegations by ASIC include that the firm made false or misleading representations to customers regarding fees that were being charged and services that were not provided, and not providing fee disclosure statements. The allegations date back between July 2016 and June 2019 and involve 5,500 occasions under scrutiny.

FPA releases video SoA toolkit

The Financial Planning Association (FPA) has published a new toolkit designed to help members create a video Statement of Advice (SoA) that complies with regulations. The Statement of Advice Project (SOAP) Box Set is made up of 14 videos covering how-to guides and examples.